Subsidies and Investment Promotion Reaching New Heights in the Aviation Sector: The US – Tax Incentives Dispute

23 Pages Posted: 3 Oct 2018 Last revised: 4 Oct 2018

See all articles by Kristy Buzard

Kristy Buzard

Syracuse University - Department of Economics

Panagiotis Delimatsis

Tilburg Law and Economics Center (TILEC); Tilburg Law School

Multiple version iconThere are 2 versions of this paper

Date Written: October 3, 2018

Abstract

This article analyses the most recent WTO Appellate Body (AB) report in a series of disputes between the U.S. and the EU over government support to aircraft manufacturers Boeing and Airbus. The measures under dispute in US – Tax Incentives were investment promotion subsidies provided to Boeing by the State of Washington. The EU contended that the Washington State subsidies, which were conditioned on Boeing locating production of specific parts of its new 777X program within the state, were prohibited import substitution subsidies. The AB took this case as an opportunity to consolidate WTO case-law on import substitution subsidies. It confirmed a single legal standard for export promotion and import substitution subsidies but with a stricter requirement for a finding of a violation in the case of import substitution subsidies. We argue that the AB, in allowing the subsidies to Boeing, unnecessarily blurred the distinction between contingency in law and contingency in fact by ruling that identifying a condition requiring the use of domestic inputs would be a necessary element for a determination of a de facto contingency. This appears to be an unduly formalistic view that leaves little legal space for any de facto contingency claim in the future.

Keywords: subsidies; investment promotion; taxation; tax incentives; import substitution; local content requirements; Boeing; aviation; air transport

JEL Classification: [comma separated]H25; H71; F13 ; F23 ; L93

Suggested Citation

Buzard, Kristy and Delimatsis, Panagiotis, Subsidies and Investment Promotion Reaching New Heights in the Aviation Sector: The US – Tax Incentives Dispute (October 3, 2018). TILEC Discussion Paper No. 2018-030. Available at SSRN: https://ssrn.com/abstract=3259820 or http://dx.doi.org/10.2139/ssrn.3259820

Kristy Buzard (Contact Author)

Syracuse University - Department of Economics ( email )

Syracuse, NY 13244-1020
United States

HOME PAGE: http://faculty.maxwell.syr.edu/kbuzard

Panagiotis Delimatsis

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Postbus 90153
Tilburg, NL-5000 LE
Netherlands
0031 13 466 8251 (Phone)
0031 13 466 8047 (Fax)

HOME PAGE: http://www.tilburguniversity.nl/webwijs/show/?uid=p.delimatsis

Tilburg Law School ( email )

Warandelaan 2
Postbus 90153
Tilburg, 5000 LE
Netherlands

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