Bombardier’s attempt to enter US market: Boeing uses US state to crush its competitor

Since this article was published a week ago, the US Commerce Dept. has levied additional tariffs on Bombardier at the behest of Boeing, now amounting to some 300 per cent on a sale of the C Series of aircraft to Delta Air Lines Inc. Yesterday, Bombardier announced that Airbus SE, a European Union monopoly and the main rival to Boeing, has assumed 50.1 majority ownership of the C Series airliner, without putting up a dime, in a deal that lasts only seven years. Jetliners ordered for the US market will be assembled in Mobile, Alabama to circumvent the tariffs. The C Series was originally intended to end the duopoly in the narrow-body jet market between Airbus’s A320 family and Boeing’s 737.

The new arrangement signifies an abject surrender to the US/Boeing attack. Far from being a solution, it marks an intensification of the global rivalry between Airbus and Boeing in which Canada has become enmeshed. Two examples can be given. The Airbus-Bombardier deal occurs as Canada has lifted sanctions on Iran, which both companies covet. Iran is purchasing both wide and narrow-bodied jets as well as turboprops. Boeing’s contract to sell aircraft to Iran is also reportedly hanging by a thread due to Trump’s attack on the nuclear accord agreement, although there are different opinions. Boeing’s Iran Air sale involves the carrier purchasing 50 of its narrow-body 737 passenger jets and 30 of the wide-body 777 aircraft. Iran Air also is buying 100 commercial aircraft from Boeing’s rival, Airbus. Boeing has yet to deliver any of its planes to the country’s flag carrier, but Airbus has already delivered at least three jets. The imperialist sanctions had adversely affected Iranian airlines, contributing to many crashes of airliners considered obsolete. IranAir wanted the huge planes as part of developing new routes to US major cities to attract the Iranian diaspora. Iran’s smaller carriers – Iran Aseman Airlines, Iran Airtour, Zagros Airlines and Kish Airline – have also announced ambitious plans to purchase new planes from Airbus and Boeing.

In another unconfirmed development, Turkish Air has reportedly cancelled an order signed on Sept. 20 worth $11 billion for 40 Boeing 787-9 Dreamliners – it already has 75 Boeing 737 Max jets on order, according to the planemaker’s website – following the cold climate that has developed between the US and Turkey after the failed coup to oust Erdogan. Turkey indirectly blames the US of being behind the failed coup and has recently embarked on the arrest and detention of Turkish employees of the US Embassy in Ankara. On Feb. 24, 2016 then Foreign Affairs Minister Stephane Dion went to Istanbul with a Bombardier delegation to market the C Series. In 2011, AtlasJet of Turkey had ordered 15 of the aircraft, and Turkish Aerospace is a sole source supplier of components (Fixed Trailing Edge) for the C Series. On Feb 9, 2016 Bombardier Transportation and Turkish-based transportation manufacturer Bozankaya Ltd. signed a Memorandum of Understanding aimed at strengthening their strategic partnership in the development of high speed trains for the Turkish rail market.

Russia is now developing a 200-passenger airliner. 

We are posting an article from Workers’ Forum, which analyses the significance of the Boeing/US attack and the Canadian response and presents an alternative road, for your information. –TS

***

(Oct. 5) – The U.S. Commerce Department has unleashed an attack on Bombardier, a global transportation monopoly headquartered in Montreal. Bombardier is attempting to enter the U.S. airline market with its C Series mid-size airliner. The plane has already been sold in modest amounts in Europe and recently secured an order for 125 planes from U.S.-based Delta Airlines for delivery beginning next Spring.

Boeing saw the Delta order as a direct threat to the airliner monopoly it enjoys along with its European rival Airbus. Aside from being unwanted competition in a section of the market it plans to occupy, Boeing considers the low price for the C Series jet as putting downward pressure on the price of airliners generally. Tariffs and duties have the effect of raising market prices for the affected goods. Such has been the case with the recurring imposition of duties on Canadian softwood lumber exports to the U.S.

