7 ms·

I'm unclear on why / how a 300% tariff on the Bombardier jets would be considered fair or good in any way, for anyone other than Boeing. Is this just classic c

I'm unclear on why / how a 300% tariff on the Bombardier jets would be considered fair or good in any way, for anyone other than Boeing. Is this just classic corrupt lobbying or is there more to it?

tfe 9y ago
Their complaint is that the Canadian government subsidized development costs (which it arguably did), so it's unfair competition. https://en.wikipedia.org/wiki/Countervailing_duties https://en.wikipedia.org/wiki/Countervailing_duties However Boeing is also quite subsidized, just more indirectly through defense contracts. And what's more, Boeing doesn't even offer a competitive product. They don't sell any aircraft in this size range.
- bparsons 9y ago
  By some accounts, Boeing is the most subsidized company in the world. https://globalnews.ca/news/3773916/bombardier-boeing-subsidies/ https://globalnews.ca/news/3773916/bombardier-boeing-subsidi... https://www.forbes.com/sites/taxanalysts/2014/03/14/where-is-the-outrage-over-corporate-welfare/#2b698cd927dd https://www.forbes.com/sites/taxanalysts/2014/03/14/where-is...
  - magila 9y ago
    You have to be careful when you see claims of a company receiving $x in subsidies. There is often some questionable accounting which going into computing those numbers. For example, the $64 billion figure from the headline of the first article appears to be mostly from loan guarantees. Loan guarantees are definitely a form of subsidy, but computing their value is not trivial. You need to figure out what the rate would have been without government backing and compare that with what the actual rate was. Simply taking the notional value of the loan, as was done to get the $64 billion figure, vastly overstates the magnitude of the subsidy.
    - seanmcdirmid 9y ago
      One of my teachers in high school was complaining about Boeing being exempt from Washington state sales tax for the sale of...airplanes. Is that a subsidy? I wouldn't count it as such.
      - wbl 9y ago
        It is. It's a targeted expenditure (vs. a lower sales tax rate overall) but IANAL.
        seanmcdirmid 9y ago
        For a company with international sales, sales tax (and VAT) should be handled in the district where the sale occurs, not where the product is manufactured. The big problem with the USA is that it doesn't have a VAT system in place to make it all work out equitably.
        JDShu 9y ago
        Unless I'm misunderstanding your point, I think it still works out equitably regardless of the existence of a VAT system.
      - barrkel 9y ago
        All tax breaks are subsidies.
        tim333 9y ago
        Well, it makes a difference whether the government is giving money to the company or visa versa.
        dmix 9y ago
        In effect maybe, but this isn't considered a subsidy on paper though... from my understanding the distinction is "giving" is a subsidy vs "not taking" is a tax break?
- ams6110 9y ago
  It's not like the defense department would not be developing and buying jets if Boeing didn't exist. I don't really think of defense business as a subsidy. Though admittedly I'm sure there's plenty of grease money being spread around.
  - convolvatron 9y ago
    one look at senators arguing about saving platforms the DoD doesn't even want because federal money flows into their state should give you pause
  - Nokinside 9y ago
    Not always subsidy by itself, but DoD and NASA are used to subsidy Boeing and others. DOD and NASA transfer economic resources to the industry on terms more favorable than available on the market.
  - skgoa 9y ago
    Defense spending isn't supposed to be a direct subsidy, but the DoD does sometimes blatantly choose one product instead of better competing products based on industrial concerns. E.g. that tanker buy where Airbus won the competition, but the DoD reversed it and leaked emails showed that it was done purely to benifit Boeing. Or that the US Army refused to allow the widespread introduction of a modern infantry rifle that isn't made by Colt, forcing the US Marines to designating their new rifle as a "light machine gun". Every country does this, since having your own defense industry is a massive strategic boon and keeping those high-tech jobs are good for the economy. But it's definitely anti-competitive behavior and the respective defense companies do get a lot more taxpayer money for the capabilities the country gets than would be optimal.
