That was fast people, I’m almost impressed.
On Thursday, Boeing petitioned the Trump administration to investigate its Canadian competitor, Bombardier, in an anti-dumping trade case.
Basically, Boeing is accusing Bombardier of unfairly undercutting it on price in order to win deals. This all goes back to a Delta deal that Boeing lost to Bombardier because Bombardier priced its C Series planes at $US19.6 million while Boeing’s cost $US33.2 million.
“Propelled by massive, supply creating and illegal government subsidies, Bombardier Inc has embarked on an aggressive campaign to dump its C Series aircraft in the United States,” Boeing said in its petition, according to Reuters.
What this all means is that someone in American business has figured out how to make the Trump administration’s hyperaggressive posture on trade work for them. Boeing could easily take this issue to the World Trade Organisation itself, but why do that when the president is willing to bully for you. Maybe they will even stick a tariff on the Bombardier planes.
The beauty for Boeing, here, is that it’s anyone’s guess.
I’m against bullying
Now this isn’t to say American business hasn’t benefitted from government trade action before. Let’s take another Trump trade case, the current countervailing duty case against Canadian softwood lumber, as an example. The administration believes that because timber logged on state-owned lands in Canada is cheaper than American timber take from private lands, that counts as an unfair advantage in the marketplace.
And so this week, Commerce Secretary Wilbur Ross announced a 20% tariff on Canadian softwood lumber.
Now, the US has tried to argue this public vs. private advantage point before, and it’s lost every time. The most recent go was 1991, under George H.W. Bush — a time when Peterson Institute expert Chad Brown says the “industry hardly needed the effort.”
Of course, Canada still went to the table and negotiated. And when it did, Carl Grenier, a former executive vice-president (1999-2006) of the Free Trade Lumber Council and current professor at the University of Leval in Canada, was around to see it.
“The only thing they [American lumber companies] want is more money,” Grenier told Business Insider. “When they bring countervailing duties the price of lumber and land goes up in the U.S.”
“This would be catastrophic for Canadian lumber producers,” Grenier continued. “We’ve been supplying your market for a long time… There simply isn’t enough lumber in the US to satisfy demand…”
(Kind of the point of trade.)
“The fit is perfect but the US lumber industry has found a quick way, a cheap way, and an easy way to make money,” Grenier said.
Trump will seek a hard cap on lumber imports.
Pick on someone your own size
As a point of reference, the Bush lumber case took four years to get through. Bombardier doesn’t have 4 years. The entire company is only limping along because of a Quebec government bailout which the government defended as a “commercial partnership.”
In other words, the C Series sale to Delta was a life or death situation.
As Business Insider’s Ben Zhang wrote:
The decision to enter the market with the C Series was a major financial gamble for Bombardier, with a program price tag of $US5.5 billion. Since its inception more than a decade ago, the aircraft has been beset by a series of development delays and slow sales.
Last year, the aeroplane maker was forced to write down $US4.4 billion and take a $US1 billion bailout from the Quebec government. Even as it struggled to close a sale, Bombardier was credited with building an aircraft that’s one of the most capable on the market today — besting rivals Boeing and Airbus in terms of efficiency and ability.
The funny thing is, Boeing could just go ahead and initiate this investigation itself. The company could take it to the World Trade Organisation and fight it out. That’s actually more common than the government intervening in what’s called a “self-initiated” investigation. Boeing already has one going before the WTO against Airbus SE, which it also accuses of benefitting from government subsidies.
Of course, what Boeing can’t do is potentially throw up a tariff — something this administration seems willing to do.
So why not give it a shot? All it will do is insult one of our neighbours and biggest trading partners, right?
Great job everyone.
Get the latest Boeing stock price here.
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