protectionism

Sep 28, 2017

How a Canadian regional jet could spark a ruinous trade war

With friends like the US Department of Commerce, does Boeing have a worse enemy in terms of a trade war fought over subsidies?

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

A CSeries 100 in Delta livery

Will a ham fisted imposition of massive duties on a Canadian airliner, the Bombardier CSeries regional jet, in a preliminary US trade dispute ruling, become aviation’s Sarajevo moment?

The decision of the US Department of Commerce to assess that the slick new jet from Canada had benefited from ‘illegal’ subsidies of 219.3 percent in relation to the sale of 75 CSeries 100 jets to America’s Delta Airlines has already provoked a war of words with the UK Government, as Bombardier makes the airliner’s wings in Northern Ireland.

This follows earlier threats by Canada’s Prime Minister Justin Trudeau to scrap his government’s planned purchase of Boeing Super Hornet fighter jets if the US tried to destroy the viability of CSeries sales to American carriers at the behest of Boeing.

At its most fundamental, this is an issue which relates to the never ending claims and counter claims that Boeing and Airbus have made against each other over alleged unfair subsidies for almost 20 years.

In this case Boeing doesn’t even have a design which comes close to the specifications and performance of the 100-115 seat CSeries 100 jet, and didn’t try to sell against it on its technical merits.

It appeared to want to head off any risk that Bombardier might evolve the CSeries into a threat to its own larger capacity 737 MAX single aisle family, the nearest poteential competitor to the CSeries 100 model being the slow selling 737 MAX 7 model.

Delta has made it known that it couldn’t afford to take delivery of the Canadian jets if it had to pay the penalty duty recommended by the US Depart of Commerce. Delta is also America’s, and the world’s, largest airline, and a major existing as well as potential customer for other Boeing and Airbus jets.

Its current and likely future fleet needs include hundreds of jets that could be made by either rival maker, and all of them can involve the purchase of engines and systems that make up large parts of the value of such purchases from aerospace industry firms on either side of the Atlantic as well as in Japan, Korea and China.

The real world truth about jet airliner subsidies for Boeing, Airbus and Bombardier, is that they happen everywhere, and despite all the posturing about competitor’s getting ‘unfair’ assistance from various state or federal governments, the airline and aircraft making sectors would be a poor shadow of what they have become without them.

It could be some time before a CSeries jet flies for an Australian airline. The current need for regional jets in this country is depressed by falling resource industry activity, and large fleets of older F100 and Boeing 717 aircraft that are unlikely to need economically rational replacement until sometime in the 2020s.

But the raw nerves being inflamed by the current dispute could burn a lot of other orders for Boeing aircraft, all of them also subsidised, and often sold for way below cost of production in fierce contests.

This is an issue similar to other free trade or fair trade disputes in agriculture, textiles, automobiles and consumer white goods. If the barriers to trade go up, the common wealth that underpins societies like those of Australia and its Asia trading partners will go down.

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