The politics of bitter global trade disputes

Boeing is no stranger to disputes with foreign competitors, but a rising tide of protectionism has turned its most recent trade disagreement into an international throw down.

The US Commerce Department has announced its decision on Boeing’s allegation that Bombardier, a Canadian jet maker, was able to sell new aircraft in the US at unfairly low prices because of subsidies it received from the Canadian government. It imposed duties on Bombardier, making imports of the Canadian aircraft more expensive and potentially reshaping the airline industry for years.

Trade fights between multinational companies are routine, with career officials at Commerce weighing dozens of cases each year with little fanfare. Yet Boeing’s most recent challenge has become unusually high profile: In recent weeks, Prime Minister Justin Trudeau of Canada and Prime Minister Theresa May of Britain have publicly and privately urged President Donald Trump to persuade Boeing to drop the case.

Trump has not publicly weighed in on the dispute, and the White House typically plays no role in this particular type of trade case. Yet Trump’s previous criticisms of Boeing, maker of some of the US’ biggest high-tech exports, may be giving his foreign counterparts comfort to escalate the case to new heights.

Since winning the election, Trump berated Boeing on Twitter about the price of its 747 airliner. Speaking from a Boeing factory in South Carolina in February, the president threatened a “substantial penalty” for companies that move jobs overseas. The current dispute highlights an era of increased trade tensions and political intervention in markets.

Todd Tucker, a fellow at the Roosevelt Institute, said what would once have been a dry and straightforward trade case “in more boring days” had boiled over into a “multi-country feud.” “Once you start politicising some of these more technocratic disputes, it can escalate rapidly,” he said.

Boeing’s complaint alleged that substantial support from the Canadian government has allowed Bombardier to sell its CSeries aircraft at “absurdly low prices” in the US, undercutting a valuable market for Boeing. Bombardier has argued that Boeing is also a recipient of substantial government funding and that pricing new models more cheaply is a standard industry practice.

In a recent statement, Bombardier called Boeing’s complaints “pure hypocrisy”. Boeing is the largest beneficiary of the US Export-Import Bank, which subsidises US companies that send goods abroad. It has sparred at the World Trade Organisation for more than a decade with European rival Airbus over allegations that its subsidies violate the group’s rules.

“The perception in Canada is that Boeing is using US trade law as a commercial weapon, and that it’s pretty hypocritical coming from a company that receives billions and billions of US taxpayer subsidies,” said Roland Paris, a professor of international affairs at the University of Ottawa.

The dispute has unfolded against a backdrop of rising trade tensions between the US and its closest allies, especially Canada. While Trump focused on Mexico’s trade practices during the presidential campaign, the US has sparred with Canadian officials more often since his inauguration. The president has already traded barbs with Trudeau, criticising Canada over what US farmers and companies have called illegal subsidies of dairy and lumber exports to the US.

Officials from Canada, Mexico and the United States are meeting in Ottawa to hammer out some controversial elements of the North American Free Trade Agreement, including disputes between the US and its neighbour to the north. In fact, some of the most intractable areas in the ongoing negotiations over NAFTA are with Canada — such as the US’ effort to get rid of a particular type of trade panel that has often ruled in favour of the Canadian lumber industry.

Trump’s public bullying of corporations, individuals and others with whom he disagrees is prompting some foreign counterparts to dispatch with diplomatic niceties that have governed international relations for decades. In a joint news conference with May on September 18, Trudeau threatened to abandon a planned purchase of military aircraft from Boeing unless the case against Bombardier was dropped.

“We have obviously been looking at the Super Hornet aircraft from Boeing as a potential significant procurement of our new fighter jets,” the Canadian prime minister said. “But we won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business.”

May also raised the issue with Trump in a phone call on September. 5, and again on the sidelines of the UN General Assembly on Wednesday, according to the British Embassy. Analysts said May’s governing coalition in the UK hinges on the cooperation of representatives from Northern Ireland, where the wings for Bombardier’s CSeries aircraft are manufactured.

The Commerce Department’s ruling is the first in a series of decisions about what, if any, level of duties to impose on Bombardier planes coming across the border. The International Trade Commission, a US government agency that reviews unfair trade practices, could ultimately uphold or eliminate the Commerce Department duties in a final ruling early next year.

Bombardier or the Canadian government could also eventually challenge a ruling against Bombardier in a number of venues, including at the World Trade Organisation.

But, in the meantime, customs officials would start collecting duties on any planes that cross the border, likely chilling Bombardier sales and potentially prompting retaliation against Boeing. While Boeing argues that the Bombardier plane competes directly with Boeing’s American-made 737-700 and 737 MAX 7 planes, Bombardier says Boeing no longer makes aircraft as small as the CSeries.

Delta Air Lines, which ordered 75 of Bombardier’s smaller CSeries planes last year, said Boeing offered no viable alternative. “Boeing simply was not in the mix,” Greg May, a senior vice-president at Delta, told the International Trade Commission. “They did not have a plane that satisfied our mission profile and needs.”

Foreign leaders have asked Trump to intervene. But beyond persuading Boeing to withdraw its complaint, it is questionable how much influence Trump could have over a fairly bureaucratic process, Tucker said. Unlike a recent ruling on solar tariffs, the case does not officially go to the president for a decision.

— New York Times News Service