Bombardier vs. Boeing: Tariff Row or Opportunity?

by John Brian Shannon | Reposted from LetterToBritain.com

An increasingly protectionist United States has suddenly announced a 219% tariff on Bombardier passenger aircraft.

Bombardier Aerospace, headquartered in Montreal, Canada, also employs some 4000 people in Northern Ireland who produce a significant percentage of the components used in the C-Series passenger jets (CS 100 and CS 300) that have recently entered production.

Switzerland has already taken delivery of some of their C-Series jets, with others to be delivered in the coming months. Airlines from Germany, Finland and other European nations have indicated huge interest in these modern and fuel-efficient airliners, and China has told the company they will take as many planes as Bombardier can produce.

Bombardier C100 passenger aircraft
Bombardier C100 passenger aircraft. Image courtesy of BombardierAerospace.

There isn’t a better commercial aircraft in the 100-150 seat market in the world today.

And if that sounds like advertising copy, it’s because the aircraft the C-Series competes against were originally designed in the 1970’s (Boeing 737) and 1990’s (Airbus) and early 2000’s (Embraer) and although those aircraft lines have received numerous upgrades over the decades, from an engineering point-of-view nothing beats starting with a clean sheet.

This allows designers a free hand to use the latest composite materials, fully digital electronics instead of digital-over-analog, and 100% CAD/CAM design and manufacturing instead of only part of the process being CAD/CAM (Computer Aided Design/Computer Aided Manufacturing) all of which means there are no engineering compromises.

When you have the best plane on the market in that particular segment, one that boasts the quietest takeoffs and landings (significantly quieter) and the best fuel mileage, and the lowest maintenance cost per mile — high tariffs in one country means you simply sell the same number of aircraft per year — but you sell them to different countries.


China can’t get enough commuter aircraft from all sources it seems, and its own fledgling passenger aircraft manufacturer is geared towards truly excellent jumbo jet airliners. The country needs almost 7000 new aircraft over the next 20-years.

Boeing Forecasts Demand in China for 6,810 Airplanes, Valued at $1 Trillion (Boeing)

Good news for Bombardier! China becomes the world's first $1 Trillion aircraft market.

All good news for Bombardier there! The company should easily score 1/3 of all single aisle passenger jet sales in China over the next 20-years. And if they can’t, the entire executive staff of Bombardier should be exiled to Antarctica for life. Yes folks, opportunities like this don’t come along once-per-decade, nor even once-per-century.

Just in case you’re counting along at home; If Bombardier receives 1/3 of all single passenger jet sales in China over the next 20-years, it would need to deliver 6-jets per day to China.

(That’s China alone! India, the Middle East, Indonesia, and other nations all have rapidly growing markets for world-class single aisle passenger jets featuring low noise and exceptional fuel efficiency)

The future couldn’t be brighter for Bombardier and its clients. A missed deal with the United States might in retrospect turn out to be the best thing that ever happened to the company. Instead of thinking ‘regional’ — it’s now time to think ‘global’ — thanks to the U.S. Commerce Department.

Trade war, schmwade war! In the 21st-century, the name of the game isn’t getting into fights with your competitors, it’s about out-succeeding them.

Remember your pilot’s etiquette now; Always dip your wings ever-so-slightly (in respectful salute) every time you pass your competition! 😉


Related Articles:

  • U.S. Department of Commerce Issues Affirmative Preliminary Countervailing Duty Determination on Imports of 100- to 150-Seat Large Civil Aircraft From Canada (Commerce.Gov)
  • Britain’s Theresa May issues warning to Boeing over Bombardier trade dispute (The Globe and Mail)
  • UK government threatens retaliation against Boeing in Bombardier tariff row (The Guardian)
  • Boeing Super Hornet jet purchase likely to become 1st casualty in possible trade war (CBC)
  • Bombardier flying high after handing over first C-Series jet to SWISS (Financial Post)
  • On the book of Bombardier vs. Boeing, skip to Chapter 19 (The Globe and Mail)
  • May Says Boeing Undermining Ties With U.K. Over Bombardier (Bloomberg)
  • Bombardier Nears $1.25 Billion C Series Deal With Air Baltic (Bloomberg)
  • Bombardier C-Series Marketing Brochure (BombardierAerospace)
  • U.S. imposing 220% duty on Bombardier C-Series planes (CBC)
  • How Canada’s fight with Boeing began in Washington (CTV)
  • Bombardier BDRBF:US OTC (Bloomberg)

