As the U.S. International Trade Commission (ITC) prepares to decide the immediate fate of Bombardier Inc.'s C Series aircraft in the United States, logic might be on the Canadian plane maker's side. But recent history isn't.
Four members with the quasi-judicial body will vote on Friday afternoon on whether they believe U.S. giant Boeing Co. and the wider American aerospace industry were injured, or could be injured, by Bombardier C Series imports into the United States – planes it says benefited from massive government subsidies allowing them to be sold at less than fair value. A yes vote means duties totalling nearly 300 per cent imposed by the U.S. Department of Commerce will stand, effectively shutting the airliners out of the U.S. market.
The stakes are high. Bombardier chief executive Alain Bellemare is counting on sales from the C Series to help propel a turnaround after the plane maker's brush with bankruptcy in 2015. The livelihood of thousands of workers is tied to the aircraft. Ironically, a decision to turn to the Quebec government for financial backing to help save the C Series could end up dooming the airliner's prospects in the world's biggest market.
Common sense dictates Bombardier should win, according to many observers.
First, Boeing has been the recipient of massive government military contracts in its own right that allowed its commercial jet business to get airborne and enjoy an order backlog topping 5,800 planes at the end of 2017. Second, it doesn't really have a jet that competes with the smaller CS100 C Series, having abandoned the roughly 100-seat market a decade ago. Interest in Boeing's 737-700, which typically carries 126 to 138 passengers, has been thin for years. And its revamped 737 Max 7 also remains a tough sell.
As Bombardier's commercial aircraft boss Fred Cromer put it: "Boeing says it wants a level playing field, but it is not even on the field."
But the record suggests things could cut the other way for Canada's aerospace champion.
Toronto-based Veritas Investment Research Corp. reviewed ITC case history for the past three years and found that 87 per cent of its final rulings in anti-dumping and countervailing duty investigations resulted in affirmations that a U.S. industry was materially injured, or threatened with injury. A review stretching back five years shows the commission affirmed harm in 78 per cent of cases.
"While it is possible that the ITC determines that Boeing failed to adequately demonstrate injury, the ITC's track record of final rulings [in these types of cases] does not favour Bombardier," Veritas analyst Dan Fong said.
A majority of commissioners, three of the four, must find in favour of Bombardier for the plane maker to win. A tie vote goes in favour of the petitioner, in this case Boeing.
The row started last spring when Boeing took legal action against Bombardier for selling 75 C Series planes to Atlanta-based Delta Air Lines at what it says were "absurdly low prices" while benefiting from unfair subsidies from the Canadian, Quebec and British governments. It asked the U.S. government to impose countervailing and anti-dumping duties on the C Series to even things out.
In a final determination issued just before Christmas, Commerce confirmed duties of nearly 300 per cent on Bombardier C Series planes. U.S. President Donald Trump is said to covet such duties as he tries to put in place an "America first" trade strategy that aims to save manufacturing jobs. Boeing is only one of several U.S. companies that have sued foreign rivals in recent months, aligning itself with the political winds to push its own interests.
U.S. trade action against the C Series has angered political leaders in Canada and Europe, casting a shadow over NAFTA trade talks and souring relations between the United States and its trading partners. Canada's Liberal government cancelled plans to buy new Boeing fighter jets because of the company's actions and Britain, which is home to a big C Series wings factory, has also threatened to review its defence purchases from Boeing.
Bombardier has a legitimate chance to win, said Simon Lester, a trade policy analyst with the Cato Institute. The ITC is more objective and less political than the commerce department and Bombardier has many facts in its favour, he said.
"There's the question of whether Boeing has actually been injured. How can you show you're injured when you're as profitable as Boeing is?" Mr. Lester said. He noted that Bombardier hasn't delivered a single C Series in the United States yet, which further complicates the analysis and might make the ITC hesitant to find harm.
William Perry, an international trade lawyer who used to work for the ITC, disagrees. He says it's nearly certain Bombardier will lose the case because the company made the fatal mistake of failing to respond to some questions in the dumping portion of the probe. "You don't have the right to just brush off the questions," Mr. Perry said. Bombardier has said Commerce asked for data that do not yet exist because there have been no sales yet into the U.S. market. The company counts an order as a sale when the aircraft is delivered.
Whoever loses Friday's vote will almost certainly challenge the decision. Among the avenues for appeal for Bombardier is the U.S. Court of International Trade, although the Canadian company might be shy to take on another long court battle in another U.S.-centric venue. Canada could also request a review of the decision under NAFTA's dispute resolution mechanism or seek a panel review at the World Trade Organization, both of which could take years to resolve.
In the meantime, Bombardier has a plan for getting the C Series to U.S. buyers. Through a new partnership with Airbus SE, Bombardier is working on a final assembly line for C Series aircraft at Airbus's existing manufacturing site in Mobile, Ala. The partners say the line will go ahead regardless of how the Boeing petition concludes and will render any import tariffs non-applicable because C Series built there will be American-made products.
That plan, too, could be challenged by Boeing.