By: Zack Duvall
The U.S. Commerce Department is set to announce its decision this week on allegations made by American aerospace and defense company, Boeing, that a Canadian-based rival has been using subsidies provided by the Canadian government to introduce its products to the American marketplace at an “absurdly low price.”
The complaint by Boeing says that the Canadian company, Bombardier Inc., introduced a new version of its C-series commercial jetliner to U.S. markets at a price that undercut American alternatives to that product because production costs were offset by funds from Canada’s taxpayers.
If the Commerce Department sides with Boeing on the case then fines, also called ‘duties’, would be levied on all further Bombardier imports to the U.S. for a period to be determined by the department.
Although a favorable ruling for Boeing would impact the U.S., and possibly global, airline industry for years, a new dynamic to this kind of case is that some major world leaders are taking a very strong interest in this particular trade dispute, a very troubling sign that historically mundane trade practices, policies and disputes are set to become highly politicized international affairs.
Something that trade analysts and experts, including Todd Tucker a fellow at the Roosevelt Institute, are sounding the alarm about.
“Once you start politicizing some of these more technocratic disputes, it can escalate quickly.” Tucker said in an interview about the matter.
He went on to say that historically major heads of state had allowed their nation’s trade officials and representatives handle all disputes between companies and trade entities, even if they were international bodies. But said that recently more elected leaders were getting “hands on” with various trade related issues.
A practice that has been responsible for oftentimes dry and rather straightforward cases turning into international feuds as in the Boeing-Bombardier case.
Just this month Theresa May of the United Kingdom and Canada’s Prime Minister, Justin Trudeau, held a major press conference to put pressure on Boeing to drop the case, going so far to threaten the cancellation of joint contracts with Boeing to purchase military aircraft from the company.
“We won’t do business with a company that is busy trying to sue us and put our aerospace workers out of business.” Trudeau said in a statement during the news conference.
May, who has also called President Trump to discuss the issue as recently as September 5th, said that the UK’s interest in the matter is making sure that Bombardier’s workers in Ireland, where the company’s aircraft wing components are made, are “not adversely impacted” by Boeing’s action against the company.
Bombardier has issued several statements slamming the allegations by Boeing as “pure hypocrisy” and says that the use of government subsidies by aerospace companies is “standard industry practice” citing Boeing’s own use of such funds.
“The perception in Canada is that Boeing is using U.S. trade laws as a commercial weapon, and that it’s pretty hypocritical coming from a company that receives billions and billions of taxpayer dollars.” A statement about the case said.
Boeing is the single largest beneficiary of the U.S. Export-Import Bank’s subsidy program for American companies that send goods abroad.
President Trump has yet to weigh in on the issue, but in the past, the White House has always stayed out of such trade disputes and allowed the relevant authorities decide on trade disputes.
However, the case, and all of the attention surrounding it, comes at a time when U.S. representatives travel to Ottawa, Canada and meet with Mexican and Canadian officials to discuss changes set to be made to the North American Free Trade Agreement (NAFTA), including the settlement of longstanding U.S.-Canadian trade-related disagreements such as a years-long lumber industry fight.
Although a favorable ruling from the Commerce Department would immediately enact tough fines, or “duties”, against all Bombardier products that enter the U.S. it would only be the first in a series of reviews ending with a final decision by The International Trade Commission, a U.S. government agency sometime next year.