British Prime Minister Theresa May has threatened the US with a trade war after the US Department of Commerce issued a preliminary ruling that slapped punitive tariffs on a British-built aircraft.
The ruling decided that Bombardier aircrafts, which are built in Northern Ireland, should be given a 219 percent import duty. This came as the result of the American aviation giant Boeing’s complaint, which stated that the Canadian plane manufacturer has received an unfair state aid.
“The US Department of Commerce today affirmed that Bombardier has taken massive illegal subsidies in violation of existing law,” said Boeing in a statement. “Subsidies enabled Bombardier to dump its product into the US market, harming aerospace workers in the United States and throughout Boeing’s global supply chain.”
This decision is considered to cast doubts on a key plank of May’s strategy. The British government responded by warning that Boeing’s behavior “could jeopardize” future contracts with the Ministry of Defense for its aircraft.
The prime minister has previously tapped the US president to intervene in the dispute, which has also caused some doubts to arise over hopes of signing a post-Brexit free trade deal with the US. Bombardier has responded and tagged the ruling as “absurd and divorced from reality,” accusing Boeing of manipulating the US trade law to stifle competition.
“We are confident the USITC will conclude that no US manufacturer is at risk because neither Boeing nor any other US manufacturer makes any 100-110 seat aircraft that competes with the CS100. Boeing has no American-made product to offer because it canceled production of its only aircraft in this size range—the 717—more than 10 years ago,” said Delta, another airline company.
The US International Trade Commission will be giving a final ruling on the US Department of Commerce’s proposed punitive tariffs in early 2018. According to some analysts, if the USITC rules in favor of the Commerce Department, it will have to explain how it reached that conclusion.
“If they can’t explain how they came to that conclusion, that’s really dangerous because the Canadians are going to regard this as a slap in the face,” said Aboulafia, vice president of analysis at Teal Group.
This escalating spat also puts a dent on the Conservative’s relationship with the DUP, since Bombardier employs over 4000 people at its factory in Belfast.
Theresa May is Bitterly Disappointed
May has said that she was “bitterly disappointed” with the decision, adding that Boeing’s long-term relationship with the government is being “undermined by this behavior.”
“We are very clear about the importance of Bombardier and the importance of those jobs in Northern Ireland and we will be doing everything we can to ensure that we can see those jobs being guaranteed in future,” she said.
Sir Michael Fallon, who is the British Defense Secretary, echoed the prime minister’s sentiments.
“This is not the kind of behavior we expect from a long-term partner. We have contracts in place with Boeing for new maritime patrol aircraft and for Apache attack helicopters and they will also be bidding for other defense work and this kind of behavior clearly could jeopardize our future relationship with Boeing,” Fallon said.
May has previously ordered different ministers to “engage intensively” with Boeing, while trying hard to resolve the matter.
Arlene Foster, the DUP leader, is pushing the UK government to challenge the “completely unjustifiable” ruling.
In an interview, Foster has said that the decision was not surprising.
“What we must do now is to continue to work with our own government, with the American government, with the Canadian government in trying to get Boeing to see sense in relation to this issue,” said Foster.
She also emphasized that they are concerned “about the jobs here in Belfast and Northern Ireland.”
On the other hand, US Commerce Secretary Wilbur Ross, who has recently met with Chinese officials, said that the US values its partnership with Canada, but “even our closes allies must play by the rules.”
“The subsidization of goods by foreign government is something that the Trump Administration takes very seriously, and we will continue to evaluate and verify the accuracy of this preliminary determination,” said Ross.
Allie Renison, who is the head of EU and trade policy for the Institute of Directors, said in a statement that this row could be a “taste of things to come” when Britain takes back responsibility for trade relations post-Brexit.
“It’s a little unhelpful news at the moment given the US is meant to be our first port of call for trade. After Brexit we’ll have to make decisions and be the subject of decisions including from the US on tariffs and we’d have to work out how we’d respond,” said Renison.
Foreign Secretary Boris Johnson expressed hopes that the conflict will be solved quickly. “We will be looking at what we can do to ensure free and fair trade to make sure that Bombardier gets a fair crack of the whip,” he said.
Jeremy Corbyn, a Labor leader, pressed the government in a speech saying, “If the special relationship means anything, it must mean that we can say to Washington: that way is the wrong way. That’s clearly what’s needed in the case of Bombardier where thousands of jobs are now at stake. A Prime Minister betting our economic future on a deregulated trade deal with the US might want to explain how 220 percent tariffs are going to boost our exports.”
Boeing issued a statement and explained that the dispute has nothing to do with limiting innovation or competition. It has insisted that the central focus of the spat has everything to do with “maintaining a level playing field” and ensuring that companies like Bombardier follow and abide by trade agreements.
This trade row has taken away all the attention from the launch of the Institute for Free Trade, which is a new think-tank that calls for the British government to reduce trade barriers with non-EU countries after Brexit.
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