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Boeing, to Fend Off Sanctions, Backs Ending State Tax Breaks

Washington State is expected to approve legislation removing what the World Trade Organization says are unfair subsidies.

An unpainted Boeing 737 Max at the company’s factory in Renton, Wash.Credit...Lindsey Wasson for The New York Times

Moving to end a threat of international trade sanctions against Boeing, lawmakers in Washington State on Wednesday introduced legislation that would eliminate tax breaks for the plane maker.

The World Trade Organization concluded last year that Boeing benefited from unfair subsidies from the state worth roughly $100 million a year.

State Senator Marko Liias, a sponsor of the bill, said the proposal had come from Boeing itself. The Legislature is expected to act before its session ends on March 12.

Boeing was founded more than a century ago in Seattle, and though its headquarters are now in Chicago, Washington State remains its manufacturing hub. It also has a factory in South Carolina.

The fight over tax breaks is rooted in a long-running dispute between federal trade officials and Boeing’s European archrival, Airbus, over aid that Airbus received as it developed airliners for the global market.

The United States and Boeing contend that Airbus received billions in so-called launch aid from European countries as it developed new aircraft, while European officials and Airbus responded that Boeing had received illegal subsidies from Washington State.

Late last year, after the W.T.O. upheld the American complaint, the United States imposed tariffs on $7.5 billion worth of European imports in response to the aid to Airbus.

American officials were bracing for retaliatory duties over the Boeing case, but doing away with the state tax breaks eliminates a target for European Union trade representatives.

“We don’t want to face tariffs,” said Mr. Liias, who added that the duties imposed by the European Union could have extended well beyond Boeing jets, to agricultural products like apples and cherries.

What’s more, they would come even as Boeing — the country’s largest manufacturing exporter — struggles to cope with the grounding of its 737 Max jet after two crashes. “Retaliatory tariffs would come at the wrong time,” he said. “Boeing is trying to get back on its feet, and we want to stay out of broader trade disputes.”

In a statement, Boeing said the legislation “demonstrates the commitment of Washington — and of the United States — to fair and rules-based trade, and to compliance with the W.T.O.’s rulings.”

Airbus declined to comment.

Scott Hamilton, managing director of the Leeham Company, an aviation consultancy, said the legislation was tactically savvy. “It’s a brilliant move on Boeing’s part to resolve its side of the W.T.O. trade dispute,” he said. “Airbus is now hanging out there with no leverage. Airbus suddenly has a very weak hand.”

The legislation would not eliminate the possibility of retaliatory tariffs but it removes a major cause for concern.

Even if this dispute is resolved, trade fights over the commercial aircraft industry are likely to continue, said Chad P. Bown, a senior fellow with the Peterson Institute for International Economics, a nonprofit research group. Airbus was created as a government consortium and has received billions in government aid since it was founded in 1970. And as a major military contractor, Boeing has benefited from Washington’s largess.

Still, Mr. Bown said Boeing’s move was notable. “It’s very difficult for Washington State and Boeing to give up their subsidies,” he said. “So anytime somebody gives up their subsidies that have been ruled illegal, that’s a big deal.”

Natalie Kitroeff contributed reporting.

Nelson D. Schwartz has covered economics since 2012. Previously, he wrote about Wall Street and banking, and also served as European economic correspondent in Paris. He joined The Times in 2007 as a feature writer for the Sunday Business section. More about Nelson D. Schwartz

A version of this article appears in print on  , Section B, Page 3 of the New York edition with the headline: Boeing Sees Tax Bite As a Sanctions Shield. Order Reprints | Today’s Paper | Subscribe

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