Canada-based Bombardier just won a major trade case. Boeing had accused the aerospace giant of accepting billions in “unfair” Canadian government subsidies, subsidies that allowed Bombardier to undercut its rivals — read: Boeing — on price. The U.S. International Trade Commission (ITC) disagreed. The government agency, which can act against unfair trade practices, ruled that Boeing was not harmed by Bombardier’s prices. Bombardier called that decision “a victory for innovation, competition, and the rule of law.”
1. What’s the story behind this dispute?
The disagreement centers on Bombardier’s C series — a new generation of airplanes more technologically advanced and fuel-efficient than its rivals. Bombardier spent over $6 billion bringing the aircraft to market. The C series also received backing from Canadian politicians who ponied up more than $1 billion in taxpayer funds to support the program.
Boeing argues that these handouts were illegal. The company further contends that this support allowed for the C series to be dumped into the U.S. market, “harm[ing] American workers and the aerospace industry they support.” Boeing eventually filed a trade complaint with the U.S. Commerce Department.
2. Why is the ruling significant?
The Commerce Department sided with Boeing and handed Bombardier a hefty fine. This meant that any U.S. airline buying the C series would pay a 300 percent penalty on each airplane purchased. The result? Higher costs for the airline or outright cancellation of pending C series orders. The ITC’s decision ends these prospects.
It also eases pressure on the British government. The reason? Jobs. Bombardier employs over 4,000 workers in Northern Ireland alone and is the region’s largest manufacturing employer. A further 20,000 jobs across the United Kingdom are linked to Bombardier’s supply chain.
[interstitial_link url=”https://www.washingtonpost.com/news/monkey-cage/wp/2017/06/05/trump-wants-to-privatize-air-traffic-control-heres-what-that-means/”]Trump wants to privatize air traffic control. Here’s what that means.[/interstitial_link]
3. How has the Trump administration responded?
Following the ITC’s decision, U.S. Commerce Secretary Wilbur Ross said the outcome “shows how robust our system of checks and balances is.” But that’s quite different from his previous comments. When Commerce initially ruled against Bombardier, Ross hailed it as an affirmation of President Trump’s “America first” policy. In a statement he noted, “We will . . . do everything in our power to stand up for American companies and their workers.”
Complicating matters further are Bombardier’s plans to open an assembly plant in Alabama. The move was part of the company’s strategy to avoid penalties levied by Commerce by recruiting U.S. workers. With those penalties now voided, the incentive to “hire American” has faded. However, axing jobs — notably, high-paying manufacturing jobs — in the deeply red state could dent support among core Trump supporters.
4. Could U.S. jobs be lost?
Bombardier’s CEO says no. In a recent interview with CNBC, Alain Bellemare emphasized that Bombardier has invested heavily in the United States and will be “doing more by putting the assembly line in Mobile, Alabama.” But Bellemare has said little about whether the number of jobs created in the aftermath of the ITC’s decision will remain intact.
Bellemare’s decision to kill the status quo will be influenced by Canadian politics. The government of Quebec, for example, is heavily invested in the C series. Consequently, local politicians will be keen to keep jobs associated with the program in Quebec. They will also point out that Bombardier already supports over 22,000 U.S. workers in 12 U.S. states. Canadian workers, these politicians will argue, should come first.
Ashley Nunes is a research scientist at MIT’s Center for Transportation and Logistics.