Crony capitalism flies high in Boeing’s anti-trade allegations

Crony capitalism flies high in Boeing’s anti-trade allegations
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Crony capitalism — using raw government power to advance a company’s commercial interests — is, unfortunately, flying high at the expense of the American consumer.

One example: the U.S. International Trade Commission (ITC), a Washington agency that polices alleged unfair trading practices against American businesses, recently rolled over to aerospace giant Boeing’s assertions that a Canadian firm, Bombardier, “dumped” a new class of passenger jets on the U.S. market with its sale of 75 of its C series planes to Delta. The ITC recommended the imposition of astoundingly high retaliatory duties to shield Boeing’s supposed injury.

What’s eye-rolling here is that Boeing is trying to regain a competitive advantage in the U.S. marketplace on a class of aircraft which it stopped making years ago. The ITC move would leave American domestic carriers with fewer choices and fewer jobs in the U.S.

If Boeing succeeds in having punitive import duties places on Bombardier’s C Series planes, it will harm air travelers and innovation. The C Series passenger jets are sized for efficient domestic operation; Delta stated this was one of the reasons the company selected the Bombardier jet. Industry experts have praised these planes for their fuel efficiency, reduced noise and comfort. Boeing’s attempt to protect its future domestic market will hamper innovation and force U.S. carriers to buy Boeing planes they might not really want. Fewer choices, higher ticket prices, and more unhappy customers are the byproducts of misusing trade laws. 

Now it appears at least some of these undesirable consequences might be averted. On Monday, Boeing’s archival Airbus shocked the aviation world and announced it would take over C Series production for Bombardier. If Boeing wanted the U.S. government to protect it so it could play catch-up ball with Bombardier, the Airbus-Bombardier partnership will make this very difficult. Boeing’s attempt to marginalize a worthy competitor might have backfired. 

Nonetheless, Boeing’s abuse of U.S. trade laws is not an isolated case.

Days ago, the ITC sided with profitable U.S. appliance maker Whirlpool in its claim it faces massive losses due to cheap imports of certain washing machines from Korea. President Trump will eventually decide whether to impose import restrictions to shield this diverse group of U.S. companies from foreign competition. 

Last month, the ITC agreed with the contention of two American makers of solar panels, Suniva and SolarWorld Americas, that cheap solar imports, many from China, are hurting domestic manufacturing. This, too, should elicit a Boeing-like belly laugh: Solar panels are heavily subsidized in the U.S. 

Thankfully, in these and other cases, there is ample opposition — not just from foreign producers and countries but from American stakeholders. A coalition of utilities, co-ops, manufacturers, developers, small businesses and unions has been formed to oppose tariffs on solar products. The Solar Energy Industries Association estimates that the imposition of higher tariffs and minimum prices on imported solar cells and panels would jack up domestic prices of these products, leading to a loss of 88,000 American jobs in the U.S. solar industry. 

In the Boeing case, U.S. airlines Spirit, Sun Country and Jet Blue have written to the ITC to oppose the import restrictions, as have nine elected officials from states that are home to Bombardier domestic facilities or companies that employ workers thanks to contracts with Bombardier. For example, Connecticut-based Pratt & Whitney’s revolutionary engine is in Bombardier’s C-Series.  

British Prime Minister Theresa May has been fighting against Boeing. May’s position underscores the nature of today’s global supply chain and mutual benefit for all countries to avoid interruptions and distortions in cross-border trade and investment. The wings of Bombardier’s C Series aircraft are manufactured in Northern Ireland and support the UK’s vital aerospace industry. International integration is the rule in the aerospace sector.

Boeing, of all companies, should appreciate this fact. The fact that it is willing to undermine the very system of global sourcing that has allowed it to be so successful is an unsettling and disappointing development. Boeing’s move could cascade into a destructive trade war in the aerospace sector. Recently, Brazil’s Embraer asked the World Trade Organization to look into Canada’s alleged subsidies of Bombardier, even though Canada had taken steps to align its policies with global trade rules following disputes in the 1990s.

Neo-mercantilism is both damaging and unworkable in today’s global economy. Years ago, we had to abandon the idea of an “American” car as so many Japanese and German autos are built in the U.S. while many Ford and GM models are loaded with parts and components from overseas. With today’s global supply chains, punishing Bombardier will punish global supply companies, mechanical systems and maintenance. May’s decision to weigh in on the Boeing case should remind President Trump and others that U.S. trade remedies could have global implications and erode the remarkable innovation synonymous with the aircraft sector. Officials in the UK could barely contain their glee at Boeing’s getting outmaneuvered.

The global consensus around trade liberalization which the U.S. has championed for over 75 years rests on the idea that competition makes a wider range of goods accessible to people all over the world, creates jobs and spurs innovation – again, all over the world. Over the years, countries adopted rules to make sure trade is conducted fairly and remedies are in place for violations. If existing remedies should not be adequate in particular cases, then the U.S. should take the lead in pushing the necessary changes.

The rules are intended to make the global trading system function better and not to constrain it. In today’s highly integrated trading system, when companies succeed in getting tariffs hiked, retaliatory duties imposed, or quotas raised to shore up local market share, these are usually Pyrrhic victories. The abuse of trade remedies makes trade wars inevitable and there are no winners in trade wars, as the Great Depression, which began as a global trade conflict, testifies. 

Steve Forbes is the Chairman and Editor in Chief of Forbes Media, Inc.