GENEVA/PARIS, Sept 4 (Reuters) - The World Trade Organization delivered a setback to the European Union in a long-running trade row with the United States over aircraft subsidies on Monday, reversing a recent ruling that Boeing had received prohibited support for its newest jet.
The decision by WTO appeal judges overturns a decision to ban some Washington-state support for facilities including a $1 billion plant designed to build the world's largest carbon-composite wings for Boeing's future 777X.
A WTO panel ruled last year that a reduction in the state's business and occupation tax in return for a decision to place 777X production in the state had deliberately shut out imports.
But its appeals body found the tax breaks had not explicitly targeted trade flows, removing them from the WTO's most severe category of banned aid known as "prohibited" subsidies.
The decision neutralises a potential trump card which the EU played in 2014 to shake up the world’s biggest trade dispute -- a decade into the war of rival claims between Washington and Brussels over billions of dollars of support for planemakers. (Reporting by Tim Hepher, editing by Tom Miles)