Rate of 220% on the C Series : it is protectionism

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Mathieu Bédard

Wednesday, 27 September, 2017 12:22

UPDATE
Wednesday, 27 September 2017, 12:30

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The u.s. department of Commerce ruled in favour of Boeing in its complaint against Bombardier and imposed countervailing duties that you can compare to a tax of 220% on the planes of the C Series sold in the United States. This exorbitant rate represents what the u.s. department of Commerce claims to be necessary to neutralize the effect of the financial assistance that Bombardier has received recently.

In fact, the aeronautics company has received two loans of 350 and 372,5 million $ from the federal government, in addition to an amount of US $1 billion received from Investissement Québec for the C Series and another US $1.5 billion from the Caisse de dépôt for the rail division. This without counting the aid totalling more than $ 2 billion received during the previous decades.

Well as grants and government subsidies to businesses are harmful and that it is necessary to find a solution to the frame in the long term, the path taken by the u.s. department of Commerce is simply devastating. This form of protectionism, veiled by the lexicon of the countervailing rights, aims first and foremost to protect the quasi-monopoly of Boeing in the United States by erecting a tariff barrier against Bombardier aircraft. And as many experts argue, it seems that Boeing has not suffered damages that could be compensated, since it does not offer the type of aircraft that was sold to Delta.

The upside of the race for subsidies

All governments support it in one way or another their original equipment manufacturers are national, but the magnitude of the support of the canadian government to Bombardier, which has been instrumental in the advent of the C Series, or even the survival of Bombardier, brings its share of problems.

One of them is the risk that it begins an international escalation of the subsidies. Other countries or regions, such as the United States, Europe or China, with means greater than those of Canada, could see the recent aid to the canadian company as a green light to untie their purse strings, quite deep. In such a race, Canada could not follow and the market share of the canadian aerospace industry would collapse.

However, we must not lose sight of the fact that it does not correct a bad public policy by a new bad public policy. The race to protectionism is as destructive, if not more, than the financial support the massive governments to their industries.

In addition, even in the case of property heavily subsidized by a foreign government, as is the case of the C Series of the american point of view, protectionism does not make economic sense and is to the disadvantage of consumers. Economists of all backgrounds are almost unanimous on this issue. This is all the more true, ironically, the companies with the united states air are the big winners in the sales of devices C Series at a discount, subsidized indirectly by the canadian taxpayer.

To conclude, regardless of what one thinks of the government assistance provided to Bombardier, there is not anything to delight in the american fare, which must strongly be denounced as protectionism, pure and simple. And the politicians who want to promote their florets should understand that, although the u.s. department of Commerce is wrong, the uncertainty which now face workers of the division C Series is one of the unfortunate consequences of the assistance to businesses.