What does the Bombardier dispute mean for trade deals after Brexit?

The decision by the US to push ahead with recommending punitive tariffs against Canadian company Bombardier is a clear danger to jobs in Belfast. However it is also a wider message to the UK about the tough world of international trade in which it hopes to negotiate new deals after Brexit – and in particular the aggressive approach being taken by the Trump administration. The tensions created by the Bombardier affair provide a poor backdrop to the Conservatives’ hopes of negotiating a new trade deal with the US after Brexit.

The US action against a company in neighbouring Canada follows a complaint by American company Boeing that Bombardier had sold C-series jets below cost in the US market, helped by subsidies from the Canadian government. The tariffs - special taxes on imports – could run close to 300 per cent, effectively blocking Bombardier from selling the jets in the US market and putting 1,000 jobs in Belfast at risk.

The UK’s problem as it tries to renegotiate its trading future after Brexit is twofold. It is clear that its old partners in the EU will not allow it to retain its existing access to their markets, unless Britain stays in the EU trading block and continues to play by its rules. On the other side, however, the Bombardier dispute is just one signal of the increasingly fractious world of international trade, where president Trump’s “America first” policies threaten to upset the old order.

Never easy

The UK’s job of negotiating new trade deals with the EU or new partners was never going to be easy. Commentators point out that the CETA trade deal between the EU and Canada took seven years to negotiate – and the UK is clear that it would like greater access than this offers to EU markets via a new “ bespoke” deal. The EU is equally clear that this is not on offer on the terms that the UK is seeking.

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Nor will the UK easily strike new trade deals with other countries. In fact the first job facing the UK will be to get agreement, after Brexit in March 2019, to continue to trade with the dozens of countries with which the EU has agreements on current terms during a transition period. There is no obligation on the other countries to agree and some may seek to take advantage of the UK’s position. The UK then hopes to tie up a deal with the EU and move on to do new deals with third countries. It is an enormously complicated and potentially fraught agenda.

The Trump administration’s actions against Bombardier is symptomatic of its new approach, which has also seen it take a sceptical view of the World Trade Organisation, the body which oversees international commerce. The WTO’s recent annual ministerial meeting in Buenos Aires ended without agreement or any policy declaration.

The Trump view threatens a move away from the period since the 1950s, which has seen a gradual freeing of world trade and a reduction in tariffs, on the basis that freer trade benefits all sides. In contrast, president Trump has set up his trade policy, run by commerce secretary Wilbur Ross, on a “ win/lose” basis, focusing – for example – on countries with which the US has a trade deficit as relationships where change is needed. And this change will be driven by US interests.

Aggressive action

The Bombardier dispute shows that the administration is prepared to act aggressively in the trade arena. Such disputes can quickly intensify. Canada could react in a range of ways while, in September, the UK government warned that Boeing’s behaviour in the Bombardier case “could jeopardise” future Ministry of Defence contracts for its aircraft such as Apache helicopters. Trade tensions here and elsewhere could quickly flare and widen.

This is a poor backdrop for the UK’s hopes of negotiating a post-Brexit trade deal with the US, seen as a key pillar of its global trade agenda.