U.S. trade body backs Canada's Bombardier over Boeing in tariff spat

By David Shepardson and Allison Lampert

WASHINGTON/MONTREAL (Reuters) - Bombardier Inc shares jumped 15 percent on Friday after the Canadian plane maker won an unexpected trade victory against Boeing Co which means it can sell its newest jets to U.S. customers without heavy tariffs.

The decision by the U.S. International Trade Commission is the latest twist in U.S.-Canadian trade relations that have been complicated by disputes over tariffs on Canadian lumber and U.S. milk and U.S. President Donald Trump's desire to renegotiate or even abandon NAFTA.

Trump has not weighed in on the dispute personally, but he has often railed against what he sees as unfair international trade practices such as state subsidies hurting U.S. businesses.

 

The commission voted 4-0 on Friday that Bombardier's prices did not harm Boeing and discarded a U.S. Commerce Department recommendation to slap a near 300-percent duty on sales of Bombardier's 110-to-130-seat CSeries jets for five years. Boeing's shares fell slightly.

"It's reassuring to see that facts and evidence matter," said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. "This part of the trade policy process works unimpeded despite President Trump's protectionist rhetoric."

In a statement, Bombardier called the decision a "victory for innovation, competition, and the rule of law," and a win for U.S. airlines and the travelling public.

Boeing said it was disappointed that the commission did not recognise "the harm that Boeing has suffered from the billions of dollars in illegal government subsidies that the Department of Commerce found Bombardier received and used to dump aircraft in the U.S. small single-aisle airplane market."

Delta said it was pleased with the decision and looked forward to introducing Bombardier's CS100 to its fleet.

Former ITC chairman Dan Pearson praised the decision. "Not a single commissioner was willing to buy Boeing's arguments," he said. "I think 'America First' is a policy of the White House and the Commerce Department. But it's not the policy of an independent agency (like the ITC)."

The decision may end up helping Trump's plan to boost U.S. jobs as the CSeries jets for U.S. airlines will be built in Alabama rather than Canada.

BOEING WIN EXPECTED

The ITC had widely been expected to side with Chicago-based Boeing, which alleged it was forced to discount its 737 narrowbodies to compete with Bombardier, which it said used government subsidies to dump the CSeries in the United States during the 2016 sale of 75 jets at "absurdly low" prices to Delta Air Lines .

The ITC, which currently has four commissioners, did not give an explanation on Friday for its decision.

Through a venture with European planemaker Airbus SE , which has agreed to take a majority stake in the CSeries this year, Bombardier plans to assemble CSeries jets in Alabama to be sold to U.S. carriers starting in 2019. The case has sparked trade tensions between the United States and its allies Canada and the UK. Ottawa last year scrapped plans to buy 18 Super Hornet fighter jets from Boeing.

The British Prime Minister's office said it welcomed the decision "which is good news" for the British industry, while Canada's Innovation Minister said the IRC came to the "right decision" on Bombardier.

The fate of the CSeries and the well-paid jobs associated with the plane are important both to Ottawa and the British government. Bombardier employs about 4,000 workers in Northern Ireland, whose Northern Irish political party is helping keep Prime Minister Theresa May in power.

(Reporting by David Shepardson, Lesley Wroughton and Allison Lampert; Additional reporting by Alana Wise and David Ljunggren; Editing by G Crosse and Bill Rigby)