- neves 9y ago
  There is no big airplane company without Gov subsidies. They generate so many "good jobs".
  - nradov 9y ago
    That's true, but beyond the jobs there is a legitimate issue of national security. If we're going to have a military at all then that implies we need a domestic aerospace industry capable of producing large aircraft. That capability has to be preserved as a strategic necessity regardless of cost.
    - KozmoNau7 9y ago
      Other countries do quite well military-wise, without having domestic aerospace industries. They just buy the planes from other countries that do have them. Maybe not feasible on a scale such as the US military, but still.
      - johan_larson 9y ago
        The problem is that this gives other countries a big stick to beat you with, just by refusing to sell you more aircraft or spare parts or whatever. Iran is a case in point. Under the shah, Iran was a US ally, and purchased US aircraft. After the revolution, the US shifted its favour to Iraq and refused to sell spare parts and supplies for the aircraft, severely hampering the Iranian air force. This might not have been such a problem, but Iran was at war with Iraq at the time. This sort of thing is why most countries are keen to manufacture as much of their military equipment domestically as possible.
        michaelt 9y ago
        The problem is that this gives other countries a big stick to beat you with, I've always thought it a bit odd that we don't apply the same logic to imports of things like food, oil, computers and suchlike.
        9y ago
- Nokinside 9y ago
  Boeing is subsidized in many ways, including defense contracts. Boeing is the largest winner of state and local tax incentives valued in $13 billion. Most of these go to commercial aircraft manufacturing. DoD also awards defense contracts that intend to keep strategic commercial technologies within US (just like all large nations). Boeing and Airbus have been involved in legal battle over subsidies over a decade. When WTO found that there was only $1 billion in illegal subsidies in 777X development and rest $8 billion were legal subsidies, Boeing was celebrating.
- cameldrv 9y ago
  No, the CSeries is Bombardier muscling onto Boeing’s turf. The CS300 is a very direct competitor to the 737 MAX 7.
  - snowwindwaves 9y ago
    Every news outlet I've read on this states that Boeing proposed used embraer jets to compete with the bombardier c series and has no directly competing aircraft.
    - sho 9y ago
      In order to have a valid complaint, Boeing had to identify a "Domestic Like Product", which was indeed the 737-700 and 737 MAX 7, capable of carrying 126 and 138 passengers respectively, comparable to the C300's capacity. That part of it is true. The aspect in which boeing's product does not compete is that the 737 is a 50-year-old frame by now, whereas the C300 is a modern and technologically far advanced design. Needless to say, Boeing did not over-emphasise that point in their submission. Boeing's complaint is actually factually correct and pretty much rock solid. BBD is indeed being subsidised via tax breaks and sweetheart loans from its various interested governments, and it did indeed sell the airframes to Delta at well below cost. The trouble is that Boeing does exactly the same thing all the time. These kind of tactics are, regrettably, par for the course in competition between Boeing and Airbus. I think the main reason everyone is pissed off at Boeing is not only that the C300 is inarguably a profoundly superior product to Boeing's ageing cash cow, but they're employing their most ruthless "nuclear" legal tactics against a company so much smaller than them, in a friendly, neighbouring country, which is a customer to boot! At the very least, it's not very gentlemanly. It's pretty rich to shriek about "predatory behaviour" from a company a hundredth their size. For anyone interested, the public version of the complaint is available here: https://leehamnews-5389.kxcdn.com/wp-content/uploads/2017/04/BBD-Complaint-042717.pdf https://leehamnews-5389.kxcdn.com/wp-content/uploads/2017/04...
      - avar 9y ago
