State aid and post-Brexit trade: What we can learn from the Boeing-Bombardier feud
The Prime Minister has been in Canada this week.
One of the big issues covered was how to keep UK-Canada trade as seamless as possible, given that the Canada-EU trade deal, Ceta (which comes into force this Thursday), will lapse when the UK leaves the EU unless some new agreement is made. It was announced that Ceta will form the basis of a new bilateral UK-Canada deal.
Another of the big issues discussed, however, also has an intimate connection with trade that may not be so obvious. The Canadian aerospace company Bombardier is Northern Ireland’s largest manufacturing employer. Bombardier is in enmeshed in a dispute with the US aerospace giant, Boeing, before the US trade authorities.
Read more: Theresa May to seek post-Brexit trade deal on Canada trip
Boeing alleges that the subsidies Bombardier receives from the UK and Canadian governments mean it is launching its new C series jets below cost in the US, and so the US trade authorities should impose tariffs.
Bombardier, by contrast, says Boeing’s position is hypocritical and absurd – hypocritical because Boeing prices its new planes very cheaply at launch, and because Boeing has received huge subsidies from the US government over the years; and absurd because Boeing is claiming to be damaged by Bombardier’s sales even though Boeing does not sell any competing planes of a similar size and has not done so for a decade.
It all turned a bit nasty on Tuesday with Canadian Prime Minister Justin Trudeau saying the Canadian air force will not buy Boeing’s Super Hornet jets from “a company that’s busy trying to sue us and put our aerospace workers out of business.” Theresa May, in turn, has said she will raise the issue with Donald Trump later this week at the UN.
This case provides an interesting illustration of the connection between trade and state aid. Both supporters of Theresa May’s more active “industrial strategy” and of Jeremy Corbyn’s more activist government policy platform have noted that, when the UK leaves the EU, it will have more flexibility to engage in state aid. But additional state aid may come into tension with new trade deals internationally if one side or the other decides that state aid provides a legitimate reason to impose tariffs.
Some sectors of the economy (of which aerospace is just one) have very significant government involvement almost by their nature. In such cases it may be very difficult to treat trade disputes as “purely commercial” matters. As things stand, it will be the US trade authorities that decide on the Boeing-Bombardier dispute –albeit perhaps affected by political intervention.
In any future US-UK trade deal, would we want US and UK courts deciding these matters, or would some joint arbitration body – perhaps allowing for more flexible political undertakings – be a better way forward?
We know from the Brexit negotiations that supranational courts with national jurisdiction (such as the ECJ) are likely to be problematic, but dispute resolution panels may be more feasible – perhaps sometimes using the WTO bodies in Geneva. In the end, though, “dispute resolution” may not only mean company-to-company disputes, even for supposedly “commercial” matters. It also might mean resolving disputes between governments.
Maybe post-Brexit we will stop complaining about “Brussels” imposing things on us only to start complaining about “Geneva” doing so instead?
Read more: Time for the UK and EU to start talking about trade