WTO Set To Rein In Corporations' Cross-Country Extortion Racket

05/22/2010 05:12 am ET | Updated May 25, 2011

The World Trade Organization is due to issue an important decision this week. While progressives can and should criticize the WTO's secrecy and anti-democratic nature, we should actually be excited about the forthcoming ruling: it'll start to rein in corporate tax breaks in a way that our domestic leaders never would.

One of my formative experiences in politics took place in 2003, early in my term on the Providence City Council: GTech, the giant of the lottery management 'industry,' was based in southern Rhode Island. (Yes, Rhode Island is just big enough to have both a north and a south.) At the time, GTech had cornered a majority of the market for lotto management in the United States, and was used to employing hard-nosed tactics and having its way with government officials.

Even if you read no further, be sure to check out Greg Palast's story about the time GTech blackmailed George W. Bush into giving the firm a no-bid contract to run the Texas state lottery, by threatening to release privileged information about how he got into the Texas Air National Guard.

In Rhode Island, GTech used the threat of hopping the border to Massachusetts to strong-arm local officials into handing over a variety of subsidies, including a property tax break from cash-strapped Providence, worth more than 8 million dollars.

I reluctantly voted for the package, as we thought we'd extracted some meaningful local hiring and local purchasing concessions; unsurprisingly, the company largely wriggled out of those agreements, and I wish I could have that vote back, probably more than any other I've cast: at the barrel of a gun, we'd done little more than pay GTech millions of dollars to move from one end of the state to the other.

Since then, this race to the bottom has become one of my more esoteric policy obsessions:

Corporations regularly push around cities and states, playing them off of each other to extract tax breaks that empty public coffers and move jobs around, but rarely create new ones. For any number of reasons -- campaign contributions and other corporate pressures, quick positive press hits, the difficulties of promoting real economic development -- most government officials won't challenge this process. I've written about it here and here.

On Tuesday, however, the WTO is set to say that certain European subsidies to the aircraft builder Airbus are illegal. It issued preliminary findings in September:

A preliminary report by the World Trade Organization has found that Airbus received illegal subsidies for the $13 billion A380 superjumbo jet and several other airplanes, hurting Boeing in the battle for sales, American and European officials said Friday.

In its own right, the ruling will reduce pressure to hand over tax dollars to Boeing and other domestic plane manufacturers, as much of the case for such deals has been predicated their need to keep up with stiff competition abroad. But the more exciting development is likely to follow, a few months from now: The EU has filed a complaint of its own, arguing that American subsidies -- including innumerable state and local tax breaks -- to Boeing are also invalid:

A counterclaim by the European Union, meanwhile, is being reviewed by a separate W.T.O. panel. That suit contends that Boeing has received at least $24 billion in backdoor subsidies through generous contracts with the United States military and space programs, as well as significant tax breaks from Washington State.

A ruling on the EU's charges is expected later this spring, and could mean an end to rampant undeserved tax breaks for any corporation that's good at making threats -- and also provide much-needed help for state budgets as we strive to pull ourselves out of the recession and stave off regressive tax increases and cuts to education and other services. It's tragic that we need to rely on the opaque operations of an unaccountable international body to do what our elected officials ought to, but in this economy, and in a post-Citizens United world in which corporate influence is likely to expand, let's not look this gift horse in the mouth.