Washington state repeals tax break; Boeing says U.S. complies with trade deal

WASHINGTON (Reuters) – Boeing (BA.N) said Washington state’s move on Thursday to repeal of an aerospace business tax break brings the United States into full compliance with World Trade Organization rules, which U.S. policymakers hope will avert European Union tariffs on U.S. goods.

The Washington state Senate approved a measure removing the tax break in a 45-4 vote on Thursday, giving formal approval to a revised bill passed late on Wednesday by the state House and sending it to Washington state Governor Jay Inslee for a potential signature.

“Today’s repeal by Washington state of its aerospace business and occupation tax rate brings the United States into full WTO compliance by fixing the single finding against the U.S., further emphasizing our commitment to free and fair trade,” Boeing said in a statement.

The move came ahead of an expected decision this spring from the WTO global trade body that would allow the EU to impose tariffs on an as yet undetermined amount of U.S. imports.

The Geneva-based WTO has found that Boeing and Europe’s Airbus (AIR.PA), the world’s two largest planemakers, received billions of dollars of unfair subsidies in cases dating back to 2004. It has faulted both sides for failing to comply fully with previous rulings, opening the door to a tariff war.

After years of debate, the focus of the European case against the United States involves a preferential state tax rate for aerospace introduced 16 years ago and renewed in 2013 to help attract production work for Boeing’s 777X.

If signed into law, the Washington state changes would remove the 40% saving on Business and Occupation tax, which saved Boeing some $118 million in 2018 based on published jetliner revenues.

The United States in February toughened its own tariffs on aircraft built by Boeing’s arch-rival Airbus after winning approval last year from the WTO to penalize $7.5 billion in European goods over Airbus subsidies.

A decision in the parallel EU case against the United States is expected sometime in coming months.

Makers of products ranging from luxury goods to whisky have raised concerns over the impact of a tit-for-tat tariff war spreading beyond the aerospace industry.