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NAFTA Chapter 19 intensifies as a pivotal issue after U.S. ruling against Bombardier

Unifor workers rally to call on Boeing to drop it’s complaint against Bombardier, Sept. 20

In what could become a rapidly escalating trade war during the renegotiation of the North American Free Trade Agreement (NAFTA), the United States Department of Commerce has slapped a 219.6 per cent countervailing duty on the export of Montreal-based Bombardier CSeries passenger jets to the U.S., which effectively triples their per airplane cost from about $19 million each to about $61 million each.

The Canadian Press reports, “The U.S. Department of Commerce has clobbered aerospace giant Bombardier with a hefty 220 per cent countervailing duty on the sale of its CS100 commercial jets to a U.S. airline following a trade complaint from an American rival [Boeing]. The department ruled that Bombardier benefited from improper government subsidies, a finding that deals a blow to the Montreal-based company’s chances in its dispute with U.S. rival Boeing. …The financial penalties aren’t officially due until Bombardier delivers the first CS100 to Delta sometime in the spring.”

The article adds, “With one preliminary ruling out of the way, the Commerce Department will now turn its attention to whether Bombardier ‘dumped’ its CS100s into the U.S. market by selling them below cost. That finding is scheduled for Oct. 4, but could be delayed. …The question of whether the Bombardier-Delta deal hurt Boeing is being tackled by the U.S. International Trade Commission, whose ruling likely won’t come out until spring. The commission’s ruling will be the key to whether any duties slapped on the CS100s become permanent, or whether the case is dismissed, all duties paid are refunded and the Bombardier-Delta deal can go ahead as planned.”

In other words, final rulings on this case are expected around the same time that NAFTA 2.0 talks could conclude.

The Globe and Mail’s National Business Correspondent Barrie McKenna comments, “The deck is heavily stacked against a foreign company such as Bombardier when it’s going up against a politically powerful domestic industry. And few can rival Boeing’s clout and influence, particularly in the current protectionist trade climate in Washington.”

McKenna highlights, “Tuesday’s preliminary duties ruling by the U.S. Commerce Department is a vivid reminder that NAFTA’s Chapter 19 is worth fighting for. That’s the section of the North American free-trade agreement that allows Canada, the United States and Mexico to challenge subsidy or dumping decisions before a binding panel if they aren’t convinced another country has fairly applied their own trade laws. And on its current course, a Chapter 19 challenge might be Bombardier’s only hope of coming out on top in the dispute.”

He also notes, “The Trump administration has targeted Chapter 19 in the ongoing renegotiation of NAFTA. So far, however, the United States has not put a specific proposal on the table, as the third round of talks continues in Ottawa this week. U.S. players in industries such as steel and lumber have long been suspicious of binational panels, which they regard as an infringement on the sovereignty of U.S. courts. Some have even threatened to mount a Supreme Court challenge to have Chapter 19 declared unconstitutional.”

McKenna argues that the value of Chapter 19 is that “panel rulings are enforceable in U.S. courts. That isn’t the case for rulings by the World Trade Organization. And it offers relatively speedy justice – a final ruling is due 315 days after a country requests a panel review. That’s significantly faster than pursuing a case in the courts or at the WTO.”

Negotiations on NAFTA 2.0 – if they don’t collapse – are expected to be completed sometime between December of this year and February 2018. The next scheduled rounds are expected to be:

October 11-15 – fourth round of NAFTA talks in Washington, DC

October 29-November 2 – fifth round in Mexico

November 16-21 – sixth round in Canada (most likely Ottawa again)

December 6-10 – seventh round in the US (possibly in Detroit)

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