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Gregor Kleinknecht discusses US tariffs of Bombardier and the politics of law in Discover Germany

  • November 07, 2017
  • By Hunters Law

The Sky is the Limit

The British press, government, business and public were up in arms and not so quietly indignant the other week when the US Department of Commerce imposed punitive tariffs of 219 per cent on Bombardier C-Series aircraft as a result of a preliminary ruling by the US International Trade Commission (USITC).  The background to this story is that Canadian manufacturer Bombardier received a large order for this type of aircraft (partially designed and manufactured in Northern Ireland) from US airline Delta.  Its competitor Boeing then launched a complaint to the US authorities, alleging that Bombardier receives state subsidies which enable it to offer aircraft at artificially low prices.

I have previously talked in this column about the politics of law and there can be few examples where this more a case in point then here.  Let’s be clear about one thing: this whole episode is not about upholding the rule of law but about national self-interests and (a lot of) money.  Not surprisingly, UK defence secretary Michael Fallon promptly warned Boeing that it “could jeopardise” its chances of securing government contracts; as it happens, Boeing is still looking to complete a large contract with the MoD for the delivery of Apache attack helicopters.

There are a few more background facts that are worth savouring for a moment: as is always the case with tariffs, they will make the affected product more expensive for the (in this case American) customer.  Further, Boeing did not directly lose out because it did not compete with Bombardier for the Delta contract (it builds no aircraft that competes with the C-Series), which rather suggests that this is more about harming an unwelcome competitor in other aircraft segments than concerns about state aid (which Boeing arguably receives itself in large measure).  Finally, and hopefully, Delta will think twice before it places any future orders with Boeing.  These points rather illustrate that trade sanctions in a globally intertwined economy more often than not can end up with the complainant cutting its nose to spite its face.

Following the preliminary ruling, the case will now proceed before the USITC; its determinations can be appealed to the US Court of International Trade and, because this case involves Canada, and Canada is a member of the North American Free Trade Agreement (Nafta), before a Nafta disputes panel.  Ultimately, the government of Canada could even pursue a case against the US at the World Trade Organisation.

There is one thing that should make the UK government rather wary of what has happened: if the US are meant to be the country’s new best friend and free trade partner, the imposition of punitive tariffs on a product partially manufactured by a key employer in Northern Ireland is surely not a good start to the new relationship.  Oh, and one last thing: for the time being, and until Brexit, external trade is a matter for the EU, rather than the UK government, and the EU has in the past indicated that it will respond to US punitive tariffs in kind.  It is a lot easier to stand up to the bullies if you have 27 friends at your side.

 

This article was originally published in Discover Germany, Issue 56, November 2017 and can be accessed here 

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