It's Canada and U.K. v. U.S. airplane giant at trade tribunal hearing
Canada's Ambassador to the United States David MacNaughton attends a business luncheon in Montreal, Wednesday, November 16, 2016. (Graham Hughes / THE CANADIAN PRESS)
Alexander Panetta, The Canadian Press
Published Monday, December 18, 2017 10:47AM EST
Last Updated Monday, December 18, 2017 5:35PM EST
WASHINGTON -- In a test case for the aggressive use of trade penalties in Donald Trump's America, the Canadian and British governments urged a U.S. tribunal Monday not to impose duties on Bombardier planes
Canada's ambassador to Washington argued that potential duties of up to 300 per cent on Bombardier's C-Series jet were illegitimate and he urged the U.S. International Trade Commission to reject them.
On the same day the ambassador was fighting one commercial dispute, the Trump administration released a new national security strategy mentioning trade almost five-dozen times, heralding an elbows-up attitude to trade in general.
And, in New York state, the governor instituted a new law with Buy American provisions.
MacNaughton listed several problems with the penalty on Bombardier. First, he said it's rooted in speculation that American powerhouse Boeing will be hurt by Bombardier C-Series imports, the sort of conjecture forbidden not only under U.S. law, but also by World Trade Organization rules.
Moreover, he told the commission there's no evidence Bombardier planes will be exported to the U.S.; that the C-Series does not compete with similar-sized Boeing aircraft; that Boeing has a seven-year backlog in sales, invalidating its claim of an injury; and that duties would ultimately hurt Americans because Bombardier accounts for 23,000 jobs in nine U.S. states.
The British ambassador to the U.S. made a similar case, and added another shot at Boeing. Kim Darroch argued that Boeing has benefited from billions in government support via different U.S. mechanisms, while it complains about subsidies elsewhere.
MacNaughton acknowledged the broader implications of this fight.
Speaking to reporters outside the hearing, he said anti-trade rhetoric in the U.S., not just from the Trump administration, has emboldened companies to launch commercial attacks on their foreign rivals.
"What we are seeing is because of, in large measure, the rhetoric that exists in the United States at the present moment -- and I'm not just referring to one source of the rhetoric, I'm talking broadly of the anti-trade rhetoric -- it has given U.S. companies the permission to take action they wouldn't have taken before," MacNaughton said.
"The real danger of this is it's going to have a negative impact on U.S. jobs."
The Trump administration itself has boasted about how trade complaints like Boeing's have surged since it took office. On Monday, it released a new national security strategy and listed trade as a top threat.
"Economic security is national security," it said the document. "Unfair trade practices (have) weakened our economy and exported our jobs."
In New York State, Democratic Gov. Andrew Cuomo signed a law with Buy American rules for steel and iron on bridges, more limited than earlier domestic-procurement rules Canadian premiers had lobbied against.
Boeing argued that it's Canada that is practising unfair trade.
The company said public subsidies in Canada have allowed its rival to stay alive, and creep into potential markets. It said C-Series sales are already hurting its orders and claimed the recent Bombardier-Airbus partnership to build in Alabama is a ruse that would disappear if duties are rescinded.
It's hard to compete when your rival benefits from a bottomless source of funding from foreign taxpayers, said the president and chief executive officer of Boeing Commercial Airplanes, Kevin McAllister.
"Boeing makes the best airplanes in the world. But we can't compete with companies funded and backed by governments," McAllister said.
"In a fair competition, I'll bet on Boeing, our U.S. employees, and the U.S. industry every time. But we should only have to compete against private companies -- not governments and the airplanes they create and produce through endless subsidies."
He cited examples of how hard it is to compete with government. For example, he noted that the Canadian government recently cancelled a big military contract for Boeing Super Hornets, in retaliation for the fight with Bombardier.
He also argued that rock-bottom prices, subsidized by Canadian taxpayers, helped Bombardier swoop in to steal a contract with Delta, when that airline had initially looking to buy used airplanes in a deal brokered by Boeing.
"Essentially Bombardier offered new airplanes at used airplane prices. And it worked," McAllister said.
He also cast this fight as something bigger. The Boeing executive explained how he grew up in Bethlehem, Pa., and saw the iconic Bethlehem Steel company shut down a generation ago, killed slowly by a variety of factors including dumped foreign steel.
He said he now keeps a painting of the old plant in his office: "This left an impression on me."
One trade expert said the aircraft feud might have happened under any other presidency, as Boeing has the right to a bureaucratic investigation under American trade laws -- independent of the politics.
But Chad Brown, co-host of the "Trade Talks" podcast and senior fellow of the Peterson Institute for International Economics, said it's notable that Boeing filed this case in the U.S., rather than going the usual route of past aircraft disputes: the WTO.
"I would argue that Trump's approach to trade policy made it more likely that Boeing would file this case," Brown said.