WTO Notes Wichita Incentives

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The common practice of municipal governments in the U.S. providing incentives for aircraft companies has apparently been ruled illegal by the World Trade Organization. On Monday the WTO determined that both Boeing and Airbus received billions in illegal subsidies to develop and produce commercial aircraft. The WTO noted that NASA and the U.S. military had directly subsidized Boeing, something Airbus has been alleging for years. But also included in the list of subsidies were the incentives provided by the city of Wichita.

It's become customary for municipal and state officials to attend plant announcement ceremonies to detail the taxpayer-funded incentives provided to entice or keep the plant. The most common form of incentive is the relief of taxes in exchange for minimum employment guarantees, but it's also common for bargain-rate land deals and even building leases to be part of such deals. Initial reports on the ruling didn't detail specifically what Wichita did to attract the attention of the WTO but it does raise the specter of other companies being drawn into similar disputes. For example, several Wichita-area politicians have been vocal about the alleged subsidization of Embraer by the Brazilian government, and the WTO ruling might give Embraer or other foreign companies ammunition they need to launch retaliatory claims against Wichita-based companies. There is some irony in that Boeing recently announced it's pulling all its operations from Wichita and moving them back to Washington State.