Boeing asked the Commerce Department to impose an 80 per cent tariff on Bombardier planes sold in the United States to compensate for the alleged low price. Boeing used as proof of a price below market value the well-known facts of federal Canadian and Quebec state funds given to the private Bombardier monopoly generally and specifically for the production of C Series airliners.[1]

Boeing refuses to acknowledge that all monopolies within the imperialist system of states receive state funding in varying amounts. The private monopoly Boeing consistently receives state funds to pursue its empire-building.[2]Boeing is one of the largest production monopolies in the world. In 2016, it reported gross income of $94.571 billion from the sale of 748 commercial aircraft, 180 military aircraft and 5 satellites, plus its services, leasing and supply of parts. Boeing reports employing 147,683 workers mostly in the U.S. but also 1,600 workers in Canada manufacturing parts in Winnipeg, 2,000 in the U.K. in maintenance, repair and overhaul (MRO) and 3,500 in Australia.

Bombardier Inc. reported a gross income of $16.34 billion in 2016 employing 66,000 workers worldwide in all its divisions. Twenty-five thousand workers are in the aerospace division with 17,000 in Montreal and 4,000 in Belfast, Northern Ireland. The aerospace division had a gross income of $11.2 billion in 2015. The transportation (rail) division reported a gross income of $9.6 billion in 2014. In January 2011, the rail division had 34,900 employees, 25,400 of them in Europe, and 60 manufacturing locations around the world.

The U.S. Commerce Department has upheld the Boeing complaint and put a 219.6 per cent tariff on Bombardier airliners sold in the U.S. – not the 80 per cent requested. This tripling of the price for the C Series jet effectively shuts Bombardier out of the U.S. market. As usual in these trade cases, the specific findings of the price of production versus the market price along with the influence of the pay-the-rich schemes were not revealed other than in vague terms such as “unfair” or an “absurdly low” market price paid by Delta for the jets.

Canadian Foreign Affairs Minister Chrystia Freeland said in a statement that the U.S. duty “is clearly aimed at eliminating Bombardier’s C Series aircraft from the U.S. market.” Prime Minister Trudeau threatened in retaliation to cancel the purchase of Boeing fighter jets, which has yet to be finalized. Quebec Premier Philippe Couillard used militarist language to describe the situation saying, “Boeing may have won a battle but let me tell you the war is far from over — and we shall win.” He accused the U.S. government and Boeing of trying to “eliminate a competitor that makes better products.” Couillard said the issue has nothing to do with state subsidies to Bombardier, declaring Boeing itself a “giant created and fed by decades of government support in the United States.”

Captive within US-dominated imperialist system of states

The Canadian and Quebec economies are overwhelmed within the U.S.-led imperialist system of states. The terms of monopoly-controlled trade worked out in NAFTA, CETA and the World Trade Organization are meant to cater to the monopolies and their penetration into nation-states without restrictions. However, when a powerful monopoly or grouping of monopolies within the U.S. or European Union consider it necessary to act in their own interests, it simply ignores the established terms of monopoly-controlled trade and uses the state machine directly to achieve what it wants. This is what Boeing has done and any complaint filed within NAFTA or the WTO will take years to resolve and the end will have already been achieved.

Boeing wants to eliminate Bombardier’s penetration into the U.S. airliner market and ensure market prices for airliners remain high and that it continues to reap record money profits. To achieve its aim, Boeing circumvents the existing conventions and defends its empire-building by using the U.S. state machine.

Bombardier and the Canadian state are mostly impotent in the face of the U.S./Boeing attack because they have become completely enmeshed within the imperialist system of states and rely on global trade and markets to sustain production. The U.S. amounts to one-third of the global market for airliners and at least one half of that market exists in having standardized parts, servicing and suppliers through maintenance, repair and overhaul (MRO). Bombardier loses not only the sale of airliners but the accompanying MRO.

Disruption in global trade either by this sort of particular attack or recurring economic crises has a serious effect on the security and livelihoods of Canadian workers and their well-being. If Canada had a vibrant all-sided internal self-reliant economy producing raw materials, other means of production and consumer goods and services, accompanied with a vast array of public services and social programs, then international trade based on state-to-state mutual benefit would be an added factor contributing to the economy. The economy would not be susceptible to disruption from an attack like the Boeing/U.S. assault on Bombardier, the tariffs imposed on softwood lumber or economic crises within the imperialist system of states.

