The Strange Case of Boeing vs. Bombardier

The federal government is considering whether to impose tariffs of nearly 300 percent on imported Bombardier C-Series jets from Canada. The tariffs are in response to Boeing’s allegation that Canada-based Bombardier has received “billions of dollars in illegal government subsidies.”

The U.S. International Trade Commission (ITC) is scheduled to vote Friday on whether Boeing is harmed--technically, “threatened with material injury”--by Bombardier imports from Canada.

It might surprise people to know that this is the only thing the ITC looks at. There are several seemingly relevant facts the ITC cannot factor into its decision, including:

  • Boeing itself has been described as the “king of corporate handouts.” According to the Good Jobs First tracker, Boeing has received more than $9 billion in government preferences since 2010 -- billions of dollars more than Bombardier allegedly received for its C-Series jets.

  • Much of the value of Bombardier aircraft consists of components from U.S. companies like Connecticut’s Pratt & Whitney, which makes engines for the C-Series jets. Connecticut Sens. Richard Blumenthal and Chris Murphy and Rep. John Larson asked the U.S. government to “refrain from taking action that will endanger the many jobs in Connecticut that depend upon Bombardier.” According to Bombardier, more than half of the content of C-Series jets is sourced from the United States. If C-Series jets were assembled in Canada, it’s possible these U.S. components would enter Canada tariff-free, then be taxed as part of any finished aircraft sold in the United States.

  • The ITC decision may be significant for Alabama, where future C-Series jets are now slated to be assembled. According to Alabama Governor Kay Ivey, “We look forward to adding the C Series aircraft as another product proudly made in Sweet Home Alabama.” Jets assembled in Alabama would not be subject to tariffs, although it’s possible some imported components could be.

  • Delta and U.S. airline passengers will be affected by the ITC decision, but they are largely excluded from consideration under current law. According to Delta CEO Ed Bastian, “When they (Boeing) could no longer win in the marketplace, and they couldn't win in the marketplace with us because they didn't have anything we wanted, they went to the government.”

  • Bombardier is based in Canada, but the ITC decision could affect the company’s nearly 7,000 U.S. employees.

  • The original trade petition from Boeing asked for tariffs that would apply to Bombardier jet imports from Canada, but not Embraer jet imports from Brazil. Boeing confirmed last month it just happens to be looking at acquiring Embraer, and Bombardier recently asked the ITC to include Embraer aircraft in its analysis.

There is one clear conclusion to draw from this complicated battle: When governments start picking winners and losers, taxpayers inevitably lose.