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U.S. Department of Commerce to issue findings on Boeing trade challenge vs Bombardier on Sept. 25

The Bombardier CSeries aircraft assembly line in Dorval, Quebec. Photo by Ryan Remiorz/Canadian Press.

What is the dispute between the U.S.-based The Boeing Company and Quebec-based Bombardier Inc. about?

1- The basics

CBC reports, “Boeing argues the Montreal company is unfairly subsidized by the Canadian government and sells its C-Series jets south of the border at below market costs.” In May, Reuters explained, “The [U.S. Department of] Commerce probe in Boeing’s case parallels a probe by the U.S. International Trade Commission (USITC) into Boeing’s allegations that Bombardier sold 75 CSeries planes to Delta Air Lines Inc last year at a price well below cost. Bombardier has rejected the allegations and the two sides clashed at an ITC hearing whether the companies’ competing plane models are even comparable.”

Maclean’s adds, “[Canada’s ambassador to the United States] David MacNaughton said the officials wanted to know why Boeing was picking a fight with Bombardier, since the two are not direct competitors. …A senior Boeing official told The Canadian Press this month the firm was concerned that Bombardier’s deal with Delta could hurt its long-term prosperity and that of the entire aerospace sector.”

2- The question of subsidies

The Financial Post has noted, “[Boeing] complains that Bombardier has received more than US$3 billion in government subsidies so far that have allowed it to engage in ‘predatory pricing’. Lawyers for the U.S. aerospace giant argue that Bombardier’s own words prove it was rescued financially by multibillion-dollar assistance from the Quebec government, which last year invested US$1 billion in exchange for a 49.5 per cent stake in the CSeries. The company also shored up its finances by selling a 30 per cent stake in its railway division to pension fund manager Caisse de depot [a provincial Crown corporation] for US$1.5 billion.”

In February, the Trudeau government announced a $372.5-million loan package for Bombardier’s CSeries and Global 7000 aircraft programs. (Controversy followed given Bombardier had laid off thousands of workers as part of a turnaround plan while increasing the total compensation of five Bombardier executives from US$21.9 million in 2015 to US$32.6 million in 2016.)

The Globe and Mail adds, “Many experts have countered that Boeing’s petition is pure hypocrisy because the company has benefited from billions in support from various levels of U.S. government.”

3- The spat expands to Super Hornets

The Associated Press reports, “Canada’s government warned [in May that] it could cancel a planned US$2 billion purchase of 18 Super Hornet fighter jets from Boeing Co. because of U.S. Department of Commerce anti-dumping investigations against Canadian plane maker Bombardier.”

The Globe and Mail notes, “The Trudeau government announced in November its plan to purchase the [Super Hornet] planes to temporarily fill a critical shortage of fighter jets until a full competition can be run to replace the aging CF-18s [but] many defence experts, including 13 retired air force commanders, have criticized the plan to purchase interim Super Hornets and called for an immediate competition to replace the CF-18s.”

The Super Hornets are made at Boeing’s plant in Saint Louis, Missouri.

4- Labour

A Unifor media release highlights that Unifor president Jerry Dias was in Washington, DC yesterday to address this matter. Dias says, “The workers are caught in the crossfire as this ongoing dispute continues to put thousands of jobs at risk. I’m here to meet with Boeing to encourage the company to drop its case and seek a resolution with Bombardier.”

The Ottawa Citizen reports, “Aerospace workers [unionized through the International Association of Machinists] will hold a rally outside the U.S. consulate in Montreal [today, September 13] to protest Boeing’s decision to file a trade complaint against Bombardier.” IAM Quebec Coordinator Dave Chartrand says, “Boeing’s arguments are hollow. Boeing did not even bid on the Delta contract and the C-Series poses no threat to Boeing’s 737 because it’s not in the same size class.” And IAM Canadian General Vice President Stan Pickthall says, “Let’s make this very clear, this is a court battle between two corporations. Our members will be out there to protect their jobs and defend the aerospace industry in Canada.”

5- Next steps

CBC notes, “The U.S. State Department has given the green light for Canada to buy 18 Boeing Super Hornet fighter jets for an estimated price tag of $6.3 billion Cdn. The agency that oversees foreign military sales has recommended to the U.S. Congress that the sale proceed because it would benefit a NATO ally and help Canada improve its military capability. It is uncertain whether the Liberal government will actually proceed with the sole-source purchase in light of its ongoing trade dispute with Boeing, which has been getting wider and more rancorous in the last few weeks.”

The Canadian Press adds, “The U.S. Commerce Department is investigating Boeing’s complaint and preliminary findings are expected to be released on Sept. 25. The decision could lead to fines or tariffs against Bombardier.” CBC notes, “A final determination is not expected until next winter.”

The September 25 announcement on findings will come in the middle of the third round of NAFTA talks taking place in Ottawa this September 23-27.