Because of the vast size of Canada and Quebec and being blessed with an educated experienced workforce and abundant raw material and agricultural opportunities, the Canadian economy does not have to depend on external trade. The five main regions in themselves are quite capable of having a vibrant, all-sided, self-reliant economy with internal economic intercourse benefiting the development and stability of the Maritimes, Quebec, Ontario, the Prairies and BC along with vigorous support for the North.

The present direction of the economy held captive within the U.S.-dominated imperialist system of states is wrought with instability and dangers. The worry of Bombardier workers is well-founded and must be urgently addressed. But it cannot be addressed with calls for even more entrapment within the current direction. The Bombardier manufacturing plants within Canada could be immediately retooled and the skilled workforce employed to provide means of production and consumer goods now manufactured outside the country. This includes most heavy machinery for construction, raw material extraction, agricultural and even defensive military equipment such as tanks, all other rolling stock, fighter jets and ships for defence, domestic use and commerce. Many Canadians still regret and denounce the government for cancelling the Avro Arrow CF-105 in 1959 under pressure from the U.S. imperialists.

All those companies currently selling their industrial products in Canada, especially heavy machinery, without manufacturing them here could be put on notice that this will stop as soon as Bombardier and other industrial plants are producing similar goods using Canadian steel and other material. A timetable could be established with a definite plan of action based on the highest quality production on time using state-owned enterprises and financing in the main.

The U.S. imperialists have the right to decide whether they want to import the C Series airliners or not and at a market price they find acceptable. Canadians have a similar sovereign right to decide what commodities come into and go out of Canada and at what price. Such a right is an affirmation of sovereignty. Whether that affirmation of sovereignty serves the common good and general interests of society is up to the people in the sovereign country to decide.

The people do not want conflict and war over trade issues or hooligan and brigandish trade partners. That is not the modern way to engage in international trade, nor is violence the way to solve internal or international problems.

A new direction for the economy is possible based on self-reliance to guarantee security and stability and meet the needs of the people and general interests of society where the rights of all are recognized and upheld. The crucial aspect missing to make it happen is the political will and leadership of the organized and mobilized working class.

No to empire-building where might makes right outside and in contradiction with any modern rule of law!

Yes to nation-building on a new basis where the people decide and exercise their right to control the affairs of state within a modern constitution and rule of law that guarantees their well-being and rights!

Notes

1. Pay-the-rich schemes for Bombardier widely reported in the media:

Bombardier has received federal aid 48 times since 1966 with similar largesse shown by the Quebec government.

Other payments specific to the C Series include:

– Equity infusion by Investissement Québec ($1 billion)
– Equity infusion by Caisse de Dépôt et Placement du Québec ($1.5 billion)
– Launch aid for the C Series by Canadian Federal Government ($259.9 million)
– Launch aid by Québec Provincial Government ($86.9 million)
– Launch aid by U.K. Government ($145.9 million)
– Export Development Canada and Export Financing Investissement Québec Export Financing ($1 billion)
– Technology Partnerships Canada Program ($103.7 million)
– Technology Demonstration Program ($40.1 million)
– Government provision of production facilities and land at Mirabel for less than adequate remuneration
– Tax incentives and other support provided by the City of Mirabel
– Innovation, Science, and Economic Development Canada support for Aerospace Research and Development ($14.9 million)
– CDPQ Line of Credit ($500 million)
– Emploi-Québec ($3.0 million)

2. Media in the U.S. have noted the irony of Boeing suing anyone over government handouts. Boeing is the No. 1 recipient of state funds from all levels of government. The federal U.S. Export-Import Bank is often referred to as, “the Bank of Boeing.” The website Subsidy Tracker has named Boeing the No. 1 recipient of U.S. state pay-the-rich schemes. It reports Boeing has received $14.4 billion in various pay-the-rich schemes since the 1990s.

Source: Workers’ Forum, October 5, 2017

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One response to “Bombardier’s attempt to enter US market: Boeing uses US state to crush its competitor

  1. Pingback: Bombardier’s attempt to enter US market: Boeing uses US state to crush its competitor | Indiĝenaj Inteligenteco

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