OPEN LETTER

Dear Legislators:

Many of you expressed frustration earlier this year when the governor committed the state to unprecedented subsidies for Boeing without first gaining your approval. Although the state’s 7E7 Project Office says that your approval of the 2004 supplemental budget(s) this year (which included funding for the Boeing training center) amounted to legislative approval of the entire Boeing agreement, there has never been a section-by-section scrutiny of the agreement by the legislature.

Due to Boeing’s prodding of the Bush administration to file a WTO complaint against Airbus subsidies, the opportunity may now exist for the legislature to re-open negotiations with Boeing and amend the state’s agreement as deemed necessary. The European Union has filed a counter WTO complaint against Boeing’s subsidies and Boeing has indicated it is “willing to discuss everything and anything” concerning the state’s agreement.

In the Seattle Times on October 12, Boeing CEO Harry Stonecipher addressed the possibility that the WTO may invalidate portions of Washington’s subsidy agreement: “It would not affect our plans one iota in terms of going forward with the 7E7. The 7E7 is going ahead. It was going ahead with or without the Washington state tax incentives.”

You’ll recall the state is granting Boeing billions of dollars in tax incentives and hundreds of millions of dollars in other assistance (roads, port upgrades, etc). These subsidies were granted because the state was told it was unequivocally necessary to keep Boeing’s 7E7 final assembly in Washington. However, Boeing now acknowledges these subsidies will likely be bargaining chips in the WTO process and, again, said the 7E7 is “going ahead with or without the Washington state tax incentives.”

In light of the current WTO review of the competing subsidy complaints, the legislature should take advantage of Boeing’s apparent “willing[ness] to discuss everything and anything” about the state’s agreement and conduct the critical oversight of each section of the agreement that has been lacking to date.

In the current WTO climate, two sections of the state’s Boeing agreement in particular should be reviewed: The first is section 10.4, which requires the state to replace any removed incentive with one of equal value. The second is section 11.3, which requires the state to “assume the entire defense of [any legal challenge] including all fees, costs and expenses whatsoever . . .” (i.e. a WTO challenge).

Under these sections, the state has to replace any incentive the WTO throws out for violations of trade rules and any legal expenses incurred can be charged by Boeing to the state. A win-win for Boeing, but a lose-lose for Washington taxpayers.

Should the legislature decide to keep aspects of the incentive package in place for Boeing, we suggest that the Priorities of Government (POG) process be extended to these resources and clearly defined value-added be required (i.e. actual job creation in Washington, not Japan, Italy, Texas). Ultimately, however, the legislature should address business climate concerns on a statewide and non-discriminatory basis for all employers and employees.

Since the legislature approved the Boeing tax incentives in June 2003 (not the complete subsidy contract signed by the governor on December 19, 2003), Boeing’s state employment has declined by 3,078 positions (6/03: 57,000; 10/04: 53,922).

Remember, according to Boeing, changes to the agreement will not affect Boeing’s plan “one iota in terms of going forward with the 7E7. The 7E7 is going ahead. It was going ahead with or without the Washington state tax incentives.”

Please let me know if you have any questions or if we can be of any assistance as you move forward.

Seattle Times: Fewer subsidies from state won't affect 7E7
Washington Boeing contract (main document)

Sincerely,

Bob Williams, President
Evergreen Freedom Foundation

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org