        Your characterization that the 737 is a 50-year old airframe and wouldn't compete with the CS300 is entirely inaccurate. Boeing just keeps the same model numbers for a series of aircraft, but through gradual evolution of sub-models the newest 737 MAX that exists today is an entirely different plane from the original 737-100 released in 1966. Just look at this specification table for the different models on Wikipedia: https://en.wikipedia.org/wiki/Boeing_737#Specifications https://en.wikipedia.org/wiki/Boeing_737#Specifications Pretty much the only thing that's the same is that the fuselage is the same diameter. Everything else from length, height, wing span, passenger count & even how fast it cruises has changed over the years. It now has over twice the range that it did in 1966. Secondly just because two aircraft aren't exactly the same size doesn't mean they aren't competing for the same market. As an example no airline sits down and decides they need a plane that carries exactly 150 passengers, and 180 would be out of the question. Instead they look at the overall price, efficiency etc. Maybe they'll buy a smaller plane and run more flights per day, rather than a bigger plane with fewer flights. You can trivially see this by looking at the multitude of airframes you can choose to fly with between pretty much any two major international airports.
- coliveira 9y ago
  Boing is one of the most subsidized companies in the world. Funny how they have even the courage to point this out against Airbus. This shows that to be a big company it is not enough to get government money, you need to be shameless.
burkaman 9y ago
The argument is that Bombardier was selling jets at unfairly low prices thanks to subsidies from the Canadian government. I have no idea if this is true or not, but generally you can't get tariffs without pointing to some alleged unfair trading practice.
- deleted 9y ago
  [deleted]
- zzalpha 9y ago
  I have no idea if this is true or not, but generally you can't get tariffs without pointing to some alleged unfair trading practice. I'd buy that if this was a WTO ruling but these are tarrifs adjudicated by Americans, supporting an American company. The US similarly imposed tarrifs on softwood lumber not that long ago, and they were determined to be illegal once it hit the WTO. There's no reason to believe that won't happen again.
- skgoa 9y ago
  It is true as far as we know. However: * Boeing is guilty of the same, selling hundreds of both the 737 and 787 far below production costs to be able to compete with Airbus' 320 and 350. * Slapping such a massive tarif onto the CSeries was a political move aimed purely at squashing a new competing product that barely overlaps in cost/capabilities with a 40 year old, obsolete Boeing product.
jhall1468 9y ago
Bombardier got a huge bailout by the Quebec Government, so it effectively funded a US companies competition. That type of thing is bad for competition. But, as a result, the few hundred planes they would have sold will not be made by their largest competitor in the US.
- wahern 9y ago
  In fairness, Quebec took a 49.5% stake in return. There's a huge grey area between complete non-intervention and state-owned or state-financed industries (Quebec doesn't control the money supply). Plus, there are all the tax deals Boeing gets. It would be interesting to compare those with the tax deals Bombardier gets in Canada.
- deleted 9y ago
  [deleted]
- hourislate 9y ago
  I was under the impression it was the Province buying into the C Series Jet. They own a % of the Jet just like Airbus now owns a %. You know the way the US Government bought GM Shares and AIG, etc. An investment not a bailout.
  - wbl 9y ago
    I can imagine Canada trying that in retaliation. Won't be a good day for anyone.
- RobertoG 9y ago
  "That type of thing is bad for competition" Is that the case? For instance, we could argue that Airbus would not exist without governments help. Would be, a world without Airbus, more competitive? Now that I think about it, we could argue that Boeing would not exist without government help neither.
jannes 9y ago
Excessive goverment subsidies can destroy competition in otherwise healthy markets (which I wouldn't classify the Boeing/Airbus duopoly as to begin with). For example, look at dairy products in Africa. Local farmers couldn't compete with the heavily subsidised European industry for a long time. http://www.independent.co.uk/news/world/politics/eu-subsidies-deny-africas-farmers-of-their-livelihood-478419.html http://www.independent.co.uk/news/world/politics/eu-subsidie... https://en.wikipedia.org/wiki/Export_subsidy https://en.wikipedia.org/wiki/Export_subsidy
- the_mitsuhiko 9y ago
  Just that Europe has no interest in a healthy market for food stuff because they would lose local producers. They want to stay at least somewhat sustainable.

