As the nation’s most trade-dependent state, Washington is particularly susceptible to ripples in international commerce. So it is that two recent news items are resonating in this state. While there is reason for consternation, the prudent action would be for trade watchers to take a deep breath and relax, understanding that the complexities of international business do not leave room for a panicked response.
In one of the items, the World Trade Organization ruled that Washington’s tax subsidies for Boeing violate international rules. In 2013, the Legislature approved an extension of tax breaks for the aerospace giant, providing subsidies that are expected to be worth $8.7 billion over 25 years; in exchange, Boeing agreed to build the 777X in the state.
While the deal secured thousands of jobs for the Puget Sound region — and ensured work for suppliers — it also triggered debate. After the agreement was reached, Boeing began announcing that other jobs would be moved out of Washington, essentially thumbing its nose at taxpayers. As The Columbian has written editorially, lawmakers should have been more diligent about tying up loose ends in the agreement to ensure that the company was beholden to citizens. There were good reasons to negotiate with Boeing; the company has about 80,000 workers in the state, making it Washington’s largest private employer. But the deal was imperfect.
That provides some subtext for the recent decision from the World Trade Organization, which ruled that requiring Boeing to assemble the 777X and its composite wings in the state violates rules about foreign goods and local products being treated equally. The decision followed a complaint from the European Union — which subsidizes Boeing’s primary competitor, Airbus — and it was the latest salvo in on ongoing trade war between the two companies. Notably, the trade organization’s ruling rejected most of the European Union’s complaints about the deal, and Boeing officials hailed the decision as a victory for U.S. manufacturing.
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Cutting to the chase, with appeals in the works and with the complexities of the ruling still being worked out, next year’s Legislature should not be eager to reconstruct the tax breaks. For one thing, lawmakers have enough items on their agenda without worrying about capitulating to the World Trade Organization; for another, it will take some time for appeals to play out.
Meanwhile, the situation demonstrates the attention that will be paid to international trade in the coming years — which brings us to the second news item. President-elect Donald Trump helped negotiate a deal that will keep roughly 1,000 jobs in Indiana after Carrier, a manufacturer of air conditioning and heating units, had threatened to move those jobs to Mexico. The simplistic explanation is that Carrier will receive $7 million in tax breaks from the state of Indiana.
Therein lies the problem. By allowing Carrier to hold jobs hostage in exchange for tax breaks, it sets a precedent for other companies to follow. Boeing did the same thing a couple of years ago in Washington, which brings up the question of where the tipping point lies. Carrier has about 45,000 employees in 170 countries; Boeing has 80,000 in Washington alone.
With Trump having campaigned on a platform of being against trade agreements, vast changes could be in the works for the U.S. economy. Those changes inevitably will be felt in this state, leading us all to take a deep breath — and probably hold it for a while.