Inslee said he would like to see a national agreement to make that sort of state subsidy escalation illegal. His comments come just two months after Washington approved perhaps the largest corporate tax break in U.S. history - valued at nearly $9 billion - to persuade Boeing Co. to build a new airplane in the state.
The Democratic governor likened the state competition to international subsidies prohibited by the World Trade Organization.
So, while Washington state may have protection from subsidy competition from France, "we don't have protection against Texas or Utah," Inslee said.
Boeing recently explored bids from 22 states that wanted to secure the thousands of jobs that would come with production of the 777X. The company has promised to build the plane in the Puget Sound region after getting extended tax breaks from state lawmakers and concessions from union workers.
Alabama Gov. Robert Bentley said Wednesday that the company used the state "to some extent" as leverage during the company's negotiations in Washington state, where much of Boeing's production already takes place.
Machinists in the Puget Sound agreed last week to move away from traditional pensions in order to secure the long-term work on the 777X.
A Republican lawmaker in Washington state is now proposing that elected officials vote to surrender their pensions as well. Inslee said he didn't see any fiscal reason to do away with pensions for public workers, since the state pension system is stable.
Inslee also said the machinists were in a difficult position, facing the prospect of jobs going elsewhere if they didn't agree to the company's demands.
"I don't think anyone should say this is OK or acceptable or fair or beneficial or happy," Inslee said. "It was just a fact of economic life, and the machinists decided their destiny."
House Minority Leader Dan Kristiansen, meanwhile, said lawmakers need to look at whether pensions are the best option for the state, questioning why the private sector has steadily moved away from those types of retirement plans.