I'm unclear on why / how a 300% tariff on the Bombardier jets would be considered fair or good in any way, for anyone other than Boeing. Is this just classic corrupt lobbying or is there more to it?

tfe 9y ago

Their complaint is that the Canadian government subsidized development costs (which it arguably did), so it's unfair competition. https://en.wikipedia.org/wiki/Countervailing_duties https://en.wikipedia.org/wiki/Countervailing_duties However Boeing is also quite subsidized, just more indirectly through defense contracts. And what's more, Boeing doesn't even offer a competitive product. They don't sell any aircraft in this size range.

bparsons 9y ago
By some accounts, Boeing is the most subsidized company in the world. https://globalnews.ca/news/3773916/bombardier-boeing-subsidies/ https://globalnews.ca/news/3773916/bombardier-boeing-subsidi... https://www.forbes.com/sites/taxanalysts/2014/03/14/where-is-the-outrage-over-corporate-welfare/#2b698cd927dd https://www.forbes.com/sites/taxanalysts/2014/03/14/where-is...
- magila 9y ago
  You have to be careful when you see claims of a company receiving $x in subsidies. There is often some questionable accounting which going into computing those numbers. For example, the $64 billion figure from the headline of the first article appears to be mostly from loan guarantees. Loan guarantees are definitely a form of subsidy, but computing their value is not trivial. You need to figure out what the rate would have been without government backing and compare that with what the actual rate was. Simply taking the notional value of the loan, as was done to get the $64 billion figure, vastly overstates the magnitude of the subsidy.
  - seanmcdirmid 9y ago
    One of my teachers in high school was complaining about Boeing being exempt from Washington state sales tax for the sale of...airplanes. Is that a subsidy? I wouldn't count it as such.
    - wbl 9y ago
      It is. It's a targeted expenditure (vs. a lower sales tax rate overall) but IANAL.
      - seanmcdirmid 9y ago
        For a company with international sales, sales tax (and VAT) should be handled in the district where the sale occurs, not where the product is manufactured. The big problem with the USA is that it doesn't have a VAT system in place to make it all work out equitably.
        JDShu 9y ago
        Unless I'm misunderstanding your point, I think it still works out equitably regardless of the existence of a VAT system.
    - barrkel 9y ago
      All tax breaks are subsidies.
      - tim333 9y ago
        Well, it makes a difference whether the government is giving money to the company or visa versa.
      - dmix 9y ago
        In effect maybe, but this isn't considered a subsidy on paper though... from my understanding the distinction is "giving" is a subsidy vs "not taking" is a tax break?
ams6110 9y ago
It's not like the defense department would not be developing and buying jets if Boeing didn't exist. I don't really think of defense business as a subsidy. Though admittedly I'm sure there's plenty of grease money being spread around.
- convolvatron 9y ago
  one look at senators arguing about saving platforms the DoD doesn't even want because federal money flows into their state should give you pause
- Nokinside 9y ago
  Not always subsidy by itself, but DoD and NASA are used to subsidy Boeing and others. DOD and NASA transfer economic resources to the industry on terms more favorable than available on the market.
- skgoa 9y ago
  Defense spending isn't supposed to be a direct subsidy, but the DoD does sometimes blatantly choose one product instead of better competing products based on industrial concerns. E.g. that tanker buy where Airbus won the competition, but the DoD reversed it and leaked emails showed that it was done purely to benifit Boeing. Or that the US Army refused to allow the widespread introduction of a modern infantry rifle that isn't made by Colt, forcing the US Marines to designating their new rifle as a "light machine gun". Every country does this, since having your own defense industry is a massive strategic boon and keeping those high-tech jobs are good for the economy. But it's definitely anti-competitive behavior and the respective defense companies do get a lot more taxpayer money for the capabilities the country gets than would be optimal.
neves 9y ago
There is no big airplane company without Gov subsidies. They generate so many "good jobs".
- nradov 9y ago
  That's true, but beyond the jobs there is a legitimate issue of national security. If we're going to have a military at all then that implies we need a domestic aerospace industry capable of producing large aircraft. That capability has to be preserved as a strategic necessity regardless of cost.
  - KozmoNau7 9y ago
    Other countries do quite well military-wise, without having domestic aerospace industries. They just buy the planes from other countries that do have them. Maybe not feasible on a scale such as the US military, but still.
    - johan_larson 9y ago