A Time for Tariffs in the Globalized World?

by John Brian Shannon
(Originally published at JohnBrianShannon.com)

A long time ago when there were unicorns, there was a justifiable need for international trade agreements to spur trade, increase movement of capital flows and to promote movement of labour — but mainly to gain access to potentially larger markets in both developed and developing nations.

International trade agreements like NAFTA and even today’s TPP are throwbacks to a day when we didn’t have all of that. Many global economies then were practically closed markets, with few exceptions.

It’s almost the opposite these days — globalization has certainly prevailed — and it’s the rare country that isn’t buying or selling wares from around the world on a daily basis.

North Korea is a closed market, so is Japan (nominally) although it is a huge exporter, and only a handful of other countries could be considered ‘closed markets’ in any substantive sense.

In your home country you can probably buy a car, a music player, clothing, food, and almost anything else — and it likely wasn’t built, created, or grown, in your country.

Globalization has succeeded wildly and we now live in a globalized world.

How’s it working?

For the people in developed nations it has meant 25-years of inexpensive goods on store shelves — goods that were either built, created, or grown, in developing nations, which has been a real bonus for developed world consumers — and it has also benefited workers in the developing world.

Unfortunately, it also led to many high-paying jobs being sent overseas, resulting in higher unemployment and worse social ills than that in some developed nations.

Liberalized international trade has become all that it could be

Which is fine. It’s served it’s purpose and we now have open markets around the world with levelization of trade, capital, knowledge, labour, and general market equilibrium — if not market symbiosis.

But there isn’t much more room for globalization to grow. Other than tidying-up some intellectual and property rights regulations, we’ve arrived at our free trade destination. We’re already living in the globalized economy.

Where do we go from here?

There are a number of things that can strengthen our domestic economies without turning back the clock to the (almost) closed economics of the 1960’s.

Ten Ways to Make Our Country Better and Stronger – While Helping Citizens to Succeed and Live Happier Lives

The Ten Ways: Increasing Intellectual Rights, Increasing Government Revenue Streams, Preventing Obscene Government Debt, and Enhanced Government Services Designed to Move the Bottom Economic Quintiles Towards Middle Income Status

