Boeing : Use tax breaks sparingly

Editor’s note: Today’s editorials originally appeared in The Columbian and Seattle Times. Editorial content from other publications is provided to give readers a sampling of regional and national opinion and does not necessarily reflect positions endorsed by the Editorial Board of The Daily News.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 state’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. Lawmakers should have been more diligent about tying up loose ends in the agreement to ensure that the company was beholden to citizens. 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.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 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.How does canceling Boeing contract save U.S. jobs?President-elect Donald Trump’s scrutiny of defense-procurement costs is welcome.Less welcome is Trump abruptly blurting out that he’ll cancel a contract affecting thousands of American manufacturing jobs in Washington state.That’s the effect of Trump tweeting Tuesday morning about Boeing’s work on the new Air Force One planes. He said, “Costs are out of control, more than $4 billion. Cancel order!”Despite having invested in Boeing and being a satisfied 757 customer, Trump has used the company as a punching bag in attacks on trade and now procurement costs.Trump must reconcile this stance with his promise to support American workers affected by global trade.Perhaps Boeing is singled out for bullying because it exposes a fatal flaw in Trump’s argument for protectionism: The aerospace company is the prime example of how America must embrace foreign trade to support its beleaguered manufacturing industry.Trump’s support should also extend to all American workers, not just a select few in states such as Indiana that voted for him.Indiana is where Trump last month pressed Carrier to keep about 800 manufacturing jobs in the state rather than move them to Mexico. It’s also the state governed by Vice President-elect Mike Pence.Get news headlines sent daily to your inboxThis generated positive headlines and support, even though Carrier will now automate the Indiana factory to lower costs and reduce jobs.America and its manufacturing industry will not be made greater with one-off deals involving members of Trump’s inner circle.To support current and future industry and jobs, the country needs policies supporting economic development and education from coast to coast. It must also support trade with foreign countries, which provide the majority of customers and growth opportunities for U.S. companies.At the start of this year, around 2,000 people were employed building 747s. The planes are globally recognized symbols of American manufacturing and technical prowess, especially customized versions that carry the president.The planes are mostly sold to international-cargo companies, which have reduced purchases as trade has slowed. This has led to cutbacks and created uncertainty about how much longer production will continue.Among the final buyers is the U.S. Air Force, which decided last year to use the 747-8 for the next version of Air Force One. It approved an initial contract with Boeing this year.More than $3 billion is budgeted through 2021 to develop several of the jets into flying-command centers for the president. They will be among the world’s most sophisticated aircraft, with features such as aerial refueling and defensive capabilities.The cost is breathtaking and deserves scrutiny before the full program is approved.Yet even more shocking is the inconsistency in Trump’s position toward American workers, and his ongoing pursuit of headlines with knee-jerk tweets.© Copyright © 2016 The Daily News Online, 770 11th Ave Longview, WA, All rights reserved., source Newspapers

Leave a Reply