The European Union is backing Britain in its trade dispute with the United States over Bombardier Inc.'s C Series airliner, saying preliminary duties of 300 per cent levied by U.S. authorities on the high-tech plane have no basis in international law.
The EU fired a warning shot this week, saying in a Nov. 14 brief to the U.S. Department of Commerce that it considers the preliminary duties imposed on the C Series to be unwarranted. It also took issue with the Commerce probe itself.
"This investigation shows significant shortcomings, both regarding the findings as well as concerning the methodologies applied," the European Commission, the EU's executive arm, said in the brief. The commission said it doubts that the procedures used to establish the duties are compatible with World Trade Organization rules.
The involvement by the EU widens the geographic scope of the trade battle and raises the stakes as the continent's 28 member states line up behind Britain and Canada, putting the United States on the defensive just as talks on renegotiating the North American free-trade agreement resume in Mexico City.
Boeing Co., whose complaint against Bombardier's marquee airplane triggered anti-dumping and countervailing duty investigations by the Department of Commerce, has repeatedly tried to characterize the dispute as one pitting two companies against each other. But as Europe wades into the fray, it's clear this is now a multination battle with widening implications. Brazil is not directly involved but sides with Boeing, alleging state subsidies allowed Bombardier to survive and offer its aircraft below production costs to the detriment of its home-grown champion Embraer.
Boeing filed a trade complaint against Bombardier last April, alleging the Canadian plane maker used unfair government subsidies to clinch an important contract for 75 CS 100 planes to Atlanta-based Delta Air Lines at "absurdly low" sale prices. Commerce sided with Boeing in rulings in September and October and slapped preliminary import duties totalling 300 per cent on C Series planes. That legal process continues with final rulings expected by the U.S. International Trade Commission early next year.
Bombardier denies any wrongdoing and says Boeing cannot prove it was harmed by the Canadian company's actions because it did not offer Delta any planes of its own. Canada, Britain and Quebec, which all provided support to Bombardier to get the C Series to market, say their investments adhere to international rules.
"Boeing is underestimating what they are tackling. It's not just the company but countries" that they're targeting, Bombardier chief executive officer Alain Bellemare said at an investors conference in Boston Tuesday. "Unfortunately, I think they're taking advantage of a [political] context that's favourable to them."
Last month, Prime Minister Justin Trudeau said he warned U.S. President Donald Trump that the trade dispute was blocking "any military procurements from Boeing." It has been the standard line in Ottawa for months that Boeing, having failed to act as a trusted or valued partner, has effectively been shut out of any new federal contracts.
The preliminary duties against Bombardier have also caused outrage in Britain, where the Montreal-based company is one of the biggest private-sector employers in Northern Ireland. About 4,000 Bombardier workers in East Belfast build wings for the C Series as well as other aerospace components.
Europe's backing is awkward for Britain, highlighting the potential advantages of belonging to a big trading bloc as the country negotiates an exit from the EU. An unnamed EU official told the Financial Times newspaper that Brussels intervened in the case to defend both the Belfast plant and aerospace suppliers across Europe that stood to be affected by the U.S. crackdown.
Europe's stance would pave the way for EU action at the WTO level if the United States presses ahead and finalizes import duties against the C Series, the Financial Times said. Canada would also examine various avenues of appeal.
Bombardier last month announced a deal to cede majority control of the C Series program to Europe's Airbus Group SE for no upfront financial consideration. The partners plan to build C Series planes for U.S. customers at Airbus's existing plant in Mobile, Ala., to bypass any duties.
The European Union, in its analysis of the Commerce Department's preliminary determination rulings, contested the findings on multiple grounds.
In the anti-dumping part of the case, the EU pointed out that no C Series airplane has been built for a U.S. customer yet, and none has been imported into the United States. Therefore, there has been no dumping under WTO rules. Further, it said Commerce asked Bombardier to provide sales information when no U.S. sales have taken place.
"It is a flagrant violation of the basic rules of due process if an administration requires a party to submit data on something that does not exist and that, as a consequence, it is unable to provide," the EU said. "Bombardier simply did not have production and sales data due to the absence of production and sales."