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A victory for Boeing Co. in its trade complaint against Bombardier Inc. would cost American jobs and disrupt supply chains in the aerospace industry, according to Canada’s ambassador to the U.S.
Boeing has accused Bombardier of dumping its marquee jets on the U.S. market at below market prices and taking unfair subsidies from the Canadian and Quebec governments. The U.S. International Trade Commission is hearing arguments Monday in the case, with the tribunal expected to give its final ruling next month.
A decision in Boeing’s favor “would put U.S. jobs in jeopardy,” Canadian Ambassador David MacNaughton said, noting that half of the parts that go into Bombardier’s C Series jet are made in the U.S. “There is no reason to believe that an affirmative determination would lead Boeing to create any more jobs to compensate for this loss to the U.S. workforce.”
It’s difficult to see how a commercially and financially “enviable” company such as Boeing with a backlog of orders could claim injury from a new market entrant, MacNaughton said.
The ITC, a quasi-judicial body, is hearing arguments on whether American industry was harmed by Bombardier’s sale of its new narrow-body C Series jet at what Boeing calls an unfairly low price to Delta Air Lines Inc.
While President Donald Trump likely won’t intervene directly in the case, the dispute is a test of his pledge to enforce U.S. trade laws more strictly while encouraging foreign investment. The case has bruised U.S. relations with Canada and the U.K., two close allies. Canadian Prime Minister Justin Trudeau this month canceled an order of Boeing fighter jets in retaliation.
The British government has warned Boeing it could lose U.K. defense contracts. Prime Minister Theresa May has said she was “bitterly disappointed” by the tariffs, which threaten about 1,000 jobs in Northern Ireland.
Boeing’s actions “are not what we’d expect from a long-term partner,” said British Ambassador Kim Darroch on Monday. The company’s complaint isn’t consistent with U.S. trade law, or international agreements the U.S. has signed, he said.
Kevin McAllister, the head of Boeing’s commercial airplanes division, is scheduled to testify Monday, as are officials from Bombardier and Delta.
The ITC ruling, expected early next year, is critical to Bombardier’s medium-term profitability as it prepares to deliver the planes to Delta. In April 2016, the No. 2 U.S. airline ordered 75 of Bombardier’s CS100 jets. The order has a list value of $5.6 billion before customary discounts. Bombardier hasn’t disclosed Delta’s price, nor has it revealed its unit costs in building the aircraft. Losing the case would make other U.S. carriers hesitant about buying the C Series and could potentially prompt Delta to drop the order, analysts have said.
Boeing won the first round in its fight with Bombardier over the C Series jets. The U.S. Commerce Department sided with Boeing in a preliminary ruling in October and ordered tariffs of about 300 percent, a penalty Delta has vowed not to pay. The ITC process runs parallel to one run by Commerce and will decide if the tariffs become permanent.
Bombardier, a crown jewel of Canadian manufacturing, has billed itself as a major U.S. employer in the run-up to the ITC hearing. It employs about 7,000 in 17 American states.
©2017 Bloomberg L.P.
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