  1. We and our trade partners — should sign a simple trade agreement to protect intellectual property rights, one that includes universal patent, trademark and copyright protections. The point is to get it done now while it is still relevant. There’s no point in bothering with it if we wait, as all the secrets (the patents, trademarks and copyrights) will be ‘out of the box’ and in the general marketplace. (The rule must be that we don’t trade with nations that won’t sign and abide by those laws)
  2. We and every country we trade with — should pass legislation to allow a simple 5% tariff on every imported and exported good — from supertankers full of oil, to consumer electronics, to clothing — in short, everything. This simple tariff would replace all other import and export taxes/tariffs/levies and related charges. Billions of dollars of goods are imported and exported every month and the tariff revenue stream can be used by the federal government; To improve productivity by funding R&D, and to improve government services and infrastructure — or used to raise national GDP and quality of life for citizens, by reducing unemployment and to lower taxes on the poor and working poor.
  3. We and our trade partners that don’t already have a national Goods and Services Tax (of 7% for example) on all retail goods — should implement one immediately. This revenue can contribute to the overall economy to improve services and infrastructure, reduce unemployment, and lower taxes on the poor and working poor, and should be shared 50/50 with states or provinces — who after all, would be the parties responsible for collecting it.
  4. We, and every country we trade with — should pass legislation making deficits of more than 4% of GDP illegal, at the federal, state, and municipal level. This prevents obscene government spending and prevents the trap of eternal debt servicing costs, once interest rates rise. Which they always do.
  5. Our own country and every country that we trade with — should no longer charge income tax on those who earn less than the equivalent of $25,000. per year.
  6. We and our trade partners — should pass legislation to the effect that every worker has the right to a minimum of 25 weeks of full-time employment, per year. Yes, it would require a job-sharing programme managed at the state level. Some workers may receive layoff notices in order to accommodate unemployed workers. On the positive side, long-term unemployed people could then contribute to the economy (and to their own personal income!) for a minimum of 25 weeks per year. In countries like Sweden, this is common in industries that can’t keep all of their workers employed, and it is normal for two workers to share the same job for many years (6 months ‘on’ and 6 months ‘off’) so that over the course of a year, every worker in the country will have worked a minimum of 6 months. Which keeps their skills sharp, makes them eligible for automatic unemployment insurance benefits during their layoff, and lowers the welfare rate to near-zero.
  7. Most government unemployment insurance programmes around the world pay 66% of a worker’s salary during periods of unemployment, often after a significant wait and a worker’s claim can be turned down for any number of strange reasons. It’s inhuman. Workers pay into unemployment insurance — it’s not their fault that there are millions more people looking for work than there are jobs available — because their jobs have been sent overseas since the advent of globalization. In some countries, a brilliant solution exists whereby workers can opt to pay into a private unemployment insurance programme, one that can top-up their unemployment insurance payments to 99% of their normal salary for the equivalent of 1 or 2 cents per dollar earned. The employee merely indicates how much extra unemployment insurance coverage he or she wants to purchase, and the deductions are automatically made from their wages and directed to the private unemployment insurance company. The private insurer also begins paying unemployment benefits from the first day of a worker’s layoff. Workers no longer need subsist on 66% of their normal income while unemployed. (Imagine working in the fast-food industry, living on subsistence wages, then getting laid off due to a slowing economy, and then having to exist on only 66% of your already subsistence-level wage!) NOTE: In Sweden, both the government-run unemployment insurance plan and the private unemployment insurance plan make a respectable profit, every year. That’s how easy it is to do, when it’s done properly.
  8. Every city, town, village or county in the country should have the option to receive a free website from the federal government — for as long as certain information is continuously updated by the local jurisdiction. Simply by typing in the name of a jurisdiction into a search engine, anyone should be able to find the local time, weather, federal, state, city, village or municipal phone numbers and addresses, emergency services and other essential services (like Hospitals and Veterinary Clinics) and employment information for that city, town, or region. Standardization is key so that workers looking for work, or visitors to a region can quickly navigate to and access important services without a frustrating search (or fruitless search, because not all jurisdictions have their own site or mobile-friendly site — but you don’t know that until you do an hour’s searching and discover that there isn’t one!) Quick access to important phone numbers and addresses can save lives and help to increase productivity.
  9. Streamlined government websites for self-employed people to set-up and begin working in one day with a minimum of confusion, stress and red-tape.
  10. Legislation to require internet service providers to provide basic internet plans of $10. per month with low entry barriers — enough to check emails, find a job, find rental accommodation, and perhaps practice the preferred local language in hopes of finding a job. The internet is an essential service in our era, and those entering the workforce or returning to work after illness, etc. need to be able to start somewhere.

It’s easy to look around the world to see what’s working well in other jurisdictions and write similar legislation.

Legislators in Sweden and Norway don’t have two brains nor any other super powers, that we know of. If they can manage to get these things done, so can we. And if we can’t, we’re not half as great as we imagine ourselves to be.

But we are! Therefore, all we lack is the will to act. So let us act, and help our country to leap forward by one order of magnitude.


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