U.S. Panel Rebuffs Boeing And Backs Bombardier -- WSJ

By FeaturesDow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 27, 2018).

Boeing Co. suffered a bruising defeat after a U.S trade panel Friday rejected its complaint of being harmed by Bombardier Inc., effectively blocking a Trump administration proposal for steep tariffs against the Canadian jet maker.

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The U.S. aerospace giant launched its challenge last year and was expected by some trade lawyers to prevail despite sharp criticism from overseas lawmakers and analysts of its pursuit of a case that drove Montreal-based Bombardier, a smaller, weaker competitor, into a deal with Airbus SE.

The U.S. International Trade Commission, an independent body, on Friday rejected Boeing's claim that Bombardier unfairly won a big sale of its new line of jets to Delta Air Lines Inc. with illegal support from Canada's government.

Boeing executives said they challenged Bombardier in an effort to maintain a level playing field in the global jetliner industry, which has been beset for years by allegations of unfair government subsidies.

The U.S. company has a huge backlog of orders, record profits and its shares more than doubled over the past year. Executives say they are concerned about Boeing's competitive position as Airbus expands its offering of planes through the planned tie with Bombardier. Boeing is pursuing its own deal with Embraer SA, the Brazilian maker of smaller jetliners.

"While we disagree with the ITC's conclusion today, we will review the Commission's more detailed opinions in full as they are released in the coming days," Boeing said. Its shares recovered after a small dip to close at $343.22.

The Boeing complaint aggravated increasingly tense trade relations between the U.S. and Canada. Other disputes have flared up over the past year on lumber and dairy sales and the future of the North American Free Trade Agreement. The case raised hackles in the U.K. as well, with the government worried about the potential fallout for a Bombardier factory in Northern Ireland. British Prime Minister Theresa May protested directly to President Donald Trump. Canadian Prime Minister Justin Trudeau publicly blasted the Boeing complaint and retaliated by dropping a $5.2 billion deal for new Boeing fighters.

But the 4-0 vote by the bipartisan trade panel rejecting Boeing's claims shows the ITC can serve as a check on controversial trade enforcement actions, especially at a time when the Trump administration has encouraged companies to file more complaints and has promised a more expansive use of trade laws to curb imports.

The Commerce Department had sided with Boeing last year and crafted a plan to impose unusually steep duties of up to 300% on imports to the U.S. of the new CSeries jets made by Bombardier.

"The U.S. values its relationships with Canada, but even our closest allies must play by the rules," Commerce Secretary Wilbur Ross said in announcing the plans to seek triple-digit duties in the case.

Those fees could only have been implemented if the trade panel concluded Boeing faced serious harm from the Bombardier imports -- a claim the panel rejected Friday. Members of the trade panel didn't explain their votes but will do so in a report to be made public by Mar. 2. The ITC in recent years has accepted industry petitions in more than 60% of the cases it has heard, according to trade lawyers.

In a statement, Mr. Ross said the ITC ruling "shows how robust our system of checks and balances is."

Bombardier on Friday called the decision a "victory" for "the rule of law." Its class B shares ended up more than 15% at C$3.34.

Boeing's assertion that it suffered harm from the Bombardier sale to Delta of 75 CSeries jets drew skepticism from some trade lawyers, and protests from both the buyer and seller.

Boeing makes only one aircraft at the 100-to-150-seat range that Delta was seeking. It tried to compete for the contract by offering Embraer jets it had acquired in a separate deal.

"Boeing has built its case around a single sale it did not lose, for an aircraft it does not produce," Delta wrote in a legal brief submitted in the case.

Boeing has said the cheap pricing in the Delta deal cascaded through the broader market, damaging its profits.

Some analysts said it was time for Boeing to cut its losses. "Boeing would be wise to move on, and repair the damage that was self-inflicted, " said Richard Aboulafia at the Teal Group.

Write to Doug Cameron at doug.cameron@wsj.com, Jacquie McNish at Jacquie.McNish@wsj.com and Jacob M. Schlesinger at jacob.schlesinger@wsj.com

(END) Dow Jones Newswires

January 27, 2018 07:08 ET (12:08 GMT)

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