Why threats to exclude it from future U.K. defense work are probably hollow.

By Geoffrey Smith
September 28, 2017
September 28, 2017

U.K. Prime Minister Theresa May tried Thursday to push Boeing to back down from a trade spat with Canada’s Bombardier that is threatening a thousand sensitive jobs in Britain.

Earlier this week, the U.S. International Trade Commission slapped a 220% import tariff on the Canadian company’s CSeries airliners, in response to a Boeing complaint that it had sold the planes at below-cost price. May said—with a sideways look at big military contracts that Boeing is bidding for in the U.K.—that “this is not the sort of behavior we expect from a long-term partner and it undermines that partnership.”

But Boeing wasn’t backing down Thursday.

“We have heard and understand the concerns from the Prime Minister and the Government about Bombardier workers in Northern Ireland,” the company said in a statement e-mailed to Fortune. But, it added, “Boeing had to take action as subsidized competition has hurt us now and will continue to hurt us for years to come, and we could not stand by, given this clear case of illegal dumping.”

The tariff decision by the U.S. International Trade Commission effectively closes the huge U.S. market to the CSeries, according to Canada’s Foreign Minister Chrystia Freeland, risking the project’s viability. That in turn jeopardizes thousands of jobs–1,000 of them at a plant in the British province of Northern Ireland, which does work on the planes’ wings and fuselages.

Read: The U.S. Has Slapped a 219% Duty on the Sale of Bombardier’s New Jets

Northern Ireland, with its sectarian divide between Catholics and Protestants, is a sensitive enough place at the best of times, but this comes at a particularly delicate moment: The province’s economy stands to be hit harder than any other part of the U.K. by Brexit if it has to reintroduce a physical border with the Republic of Ireland. Moreover, May’s Conservatives depend on the province’s (Protestant) Democratic Unionist Party for their majority in parliament, meaning they can’t pass key legislation on Brexit without DUP support. And all that at a time when the U.K. economy is visibly slowing due to uncertainty around the Brexit process.

But most embarrassing of all is the fact that May’s Conservatives have promised that the U.K. will enjoy a new golden age of free trade once it has freed itself of the protectionist shackles of the EU. That the U.S.—the only country whose leader has publicly supported Brexit—is putting up tariff barriers that could put British workers out of jobs flies in the face of such assurances.

The trouble in this case is that Boeing holds most of the aces. It already has a $2.3 billion order for 50 Apache attack helicopters in the bag, along with with a $3.9 billion deal for P-8A maritime patrol aircraft. And the defense industry is so concentrated that the U.K. can hardly afford to exclude the company from any future tenders without exposing itself to price gouging from its competitors.

Read: The U.K. Is Too Busy Fighting With Itself to Negotiate a Brexit Deal With the EU

Moreover, Boeing is pretty important to the U.K. economy too – the company says it supports more than 18,700 jobs in the U.K. either directly or through its tier one supply chain (the P-8A program alone foresees it creating 2,700 jobs in the U.K. going forward). Boeing is also a key backer of a new Advanced Manufacturing Research Center in Sheffield, the kind of academic hothouse that would normally be able to count on EU funding, but which will lose that channel of support with Brexit.

Defence Secretary Michael Fallon confirmed that neither the P-8A nor the Apache contracts would be reviewed in retaliation for the action against Bombardier. Canada’s Prime Minister Justin Trudeau, by contrast, has threatened to cancel a plan to buy Boeing’s F18 Super Hornet jet fighters for the Royal Canadian Air Force. Trudeau’s problem is that the obvious alternative to the F18 is Lockheed’s F-35, which—in a rare instance of agreement with U.S. President Donald Trump—he has already slammed as being too expensive.

Read: Northern Ireland’s Peace Generation Frozen Out by Politics of War

Ironically, one of May’s best remaining hopes to get the tariffs rescinded could lie with Sinn Fein, the Irish Nationalists that were once the political wing of the Irish Republican Army. The Republican cause has traditionally enjoyed broad, if not always overt, support from the Irish-American community, and the Belfast Telegraph quoted Sinn Fein leader Michelle O’Neill as saying that she had written to Vice President Mike Pence and “also briefed the chairman of the US Congressional Friends of Ireland committee, Richie Neal, on the damage this dispute will have on thousands of families across [Northern Ireland].”

 

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