By Tom Miles
GENEVA (Reuters) - The European Union opened a new front in a decade-old dispute over aircraft subsidies on Friday, launching a complaint at the World Trade Organization alleging illegal tax breaks in Boeing's (N:BA) home state of Washington.
The EU said the Pacific coast state, historically the base for nearly all Boeing's plane manufacturing, broke global trade rules by offering tax incentives to persuade the company to manufacture its latest model, the 777X, there.
The EU and United States have yet to resolve two parallel clashes involving mutual accusations of illegal subsidies for Boeing and its European rival Airbus (PA:AIR), collectively the biggest and longest-running dispute in the WTO's history.
Earlier this year, Reuters exclusively reported that the European Union was considering challenging the tax breaks, opening a new phase in the marathon dispute.
The latest manoeuvres could deepen the bitter industrial contest as the 406-seat Boeing 777X, an expanded version of its profitable 777, competes with Europe's upcoming A350-1000.
Airbus is due to deliver its first member of the new A350 family, the smaller A350-900, to Qatar Airways on Monday.
In its new complaint, the EU said the WTO had ruled in 2012 that Washington state's support for Boeing and other aerospace firms until 2024 was illegal, and it was now challenging the extension of these alleged subsidies until 2040.
"The subsidies scheme extension is estimated to be worth $8.7 billion and will be the largest subsidy for the civil aerospace industry in U.S. history," the EU said in a statement.
Washington state lawmakers extended the tax breaks during a brief special session in November 2013. The approval came after Boeing said the credits were necessary for the company to locate production of the 777X in the state.
Washington state officials say the credits are available to all commercial aerospace producers and that in 2013, 460 firms claimed incentives under at least one of the programmes, including "many European-owned aerospace suppliers".
The EU has in the past described such measures as a sham.
Under WTO rules, the United States has 60 days to try to deal with the EU's concerns in bilateral talks. After that period, the EU could ask the WTO to set up a panel of three adjudicators to rule on its complaint.
That would probably take until 2016 at least, although the WTO's dispute system is already congested, and any judgment could be followed by an appeal.
A spokesman for Washington state Governor Jay Inslee said he was "aware of the request for consultations" and would continue to work with the U.S. Trade Representative's office (USTR).
(Additional reporting by Tim Hepher in Paris and Alwyn Scott in Seattle; Editing by Andrew Roche)