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

This paper analyzes the most recent WTO Appellate Body (AB) report in a series of disputes between the US 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.