By Amanda Ferguson and Estelle Shirbon
BELFAST/LONDON (Reuters) - Britain told U.S. planemaker Boeing on Wednesday that it could lose out on British defence contracts because of its dispute with Canadian rival Bombardier which has put 4,200 jobs at risk in Northern Ireland.
The U.S. Department of Commerce on Tuesday imposed a 220-percent duty on Bombardier's CSeries jets, whose wings are made at a plant in Belfast, following a complaint by Boeing which accuses Canada of unfairly subsidising Bombardier.
The ruling is a political headache for Britain's minority Conservative government, which relies on support from a Northern Irish party to stay in power.
It also undermines the government's assurances to Britons that free trade and London's close ties with Washington will be pillars of Britain's prosperity and global influence after it leaves the European Union in 2019.
"This is not the behaviour we expect from Boeing and it could indeed jeopardise our future relationship with them," British Defence Secretary Michael Fallon told reporters in Belfast.
"Boeing has significant defence contracts with us and still expects to win further contracts. Boeing wants and we want a long-term partnership but that has to be two-way."
Boeing says it employs 2,200 people in the United Kingdom, which is one of the company's biggest defence clients.
"Bitterly disappointed by initial Bombardier ruling," said British Prime Minister Theresa May, who had personally asked U.S. President Donald Trump to help resolve the dispute.
"The government will continue to work with the company to protect vital jobs for Northern Ireland," she said on Twitter.
"DOES NOT BODE WELL" FOR BREXIT
Bombardier is the largest manufacturing employer in Northern Ireland, which is the poorest of the United Kingdom's four parts and is mired in political difficulties after emerging from decades of armed sectarian conflict.
The U.S. penalty will only take effect if the U.S. International Trade Commission (ITC) rules in Boeing's favour. A final decision is expected early in 2018.
British Business Secretary Greg Clark said he was confident the initial Department of Commerce ruling would be overturned.
"What needs to happen now by the trade commission is that they look to see whether there has been any detriment to Boeing," he told Sky News.
"There hasn't been because this aircraft does not compete with Boeing so we're confident that we will be able to demonstrate that and have this case dismissed."
Given the importance of Northern Ireland's Democratic Unionist Party (DUP) to May's own position as prime minister, mass job losses at the Belfast factory would be particularly sensitive.
The setback has come at a bad time for May, who was severely weakened by her party's poor showing in an election in June and who has been struggling to contain infighting within her top team over Brexit.
Manufacturing Northern Ireland, an industry group, said the row was an ominous sign of the difficulties Britain could face after Brexit.
"What we could be witnessing is the fundamental difference between being a fully-fledged member of an internal market and a junior partner in a free trade agreement," it said.
"This does not bode well for the UK's plan to be a leader in global free trade nor indeed ambitions of a free trade agreement with the EU which cannot match the benefit we currently enjoy as part of the EU's Single Market."
"SABRE-RATTLING"
Arlene Foster, the DUP leader, signalled she would put pressure on May to act.
"Everyone realises how important Bombardier is to Northern Ireland and we will use our influence with our government to make sure that continues," she said on Sky News.
However, London's options in fighting Bombardier's corner may be limited because of the importance of Boeing to its defence industry.
Boeing says the United Kingdom is its third largest supply base after the United States and Japan. It has recently begun constructing its first European parts manufacturing site in Sheffield, northern England.
Britain recently ordered the Boeing P-8 maritime surveillance plane and a new fleet of Apache attack helicopters made by the U.S. giant. Its armed forces have deployed Chinook helicopters, the C-17 transport plane and the E-3 Sentry airborne early warning and command post.
British defence analyst Howard Wheeldon said it was unlikely that Britain would pursue any reprisals against Boeing.
"I think there is a lot of sabre-rattling, but in practical terms it is not on," he said when asked whether Britain could cancel or reduce Boeing defence orders.
"They can play politics, but can't actually walk away from what they need and have committed to buying from Boeing."
(Additional reporting by Tim Hepher and Conor Humphries in Belfast, Padraic Halpin in Dublin, Guy Faulconbridge, Kate Holton and Michael Holden in London; Writing by Estelle Shirbon; Editing by John Stonestreet and Angus MacSwan)
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