The last six months saw a lot of headlines on the ongoing trade dispute between the two plane manufacturers Boeing and the Canadian Bombardier. Boeing complained about Delta Airlines purchasing 75 of Bombardier’s C-Series at an alleged dumping price. The US government initially aided Boeing by imposing a 300% punitive tariff on the C-Series.
The issue escalated to the dedicated US body to judge on this dispute, the International Trade Commission (ITC), and its commissioners came to the conclusion that there’s no unfair competition and the temporary tariffs need to be scrapped. Boeing’s lobbying for protectionism has failed and should be a lesson to corporations that are interwoven in global trade not to summon demons they can’t control.
The public still has to wait for the reasoning of the ITC’s commissioners and while one can only speculate that their reasoning might include the fact that Boeing does not even produce a plane similar to the C-Series it is worth looking at the long term implications for the aeronautics industry and Boeing in particular.
Feeling the tailwinds of protectionism blowing from the White House, Boeing executives tried to make use of their formidable relations to the US government and lobbied for an escalation of this US-Canadian trade dispute. Given the fact that large parts of the C-Series are actually being built in Northern Ireland, the dispute quickly grew to a trilateral trans-Atlantic trade issue and many analyst feared that this could be just the prelude to a decade full of protectionist interventionism and trade wars.
At the same time it hit the UK during their omnipresent Brexit debate and one thing Prime Minister Theresa May did not need were news about factories shutting down due to protectionism harming her narrative of opening up the UK to global trade.
In the middle of this skirmish Airbus aided Bombardier as a white knight purchasing significant equity in the C-Series program and actively showing their large rival from Seattle that this conflict has escalated to international politics.
Boeing’s strategy to compete with political connections instead of offering a similar or better product did not pay off. And while Brexit should mark the United Kingdom’s renewed ambitions for global trade and much closer economic ties to the United States, the trials and tribulations around Bombardier have shown how fragile these ambitions and the UK’s departure from the customs union can be.
The next weeks and the involved actors’ responses to the ITC’s ruling and reasoning will show if a de-escalation of this dispute is possible or the conflict will go to its next round with Boeing appealing the ITC’s decision. Both, Bombardier and the UK’s government must have been very relieved about the surprising ruling towards free trade and might be willing to bury the hatchet instead of coming up with a protectionist response.
In case Boeing does not understand that their protectionist strategy has been already harmful to their business and keeps pushing for tariffs they could encounter that threats from Canadian and British politicians to rethink their government contracts with Boeing might become reality.
Trade wars and protectionism is dangerous for consumers. Businesses that play with the fire of asking for tariffs should not be surprised if they are hit by the same strategy. Even 230 years old, Kant’s categorical imperative should be taught more at business schools ‘Act only according to that maxim whereby you can, at the same time, will that it should become a universal law’.
People who live in glass houses shouldn’t throw stones.