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Saturday, February 22, 2020

PBS "Frontline" episode analyzes Amazon, including HQ2

The PBS series "Frontline" on February 18 broadcast a nearly two-hour investigation of Amazon, "Amazon Empire: The Rise and Reign of Jeff Bezos." There were many important points to the story.

Naturally, there was coverage of the HQ2 auction, with an interview of Good Jobs First executive director Greg LeRoy, who also spoke on Amazon's early benefit of avoiding sales tax, something brick and mortar stores can't do. In fact, Amazon did not collect sales tax nationwide until 2017.

Labor relations were another important focus of the show. Amazon is infamously anti-union, one of the issues that came up after the company announced it would put half of HQ2 in New York City. Blowback on that score was one reason Amazon pulled out of that investment. Speedup and related safety issues (i.e., that it was difficult to "make quota" in the warehouse without cutting safety corners) are one more source of contention the story focused on. The company also chose to use a delivery truck that was too small for Department of Transportation regulations to apply to it, despite having thousands of drivers and their traffic accidents. The thing is, while we can easily find out how many vehicle accidents drivers for FedEx and UPS have, there is no comparable source of information for Amazon due to its avoidance of regulation.

Needless to say, Amazon has used tax haven subsidiaries to avoid paying taxes. According to Think Progress in 2012, all of these subsidiaries were in Luxembourg. Its report said the company's tax arrangements under so-called "check-the-box" provisions of the U.S. tax code saved it $700 million in U.S. taxes up to that point. The European Union pursued tax agreements between Amazon and Luxembourg as an illegal state aid, ordering the company to repay €250 million ($294 million) to Luxembourg in 2017.

Finally, "Frontline" covers the question of whether Facebook is a monopoly or has market power. Hilariously -- and tellingly -- company executives never use the phrase "market share," only coming as close as "market segment share." But the show interviewed numerous people who recounted what happened when Amazon suddenly stopped carrying their products, and many people were afraid to come on the show because of fear of retribution from Amazon. I recommend it highly.

Thursday, February 20, 2020

Wow! Boeing asks for end of Washington State subsidies UPDATED X 2

The New York Times is reporting that Boeing Corporation has requested that the state of Washington stop providing it with tax breaks that the World Trade Organization (WTO) has on multiple occasions ruled to be an illegal subsidy under the Agreement on Subsidies and Countervailing Measures. On February 19, State Senator Marko Liias and co-sponsors introduced a bill at the company's request to end these subsidies.

Of course, Boeing's move did not come from the goodness of the company's heart. It represents part of its maneuvering in its WTO war with Airbus. 16 years ago, the United States challenged Airbus' EU subsidies at the WTO and the European Union fired right back with a complaint against Boeing's subsidies from the state and federal government. Both won as plaintiffs and lost as defendants. (The same was true for Canada and Brazil, which alleged illegal export subsidies to Embraer and Bombardier regional jets.) As I noted over six years ago, while the federal government had eliminated its subsidies to Boeing through NASA and the Department of Defense, the state and local subsidies were continuing merrily along. Indeed, the WTO Appellate Body affirmed this again last year (h/t NYT), with the state subsidies valued at $100 million per year.

As a result, the company wants to clean its slate in order to help the United States press its case against Airbus and the unresolved issues there with EU subsidies. (Note that in the WTO, only countries have standing to file complaints; companies cannot do so.) Airbus received billions of dollars worth of subsidized loans in so-called "launch aid." This is quite an amazing dispute: Not only has it lasted ever since the World Trade Organization came into being in 1995, but a settlement to the dispute was supposed to be part of the agreements creating the WTO.

The bill is expected to pass in the current legislative session, which ends March 12. Thus, thanks to the European Union and the World Trade Organization, Washington taxpayers will save $100 million a year going forward.

Update: CNBC reports that the tax break saved Boeing $200 million in 2018, double the amount mentioned above.

Update 2: My colleague Kasia Tarczynska at Good Jobs First reminds me that Boeing also receives subsidies in Missouri and South Carolina. This led me back to the WTO's report on U.S. compliance as modified by the Appellate Body. While the dispute, for whatever reason, did not include Missouri subsidies, it also covered a variety of subsidies beyond Washington state, including Industrial Revenue Bonds (IRBs) from Wichita, Kansas, and 11 subsides that comprised the South Carolina package. If I have this correct, the Dispute Panel found that the United States had not removed the state and local subsidies in Washington, while the Appellate Body added that only some of the subsidies in South Carolina were in violation of the rules, and it was unclear if Wichita's IRBs constituted a "specific subsidy" that could be sanctioned. It is possible, therefore, that Boeing may have some more cleaning up to do to get to the blank slate it wants to have when it presses against Airbus subsidies.