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28 September 2017

What the Boeing and Bombardier trade dispute reveals about Brexit

The promise of being able to strike great deals outside the EU is so much thin gruel.

By Stephen Bush

Are we headed for a trade war with Donald Trump? Today’s papers certainly seem to think so. “Britain and US threaten to fight trade war” is the i‘s splash, while “May threatens US with trade war” is the Telegraph‘s.

The bone of contention? The dispute between American aerospace manufacturer Boeing and its Canadian rival Bombardier. The provincial government in Quebec bailed out Bombardier in order to finance the manufacture of its C-Series aeroplanes. That was all fine and dandy until Bombardier won a contract to supply an American airline. Boeing has complained and the US Department of Commerce has hit Bombardier with a 220 per cent tariff.

Why is Britain involved? Because Bombardier employs 4,000 people in Belfast and is indirectly responsible for a further 6,000 jobs in the pipeline. The loss of those jobs would obviously have big consequences for the Northern Irish economy and is therefore of paramount importance to the DUP. As the British government is Boeing’s second-biggest customer, there are calls for retaliatory action against the manufacturing giant.

The difficulty, as Deborah Haynes explains in the Times, is that the British government doesn’t just buy hardware but software from Boeing, and crucially, they buy the maintenance of that software too. There aren’t a lot of levers that the British government can credibly threaten to pull here.

The whole row is a repudiation of May’s foreign policy approach. She staked a great deal of time and burned away more than a measure of political goodwill here at home by courting Donald Trump. It doesn’t seem to have done her much good. It also has big repercussions for the government’s Brexit strategy.

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It’s not really true to see this stand-off as a direct result of the United Kingdom’s out vote. Yes, if the United Kingdom were still a full member as opposed to an occupant of the EU’s departure lounge, then the possibility of triggering a wider fightback against Boeing and the Department of Commerce might cause a normal and rational President of the United States to think twice. But the United States doesn’t have a normal President, and the British government would still have struck a number of arms deals with Boeing, leaving the UK just as unable to push back.

The real Brexit significance is revealing how the promise of being able to strike our own trade deals is so much thin gruel. The big trade blocs – the US, China and the EU27 – will dictate terms to the United Kingdom. In negotiations where both sides have something to lose – say, Canada, Japan, India, New Zealand – the United Kingdom won’t be able to secure as favourable access into those markets as it could as part of the EU. (And without the weight of the EU behind it, its ability to get its way in trade disputes that follow after these deals will be limited as well.) Most of the trade deals Britain can strike quickly and with the biggest economic benefit will be with small Gulf states to sell arms – which will be tricky to sell politically here at home.

And just as with trade deals made on our behalf by the EU, the role of provincial governments or domestic politics – in this case, that of Quebec and Trump’s need to show his “America First” routine isn’t just talk – will slow things down and gum up the works.

Yet the whole of Britain’s Brexit strategy is based around the mirage that there is a great bounty of trade deals to be unlocked after we leave. If the British government got real on the value of life outside the customs union, it could, at a stroke, have a viable solution to the problem of the Irish border after Brexit and focus on the things that really matter to the average British voter after Brexit: action on the free movement of people with a minimum of economic disruption. 

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