Fallon warns Boeing over defence contracts
Boeing’s trade dispute with Bombardier “could jeopardise” its defence contracts with the UK government, the UK’s defence secretary has warned.
Sir Michael Fallon made the comments after the US opted to impose a tax on the C-Series jet made by Bombardier.
The proposed 220% import tariff could threaten Bombardier jobs in Belfast.
Rival Boeing had complained that Bombardier had received unfair state subsidies from the UK and Canada.
It claimed these subsidies helped the firm win a major order. In 2016, Boeing won a contract to supply 50 Apache helicopters to the Army.
- Reaction to Bombardier tax ruling
- Analysis: Not the end of Bombardier row
- Why is company so important to NI?
- Bombardier-Boeing dispute explained
Prime Minister Theresa May has said the UK’s long-term partnership with Boeing was being undermined by its behaviour towards Bombardier.
Mrs May said Boeing’s behaviour was no way to operate in terms of such a long-term partnership.
She said the preliminary judgement over Bombardier would cause uncertainty and that the government was doing everything it could to protect jobs in Northern Ireland.
The prime minister said she had spoken to DUP leader Arlene Foster and Sinn Féin’s Michelle O’Neill, and would be working with them both.
Mrs May said she had spoken to US President Donald Trump “more than once” about the issue, as well as raising it during their recent meeting at the United Nations General Assembly in New York.
Meanwhile, Bombardier said it would fight the “absurd” ruling. The firm is one of Northern Ireland’s biggest employers.
Sir Michael said during a visit to Belfast that “Boeing stands to gain from British defence spending” but that “this kind of behaviour could jeopardise our future relationship” with the firm.
“We don’t want to do that. Boeing is an important investor in the United Kingdom; an important employer in the United Kingdom.
“But we would prefer this kind of dispute to be settled on a negotiated basis and we will be redoubling our efforts with the Canadian government to bring about a negotiated settlement.”
The UK government and trade unions fear the imposition of tariffs could make the Canadian firm question whether to remain in Northern Ireland, where it employs 4,100 of its 28,000-strong workforce.
The ruling damaged the global aerospace industry and was “frankly not what we would expect of a long-term partner to the UK”, said a UK government spokesman, while emphasising this was just the first step in a lengthy process.
About 1,000 jobs are linked to the C-Series, the wings of which are made at a purpose-built £520m factory at Queen’s Island in Belfast.
The programme is not just important to Bombardier jobs in Belfast, but also to 15 smaller aerospace firms in Northern Ireland – and dozens more across the UK – which make components for the wings.
The US Department of Commerce ruling, which could triple the cost of a C-Series aircraft sold into the United States, could potentially jeopardise a major order placed last year from US airline Delta – a $5.6bn (£4.15bn) deal for up to 125 of the jets.
Bombardier said the decision was “divorced from the reality about the financing of multibillion-dollar aircraft programmes”.
The Canadian firm said Boeing was seeking to use US trade laws “to stifle competition”.
Analysis: Things could get worse
By Julian O’Neill, Northern Ireland business correspondent
The outcome was predicted – but not the severity of the penalty.
The tariff could triple the cost of C-Series aircraft in the US, effectively killing the market for Bombardier.
It also puts a major order with Delta Airlines at risk – and things could get worse before they get better.
Washington’s Department of Commerce is due to make a second tariff ruling on 5 October.
But a more important date is next February when the US International Trade Commission will either uphold the penalty or remove it.
This was always the focus for Bombardier and its allies.
Bombardier said it had created a “superior aircraft” that is more efficient and comfortable but Boeing was trying to prevent “US passengers from realising these benefits, irrespective of the harm that it would cause to the US aerospace industry and the cost to airlines and consumers”.
But Boeing said the dispute was about “maintaining a level playing field”, and said its aim was to make sure that “aerospace companies abide by trade agreements”.
Delta, however, said there was no risk to US businesses as neither Boeing nor any other US firm produced 100-110 seat aircraft to compete with the C-Series.
US Secretary of Commerce Wilbur Ross said one reason for the tariff ruling was Bombardier’s failure to cooperate with the investigation.
“The evidence we have to rely on is evidence not coming from Bombardier but evidence being proposed by Boeing and other outside parties,” he said.
The US government was “not necessarily” targeting Bombardier’s Northern Ireland factory, he said, but added: “If you’re building wings for a plane that doesn’t get built, that’s a problem.”
Analysts say that the ruling will increase tensions between the US government and Canada and the UK, both countries have deals to supply military aircraft worth billions of dollars with Boeing.
The UK government and Northern Ireland Executive pledged to invest almost £135m in the establishment of the C-Series manufacturing site.
The programme received £750m from Quebec’s provincial government in 2015 when its fortunes appeared to be ailing.
On Wednesday, Quebec Premier Philippe Couillard called the tariffs “unfair” and an attack on the Canadian province where Bombardier has its headquarters and employs more than 17,000 people.
“Quebec has been attacked. And Quebec will resist,” he told journalists, adding that that Quebec remained committed to manufacturing the C-Series.
“Boeing may have won the battle but the war is far from over,” he said.
In 2016, Quebec invested US$1bn in the passenger jet.
Canadian Prime Minister Justin Trudeau has threatened to cancel the purchase of 18 Boeing Super Hornet jet fighters from the US in retaliation.
Foreign Affairs Minister Chrystia Freeland said on Tuesday that the government was disappointed in the decision.
The International Association of Machinists and Aerospace Workers – a machinists union – called the countervailing duty “a protectionist and dangerous measure for the stability of the aerospace industry”.
In Northern Ireland, CBI director Angela McGowan said the ruling put an important driver of Northern Ireland’s economic growth at risk.
Northern Ireland has effectively been without a devolved government for nine months, and Ms McGowan said the situation reinforced the need for a return of a power-sharing executive.
“With jobs and future prosperity in the region being put at risk by decisions made far away from Belfast, we need a devolved government that can speak up for and champion the needs of the local workers and businesses most affected,” she said.