US decision to slap tariffs on Canadian-owned aircraft maker threatens to sour relations between London and Washington

This article is more than 2 years old

This article is more than 2 years old

The government has warned aircraft manufacturer Boeing it could lose UK defence contracts over its part in a US decision to slap punitive tariffs of 219% on rival Bombardier, in a dispute that threatens to sour trade relations between London and Washington.

Theresa May said she was “bitterly disappointed” by the move to impose a tariff on sales of Bombardier’s C-Series passenger jet, which threatens at least 1,000 manufacturing jobs in Northern Ireland.

Michael Fallon, the UK defence secretary, stepped up the government’s rhetoric, warning that Boeing’s assault on Bombardier “could jeopardise” its chances of securing government contracts.

The business secretary, Greg Clark, joined the chorus of disapproval, branding the ruling “unjustified” and vowing to work with Canada – where Bombardier is based – to get it overturned.

Play Video 0:55 Theresa May says she is 'bitterly disappointed' over Bombardier tariffs – video

The backlash follows an interim decision by the US Department of Commerce, which agreed with Boeing’s case that Bombardier received unfair, anti-competitive state support from the Quebec regional government, including a £740m bailout.

Bombardier, which has also received £113m in repayable funding from the UK government, called the decision “absurd and divorced from the reality about the financing of multibillion-dollar aircraft programmes”.

The decision will come as a blow to May, who has made trade relations with the US a key component of the UK’s trade strategy after Brexit.

Q&A How does state aid affect the Bombardier dispute? Show Hide The US commerce department has upheld Boeing’s claim that Bombardier was able to offer its C-Series planes to US airline Delta for a vastly reduced price because of illegal state subsidies from Canada and the UK, violating global trade rules. Under international rules, unfair subsidies from governments can take the form of grants, loans, equity injections, tax breaks and production contributions, if they give a company or an industry an unfair competitive advantage over foreign rivals. In this case, Boeing claims that a US$1bn (£750m) bailout of Bombardier by the provincial Quebec government in Canada in 2015 unfairly enabled the firm to sell its C-Series aircraft in the US at below cost price.

The claim also relates to the Northern Ireland Executive and the UK government, which pledged to invest £135m in a new factory in Belfast where the wings for the C-Series planes are manufactured.

Under pressure from the Democratic Unionist party, May has also personally lobbied the US president, Donald Trump, to persuade Boeing to drop its legal action, in order to protect jobs in Northern Ireland.

Canada’s prime minister, Justin Trudeau, told the country’s parliament on Wednesday that his foreign minister, Chrystia Freeland, had raised the issue earlier in the day during trade talks with US trade representative Robert Lighthizer.



He said: “We will continue to stand up for Canadian jobs every step of the way, defend our workers in the aerospace industry in Quebec and right across the country. We know that the punitive actions taken by Boeing are completely unfounded and without merit.”



Bombardier employs more than 4,000 people at its plant in east Belfast, about 1,000 of whom build wings and fuselage for 75 C-Series jets being sold to US airline Delta as part of a $5.6bn (£4.2bn) deal struck last year.

The US government is preparing to impose a tariff of 219% on each plane sold to Delta. The extra charge would more than triple the cost of a C-Series aircraft sold in the US to about $61m per plane, based on Boeing’s assertion that Delta received the planes for $19m each.

The duty will be imposed only if the DoC’s final verdict, due in February, does not change.



Bombardier: May 'bitterly disappointed' as US tariff puts jobs at risk Read more

Labour’s shadow industrial strategy minister, Chi Onwurah, lashed out at the apparent failure of the prime minister’s lobbying efforts.



“It’s a damning indictment of the criminal negligence and complacency of Theresa May and her government, and a sign of their entire lack of international negotiating skills which bodes really badly for our post-Brexit negotiations,” she said.

The Liberal Democrat leader, Vince Cable, said: “Do we really believe the US will save us from Brexit with a comprehensive trade deal, when this is how they deal with fair and free international competition?”

A UK government spokeswoman said after the decision: “This is a disappointing interim statement but only the first step in the process. As the prime minister said last week, we will continue to strongly defend UK interests in support of Bombardier at the very highest level because an adverse outcome risks jobs and livelihoods among the 4,200 skilled workers in Belfast.

“Boeing’s position in this case is unjustified and frankly not what we would expect of a long-term partner to the UK – as well as damaging the wider global aerospace industry.”

Joe Walters, who is in his 30s and works in material logistics at the Bombardier plant in east Belfast, called on May and the British government to take a harder line with Boeing to end the dispute with Bombardier.

“The Canadian government has already stated that it will not do business with Boeing if it continues to try to break Bombardier. The British government needs to be as hardline as that. It’s simple, forget appealing to Donald Trump – he’s too busy trying to kill us all with his contest with North Korea.”

Geordie Burnside, a shop steward at the Belfast plant, said the size of the tariff had taken everyone by surprise.

“I’ve been getting phone calls from early morning asking why the ruling had slapped down such an enormous tariff,” he said. “They cannot believe the enormity of it or get their heads around it. There have been a lot of tough times at this factory over the last 26 years and we got through. I hope that the company will appeal and the battle isn’t over yet.”

In a statement, Boeing said: “We have heard and understand the concerns from the Prime Minister and the Government about Bombardier workers in Northern Ireland. Boeing is committed to the UK and values the partnership, which stretches back almost 80 years.”

The company added that it was seeking to restore a “level playing-field” in the market for short-haul passenger jets and that ultimately all countries benefit if they abide by global trade rules.