Sunday, October 08, 2017

Au Revoir, Bombardier

          By Brian Orlotti

The protectionist Donald Trump Administration dealt a potentially fatal blow to Canadian aircraft maker Bombardier by imposing a nearly 80% anti-dumping duty on its new C Series airliners that were to be sold in the US market.

As outlined in the October 6th, 2017 Canadian Press post, "Bombardier C-Series hit with 2nd tariff by US," the penalty comes on top of a separate duty of 220% imposed by the US Department of Commerce the previous week. The moves mark an escalation of the United States’ trade war against Canada and casts grave doubt over the already-tense North American Free Trade Agreement (NAFTA) renegotiation currently underway. 

The rulings, prompted by a lawsuit launched earlier this year by US aerospace behemoth Boeing Co., has triggered political shock waves in both Canada and the United Kingdom, both home to large Bombardier facilities and thousands of its employees.

Prime Minister Justin Trudeau has accused Boeing of trying to put Canadians out of work and threatened to retaliate by cancelling a major contract to buy 18 Boeing Super Hornet fighters to augment Canada’s aging fleet of CF-18s.

Quebec Premier Philippe Couillard has stated that from now on "not one bolt, not one part, not one plane" made by Boeing should be purchased by Canada until the dispute is resolved.

In the UK, where the C Series’ wings are assembled, Defence Minister Michael Fallon has also vowed to retaliate, though like Canada, British officials are using political back channels with the United States in an attempt to get the duties dropped.

Combined, the two levies will more than triple the price of Bombardier C Series aircraft sold to the US.

Boeing alleges Bombardier used “unfair” subsidies from the Canadian, Quebec, and UK governments to slash prices on the C Series and make inroads with major U.S. airlines, in effect selling at far below cost.

Yet, as outlined in the September 28th, 2018 Global News post, "Bombardier got subsidies? Boeing received $64B from the U.S. government," the alleged $2.5Bln USD ($3.1Bln CDN) in subsidies is utterly dwarfed by the $64Bln USD ($80Bln CDN) in federal loans and loan guarantees (typically non-repayable) Boeing received from the U.S. government between 2000 and 2014.

This is in addition to Boeing’s entrenched status as a prime military contractor, almost operating as a branch of the US military itself. When viewed in this light, the US rulings come across as rank hypocrisy.

The rulings, though a product of Donald Trump’s ultra-nationalist “America First” policy, are not without  opposition in the US.

Bombardier relies on US-based subcontractors for supplying many of the C-series’ subsystems. In an ironic twist, the US Dept of Commerce’s rulings may put many Americans out of work as well.

As outlined in the October 6th, 2017 Globe and Mail post, "Trump administration punishes Bombardier with another import duty," six members of the US Congress representing Kansas and other states that are home to Bombardier suppliers have also weighed in.

"This decision is short-sighted and threatens thousands of good jobs across the country," they said in a joint statement. "We urge the department to work with the parties to find a responsible solution."

Is the true target of US sanctions against Bombardier Canada or China? The October 9th, 2017 Aviation Week post, "Opinion: Why Boeing vs. Bombardier Is Really About China," argues the latter. Screenshot c/o Aviation Week.

Bombardier’s management say they are confident that they will win several new orders for the C-series this year from customers in Asia and Africa. Meanwhile, the US rulings’ true test will come next year when Boeing will need to prove before the International Trade Commission (ITC) that it suffered injury at the hands of the C Series.

Only then will the duties be finalized. Prospects for a repeal of the rulings are slim, however, since US law is biased in favour of the domestic complainant.

As Boeing and the Trump Administration move to crush their Canadian competition, Bombardier (and Canada) must seek out new partners and finally embrace a global mindset.

It’s time for Canadians to truly stand on guard.
Brian Orlotti.

Brian Orlotti is a regular contributor to the Commercial Space blog.

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