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Boeing could lose state tax break amid tariff fight

A Boeing 737 MAX plane is seen during a media tour of the Boeing plant in Renton, Washington, U.S. 7 December 2015 Image copyright Reuters

US lawmakers are taking steps to remove a tax break for Boeing that is at the centre of a fight between the European Union and the US.

Legislators in the state of Washington, Boeing's main manufacturing hub, introduced the plan on Wednesday.

They want to avoid a trans-Atlantic tariff war triggered by aircraft subsidies, the state's governor said.

The US last year imposed tariffs on $7.5bn worth European-made products as punishment for EU support for Airbus.

Those measures were approved by the World Trade Organization (WTO), which had ruled that the European support was illegal. The US recently ratcheted up the tariff rate on aircraft, in a bid to put pressure on the EU to act.

However, a similar case against the US, over the tax benefits for Boeing, is pending. In that case, the WTO is expected to rule in the EU's favour, clearing the way for retaliation against the US.

"There is broad agreement in Olympia that we need to act this session to address the WTO issue in order to avoid retaliatory tariffs that would damage not just our commercial aircraft industry, but other important Washington exports," Washington Governor Jay Inslee said in a statement.

The state of Washington, on the west coast, is a major manufacturing base for Boeing. It granted the controversial tax benefit in an effort to keep the company in the state.

In 2018, the company saved more than $100m from the part of the tax break that would be removed, according to the Seattle Times newspaper.

Boeing said it supports the measure and called on the EU to remove its support for Airbus.

"This legislation demonstrates the commitment of Washington - and of the United States - to fair and rules-based trade, and to compliance with the WTO's rulings," Boeing said.

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