Whenever a company shrieks about “unfair competition,” it usually means one of two things: they demand special support from Washington, or they want the federal government to rein in foreign competitors. It looks like that is exactly what happened on Wednesday, and now trade disputes between the U.S. and Canada will only intensify moving forward.
Boeing complained that its rival, Bombardier, received unfair government subsidies and dumped the narrow-body jets below cost to Delta Air Lines. Last year, the second-biggest U.S. carrier agreed to purchase 75 Canadian planes, but it may not be completed if the tariffs make the aircraft unaffordable for either Delta or other American airlines.
Following an investigation by the Department of Commerce, it was determined that Bombardier sold its jets nearly 80% under market value amid subsidies of 212%. Boeing asserts that Delta received the planes for $20 million each, even though Bombardier charges $33 million for similar aircraft in Canada.
The Commerce Department maintained its preliminary decision to slap Bombardier with a 292.31% tariff on the company’s C Series jets. This comes two months after the U.S. government hit Bombardier with a 79.82% anti-dumping duty and another 220% duty over its use of subsidies.
Boeing celebrated the move, issuing a statement:
“Today’s decision validates Boeing’s complaints regarding Bombardier’s pricing in the United States, pricing that has harmed our workforce and U.S. industry.
Boeing welcomes competition, but it must be competition on a level playing field. Bombardier can sell their aircraft anywhere in the world, so long as they follow the law and comply with the trade rules we have all agreed to.”
It will now be left up to the International Trade Commission (ITC), which is scheduled to make its final decision on the arrangement in February. All three parties submitted statements to the body: Boeing claims Bombardier hurt its opportunity to sell 737 U.S. planes, while Bombardier denies any wrongdoing. Delta just wants the most cost-effective planes.
Bombardier CEO Alain Bellemare defended his company’s listing prices to CNBC, arguing that early customers will always get discounts to generate interest and attention to new products.
“When you launch a new program you have aggressive pricing to start with. Boeing does the same thing,” said Bellemare. “There's no case here.”
The Hypocrisy of Boeing
Boeing might have a legitimate grievance over the number of subsidies given to Bombardier if it didn’t receive its own series of government handouts.
For years, the aerospace giant has been the recipient of state assistance to the tune of billions of dollars. Between 2000 and 2014, Boeing was given $457 million in federal grants and roughly $64 billion in federal loans and loan guarantees. State and local governments have also chipped in approximately $13 billion.
Moreover, Boeing has been on the receiving end of massive military contracts from the Pentagon.
It is true that Bombardier has had to rely on corporate welfare to get by. Conservatives and Liberals have helped fund the corporation, whether with taxpayer assistance or new contracts. According to the Fraser Institute, a right-wing think tank, Bombardier has been presented with $1.1 billion in 48 separate disbursements from Industry Canada alone since 1970. This does not include the various funding mechanisms from elsewhere in the federal government or by provincial governments. Despite this, Bombardier is one of the most mismanaged companies in the Great White North, missing multiple contractual deadlines, including with the Toronto Transit Commission (TTC) and its order of streetcars.
That said, Boeing cannot make a complaint about subsidies while it is a beneficiary of tax dollars.
Are Anti-Dumping Duties Effective?
The Trump administration has been hard at work over the last several months, hitting a wide array of countries with anti-dumping duties. To date, the Commerce Department has launched 77 anti-dumping and countervailing duty probes, up 61% from 2016.
As a result, earlier this year, the U.S. applied a 20% tariff on Canadian softwood lumber imports. In November, the U.S. imposed duties ranging between 96.81% and 162.24% on Chinese aluminum foil. Both measures, the U.S. noted, would help level the playing field by protecting American jobs.
Ostensibly, President Donald Trump is guided by an antiquated mercantilist approach to international trade. However, if his goal is to aid Americans, then he should allow the free flow of imports.
When it comes to the tariff on Canadian lumber, the American people bear the brunt of the levies, since housing prices would jump, homebuilding would be sluggish, and construction workers would lose their jobs. A duty on Chinese aluminum foil would place an added and unnecessary cost on consumers. A tax on Canadian-made jets will only raise Delta’s prices, shifting the burden to passengers.
Exporters will be affected, too, but not as much as the importing country.
Should the Canadian and Chinese governments subsidize billion-dollar corporations, then that is their prerogative. If it benefits American businesses and consumers, then why should anyone complain? The market interventions by Ottawa and Beijing will hurt their people, but it will assist Americans by raising their real incomes and stretching their dollars.
Stop Corporate Welfare Now!
The U.S. government has already followed suit with its generous corporate welfare programs. For years, taxpayers have been forced to hand over their hard-earned money to special interests in the name of righting a wrong, leveling the playing field, and combating unfair competition. Whether it is the crony Export-Import Bank or subsidies for green energy firms, Republicans and Democrats alike have deduced that the best course of action is to mimic its global rivals with delusional economic policies.
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