The US International Trade Commission (ITC) has stunned many experts by overturning its own decision in favour of the US’s Boeing and ruling instead for Canada’s Bombardier in a dispute over what Boeing claimed was unfair price competition.
The ITC’s unexpected reversal also raised the question of what had changed in the intervening seven months, and how the outcome might affect decisions about foreign investment in the US.
At stake for Bombardier was an almost 300% tariff the US Commerce Department slapped on its new C series single-aisle 100- to 150-seat passenger airplanes in December 2017 on sales to US customers. The department made the decision after concluding that a subsidy that Bombardier received from the Canadian government enabled the company to unfairly underprice its aircraft in a $5bn forthcoming sale to Delta Airlines, to the detriment of rival Boeing.
The Canadian government reacted furiously, cancelling a plan to buy military jets from Boeing and threatening further retaliation.
In June 2017, Boeing’s victory seemed assured when the five-member ITC unanimously held: “There is a reasonable indication that a US industry is threatened with material injury” by the sale of the C series “at less than fair value”.
But then an elephant entered the room. France’s Airbus SE and Bombardier formed a partnership, with Airbus holding a majority stake, under which a second final assembly plant for the C series would be created at Airbus’s existing plant in Mobile, Alabama, supplementing Bombardier’s Quebec assembly plant. “This facility will provide US airlines with a US-built plane, thereby eliminating any possibility of harm due to imports,” explained a Bombardier spokesperson.
Judith Dean, a former economist at the ITC and now an economics professor at Brandeis University in Boston, says the ITC’s reversal seems somewhat unusual. She notes that the ITC relies on its own economic analysis but also solicits public input and holds hearings.
Indeed, support for Bombardier came from the UK, where prime minister Theresa May had personally urged US president Donald Trump on behalf of workers in Northern Ireland not to impose tariffs on Bombardier. It also came from the Canadian and Irish governments, Delta, other airlines and, significantly, from a bipartisan group of senators and congressmen in states where Bombardier has facilities.
A US Congressman from Mobile joined in, citing the 400 to 500 direct manufacturing jobs the Airbus-Bombardier joint venture would create in his district, the $300m in direct investment to construct a new assembly line there, and the $30bn to be spent with US suppliers nationwide, in areas including engines, avionics, fuel systems and braking systems.
And in January 2018, the now four-member ITC unanimously ruled: “A US industry is not materially injured or threatened with material injury” by imports of the C series. As a result, “no antidumping or countervailing duty orders will be issued”.
The ITC will not make its report public until March. Meanwhile, Ms Dean says: “My hope is that the outcome of this case will incentivise companies to work with US firms and want to invest here as part of global supply chains.”
The Bombardier aircraft under review by the US International Trade Commission were the C series, not C7 airplanes as stated in an article in fDi’s February/March issue.