Eddie McFall has spent 18 years working at Bombardier’s Belfast factory, most recently on the C-Series plane at the heart of the firm’s high-profile trade dispute in the US.
McFall said the mood on the shop floor was “surprisingly good”, despite the US commerce department’s plan to slap a 219% tariff on sales of the C Series to Delta Air Lines following a complaint by rival Boeing.
But he and his colleagues have little faith in Theresa May riding to their rescue or being able to persuade the US president, Donald Trump, to back down.
“In Belfast, we are in a bad position. We have no local representation in Stormont. The DUP [Democratic Unionist party] are too busy propping up a failing government, which has still to get to grips with what Brexit really means. Then there’s Trump being Trump,” McFall said.
“My own personal assessment is that Boeing is playing on Trump’s protectionist policies and basically trying their arm.”
The Bombardier dispute seemed to sum up the difficulties Britain faces in its quest to boost exports just as the world’s major trading blocs adopt protectionist policies. Trump and his commerce secretary, the billionaire financier Wilbur Ross, are single-minded in their determination to protect US blue-collar jobs from being undercut by foreign competitors that benefit from unfair subsidies.
Unfortunately for McFall and the other 4,000 workers making the wings for the C Series, the enforcement and compliance branch of the commerce department’s international trade administration says that Canadian subsidies amount to $10m per plane, in clear breach of international rules.
Officials said that dumping occurs “when a foreign producer sells a product in the United States at a price that is below that producer’s sales price in the country of origin (‘home market’), or at a price that is lower than the cost of production”. In Bombardier’s case, it said both definitions of dumping apply. Adding to the pain, the World Trade Organisation has stepped in to investigate, which suggests there is a case to answer.
Not all is lost. Bombardier has a $1.1bn contract that airBaltic is close to signing, which could keep the factory in good shape while the US dispute rumbles on. But what about a post-Brexit world, where a Canadian company with a British factory that is accused of selling $30m planes for $20m runs up against EU anti-dumping rules and intense lobbying from Airbus?
The answer from the free market thinktanks is simple: stop subsidising industries.
A new thinktank to promote a more open, buccaneering spirit, the Institute for Free Trade (IFT), argues that we would all be better off if companies were forced to stand on their own two feet.
Before the launch of the IFT, its president, Daniel Hannan, the Tory MEP and Brexit cheerleader, said the way to solve the Bombardier case was for Britain to quit the EU. Unshackled, it could secure a free-trade deal with the US that would eliminate the incentive to impose tariffs. It would also allow the UK to retaliate with all its might, unrestrained by officials in Brussels.
In this way, Hannan has it both ways. But the logical conclusion of the argument made by the IFT – which enjoyed the presence of the foreign secretary, Boris Johnson, and trade minister, Liam Fox, at its launch – is set out by the Cardiff University economics professor Patrick Minford, who acknowledges that a British economy without government subsidies would have most of its agriculture and manufacturing sectors wiped out.
That’s because everyone is subsidising their major industries in some form, albeit less obviously than the Canadians have with Bombardier. Even Boeing receives subsidies, in the form of overpriced defence contracts and government-backed insurance covering export orders. Most countries will channel huge sums of money through universities that find their way, in the name of innovation and research, into the revenues of private companies.
Academics who monitor trade are incredulous at the naivety of the free market argument. British exports, they say, would be crushed.
Nigel Driffield, professor of international business at Warwick Business School, said: “Both sides of the Atlantic seem to think that a free-trade deal would solve the industrial problems posed by Sheffield and Pittsburgh. But when it comes to which steelworks will survive, there can be only one winner.”
Trump might say that he is in favour of a deal with the UK, but an America First slogan puts the likes of Boeing in the driving seat.
Driffield is also sceptical that life outside a major trading bloc such as the EU will be easy. All the studies of trade show that a shared history matters, but geography is more important. “Every empirical study shows that it does [matter], probably more than economic theory would lead us to believe.”
A trade deal with the EU is also an element of the free marketers’ aims, along with deals that give access to India, China and the major developing nations of Russia, South Africa and Mexico.
Detailed studies show that deals are easier to construct with nations at a similar level of development. Otherwise, governments seek to protect industries that are either fledgling and in need of a little nurturing or are large employers.
Jaideep Prabhu, professor of marketing at Cambridge university’s Judge Business School, says that a historical connection with India is difficult to capitalise on when the country’s economy has only recently achieved the level of homogeneity seen across the EU.
“India would appear to be more integrated than the EU, but it is only in the last few months that it has extended being a political unit to being an economic unit with a single sales tax. Not so long ago each state had its own customs rules and lorries stopped at state borders to pay the local tax.”
It is a measure of how much catching up there is for some countries to do before they enter into what UK officials would consider a free trade deal. There are also the protectionist tendencies of the Indian government and the likelihood of demands for free movement of labour that would accompany any deal.
Prabhu advises companies on their international marketing strategies. He says: “What is the UK’s bargaining power in a post-Brexit world? Not much. India will not be opening its markets any time soon.
“In a trade deal you have to give something to get something, and it’s not clear what the UK would have to offer.”
Lord O’Neill, the former Goldman Sachs economist and Tory minister, said last week: “You do not have to leave the EU to have great trade relationships with new exciting places in the world, and that’s something that the [Brexit] evangelists in the UK seem to ignore.”
Using the example of China being Germany’s biggest trading partner, O’Neill said: “You’ve got to be good at trade. It doesn’t matter whether you’re in the EU or not.”
O’Neill’s demand for urgent investment in infrastructure, especially to support businesses in the north of the country, fell on deaf ears in the Treasury during his time as commerce secretary and led to his resignation.
Any long-term package of cleverly structured subsidies will come too late to save the Bombardier export deal. McFall believes there will be a surge in applications for voluntary redundancies as the legal battle between Bombardier and Boeing rages in the US.
“There has already been a list of guys trying to get out on voluntary redundancies, but I’m sure this case has exacerbated things somewhat,” he says.