      The problem is that this gives other countries a big stick to beat you with, just by refusing to sell you more aircraft or spare parts or whatever. Iran is a case in point. Under the shah, Iran was a US ally, and purchased US aircraft. After the revolution, the US shifted its favour to Iraq and refused to sell spare parts and supplies for the aircraft, severely hampering the Iranian air force. This might not have been such a problem, but Iran was at war with Iraq at the time. This sort of thing is why most countries are keen to manufacture as much of their military equipment domestically as possible.
      - michaelt 9y ago
        The problem is that this gives other countries a big stick to beat you with, I've always thought it a bit odd that we don't apply the same logic to imports of things like food, oil, computers and suchlike.
        9y ago
Nokinside 9y ago
Boeing is subsidized in many ways, including defense contracts. Boeing is the largest winner of state and local tax incentives valued in $13 billion. Most of these go to commercial aircraft manufacturing. DoD also awards defense contracts that intend to keep strategic commercial technologies within US (just like all large nations). Boeing and Airbus have been involved in legal battle over subsidies over a decade. When WTO found that there was only $1 billion in illegal subsidies in 777X development and rest $8 billion were legal subsidies, Boeing was celebrating.
cameldrv 9y ago
No, the CSeries is Bombardier muscling onto Boeing’s turf. The CS300 is a very direct competitor to the 737 MAX 7.
- snowwindwaves 9y ago
  Every news outlet I've read on this states that Boeing proposed used embraer jets to compete with the bombardier c series and has no directly competing aircraft.
  - sho 9y ago
    In order to have a valid complaint, Boeing had to identify a "Domestic Like Product", which was indeed the 737-700 and 737 MAX 7, capable of carrying 126 and 138 passengers respectively, comparable to the C300's capacity. That part of it is true. The aspect in which boeing's product does not compete is that the 737 is a 50-year-old frame by now, whereas the C300 is a modern and technologically far advanced design. Needless to say, Boeing did not over-emphasise that point in their submission. Boeing's complaint is actually factually correct and pretty much rock solid. BBD is indeed being subsidised via tax breaks and sweetheart loans from its various interested governments, and it did indeed sell the airframes to Delta at well below cost. The trouble is that Boeing does exactly the same thing all the time. These kind of tactics are, regrettably, par for the course in competition between Boeing and Airbus. I think the main reason everyone is pissed off at Boeing is not only that the C300 is inarguably a profoundly superior product to Boeing's ageing cash cow, but they're employing their most ruthless "nuclear" legal tactics against a company so much smaller than them, in a friendly, neighbouring country, which is a customer to boot! At the very least, it's not very gentlemanly. It's pretty rich to shriek about "predatory behaviour" from a company a hundredth their size. For anyone interested, the public version of the complaint is available here: https://leehamnews-5389.kxcdn.com/wp-content/uploads/2017/04/BBD-Complaint-042717.pdf https://leehamnews-5389.kxcdn.com/wp-content/uploads/2017/04...
    - avar 9y ago
      Your characterization that the 737 is a 50-year old airframe and wouldn't compete with the CS300 is entirely inaccurate. Boeing just keeps the same model numbers for a series of aircraft, but through gradual evolution of sub-models the newest 737 MAX that exists today is an entirely different plane from the original 737-100 released in 1966. Just look at this specification table for the different models on Wikipedia: https://en.wikipedia.org/wiki/Boeing_737#Specifications https://en.wikipedia.org/wiki/Boeing_737#Specifications Pretty much the only thing that's the same is that the fuselage is the same diameter. Everything else from length, height, wing span, passenger count & even how fast it cruises has changed over the years. It now has over twice the range that it did in 1966. Secondly just because two aircraft aren't exactly the same size doesn't mean they aren't competing for the same market. As an example no airline sits down and decides they need a plane that carries exactly 150 passengers, and 180 would be out of the question. Instead they look at the overall price, efficiency etc. Maybe they'll buy a smaller plane and run more flights per day, rather than a bigger plane with fewer flights. You can trivially see this by looking at the multitude of airframes you can choose to fly with between pretty much any two major international airports.
coliveira 9y ago
Boing is one of the most subsidized companies in the world. Funny how they have even the courage to point this out against Airbus. This shows that to be a big company it is not enough to get government money, you need to be shameless.

