The next potential Canada-U.S. trade dispute unfolded Thursday as aerospace giants clashed at a Washington hearing that marked the formal launch of investigations into Boeing's allegations that Bombardier received subsidies allowing it to sell its CSeries planes at below-market prices.
"The U.S. market is the most open in the world, but we must take action if our rules are being broken," U.S. Commerce Secretary Wilbur Ross said in a statement after the hearing began.
"While assuring the case is decided strictly on a full and fair assessment of the facts, we will do everything in our power to stand up for American companies and their workers."
- Bombardier faces lengthy legal battle with Boeing that could hurt CSeries sales
- Boeing pushes anti-dumping probe against Bombardier
U.S. aeronautics powerhouse Boeing argued at the hearing that duties should be imposed on Bombardier aircraft, insisting its smaller Montreal-based rival receives government subsidies that give it an illicit toehold in the international market.
Lobbyists, lawyers and aerospace executives crowded the room for a little battle playing out in the broader context of the day's larger trade news: the U.S. announcement that NAFTA renegotiations will start in the next 90 days.
Bombardier has made it clear that its true goal is to grab half the international market share for 100-to-150-seat aircraft, according to Boeing, which argues its rival has received an unfair head start from Canadian taxpayers.
Boeing vice-president Raymond Conner said the sale of cheap, subsidized planes to Delta Air Lines helped build momentum for Bombardier to enter a new market. If Bombardier reaches its stated goal, he said, it would squeeze Boeing from that market and cost the company $330 million US a year in annual sales.
"Today we are at a critical moment," Conner told the seven-member U.S. International Trade Commission. "If you don't fix it now, it will be too late to do anything about it later. ... What we want is competition that is fair ...
"You guys can fix this before it is too late."
Boeing has petitioned the U.S. Commerce Department and the U.S. International Trade Commission to investigate subsidies of Bombardier's CSeries aircraft that it says have allowed the company to export planes at well below cost. A preliminary determination on the petition is expected by June 12.
If the ITC determines there is a threat of injury to the U.S. industry, preliminary countervailing duties could be announced in July, followed in October by preliminary anti-dumping duties, unless the deadlines are extended. Final determinations are scheduled for October and December.
Boeing is calling for countervailing duties of 79.41 per cent and anti-dumping charges of 79.82 per cent.
The process is similar to the one that has led to duties on Canadian softwood lumber. These are among the looming trade disputes with the U.S., as NAFTA talks could raise the heat on differences over dairy, dispute resolution auto parts and other issues.
Boeing complains that Bombardier has received more than $3 billion US in government subsidies so far that have allowed Bombardier to engage in "predatory pricing."
Lawyers for the U.S. aerospace giant argued Thursday that Bombardier's own words prove it was rescued financially by multibillion-dollar assistance from the Quebec government, which last year invested $1 billion US in exchange for a 49.5 per cent stake in the CSeries. The company also shored up its finances by selling a 30 per cent stake in its railway division to pension fund manager Caisse de depot for S$1.5 billion US.
The federal government recently provided a $372.5-million loan. That's on top of about $1 billion received in 2008 from Ottawa, Quebec and Britain to develop the CSeries.
Bombardier representatives countered that their planes never competed with Boeing in a sale to Delta — which the American rival describes as a seminal moment.
Bombardier lawyer Peter Lichtenbaum said the plaintiff is a global powerhouse that hasn't lost any sales as a result of Bombardier, has an enviable order backlog and doesn't even compete with Bombardier in the sales campaigns it has complained about because the CSeries is smaller than Boeing's 737-800 and Max 8 planes.
"Boeing's petition in this case is unprecedented in its overreach," he said. "If this is a case of David vs. Goliath, Boeing has cast itself in the wrong role."
The Caisse said it will prove that its investments in Bombardier were always done on commercial terms and don't represent a subsidy.
"The allegations targeting the Caisse are baseless and outrageous," Kim Thomassin, executive vice-president legal affairs, said in a news release. "We will refute them while offering our full co-operation to U.S. agencies to bring this matter to a quick and satisfactory resolution."
Boeing's annual sales were $94.6 billion US last year. That means the $330 million US Conner expressed concern about amounts to one-third of one per cent of its annual sales. Bombardier revenues last year were $16.3 billion US, including $9.9 billion US from aerospace activities.