Boeing Co. received an illegal tax break from Washington state as part of $8.7 billion in aid to assemble the 777X and manufacture the jetliner's carbon-fiber wing there, the World Trade Organization said.

An incentive cutting a state levy on gross receipts by 40% is a prohibited subsidy that must be removed, a three-judge panel said Monday in Geneva. The tax break, which takes effect when the first 777X is delivered in 2020, gives an unfair advantage to the U.S. plane maker to the detriment of overseas manufacturers, the WTO determined.

The European Commission said Boeing would gain $5.7 billion from the disputed benefit, while the U.S. company put the value at $1 billion over 20 years. The decision marks the latest twist in a longstanding clash between the U.S. and the European Union over government incentives to ease the heavy costs of developing new jetliners for Chicago-based Boeing and Europe's Airbus Group SE.

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