burkaman 9y ago

The argument is that Bombardier was selling jets at unfairly low prices thanks to subsidies from the Canadian government. I have no idea if this is true or not, but generally you can't get tariffs without pointing to some alleged unfair trading practice.

deleted 9y ago
[deleted]
zzalpha 9y ago
I have no idea if this is true or not, but generally you can't get tariffs without pointing to some alleged unfair trading practice. I'd buy that if this was a WTO ruling but these are tarrifs adjudicated by Americans, supporting an American company. The US similarly imposed tarrifs on softwood lumber not that long ago, and they were determined to be illegal once it hit the WTO. There's no reason to believe that won't happen again.
skgoa 9y ago
It is true as far as we know. However: * Boeing is guilty of the same, selling hundreds of both the 737 and 787 far below production costs to be able to compete with Airbus' 320 and 350. * Slapping such a massive tarif onto the CSeries was a political move aimed purely at squashing a new competing product that barely overlaps in cost/capabilities with a 40 year old, obsolete Boeing product.

jhall1468 9y ago

Bombardier got a huge bailout by the Quebec Government, so it effectively funded a US companies competition. That type of thing is bad for competition. But, as a result, the few hundred planes they would have sold will not be made by their largest competitor in the US.

wahern 9y ago
In fairness, Quebec took a 49.5% stake in return. There's a huge grey area between complete non-intervention and state-owned or state-financed industries (Quebec doesn't control the money supply). Plus, there are all the tax deals Boeing gets. It would be interesting to compare those with the tax deals Bombardier gets in Canada.
deleted 9y ago
[deleted]
hourislate 9y ago
I was under the impression it was the Province buying into the C Series Jet. They own a % of the Jet just like Airbus now owns a %. You know the way the US Government bought GM Shares and AIG, etc. An investment not a bailout.
- wbl 9y ago
  I can imagine Canada trying that in retaliation. Won't be a good day for anyone.
RobertoG 9y ago
"That type of thing is bad for competition" Is that the case? For instance, we could argue that Airbus would not exist without governments help. Would be, a world without Airbus, more competitive? Now that I think about it, we could argue that Boeing would not exist without government help neither.

jannes 9y ago

Excessive goverment subsidies can destroy competition in otherwise healthy markets (which I wouldn't classify the Boeing/Airbus duopoly as to begin with). For example, look at dairy products in Africa. Local farmers couldn't compete with the heavily subsidised European industry for a long time. http://www.independent.co.uk/news/world/politics/eu-subsidies-deny-africas-farmers-of-their-livelihood-478419.html http://www.independent.co.uk/news/world/politics/eu-subsidie... https://en.wikipedia.org/wiki/Export_subsidy https://en.wikipedia.org/wiki/Export_subsidy

the_mitsuhiko 9y ago
Just that Europe has no interest in a healthy market for food stuff because they would lose local producers. They want to stay at least somewhat sustainable.