Boeing, Bombardier, and Brexit

Published on: 29 Sep, 2017

The United States and the United Kingdom have locked horns over two companies: Boeing Co (NYSE: BA), the US aerospace giant and Bombardier, the former's Canadian rival and a large company by itself. The latter was bailed out of financial difficulties by the devolved Quebec administration so that it gets the funds to manufacture the C-Series airplanes. Bombardier then won the contract to supply a US airline. Boeing complained and the United States Department of Commerce imposed a 220 percent tariff on the company, making the contract nonviable.

Britain waded into this business minefield as about 4,000 people are provided employment by Bombardier in Belfast. The company also indirectly employs 6,000 people in various capacities. The economy of Northern Ireland will be plunged into difficulties if these jobs were to be axed. It is no wonder that the British Government is going all out to save Bombardier. Since the UK is Boeing's second-largest client, many British politicians have asked for a retaliatory action against the US company.

The problem with adopting such a stance is that the UK Government buys hardware and also software from the Boeing company. The British buy the maintenance services of the software as well. It follows that the UK Government cannot do much in reality when it comes to its confrontation with Boeing. For Theresa May, the whole thing is a blowback to her ham-handed approach to UK-Trump administered US relations. She burned away local goodwill by cozying up to President Donald J. Trump. The Brexit strategy also went down with the water.

Brexit means the UK cannot strike its own trade deals. Large trading blocs like EU27, US and China will dictate their own terms to the UK. When it comes to negotiations where both sides can lose a little, the UK cannot secure many favors by itself as it can as being a part of the European Union. If the EU is not behind the UK, the trade disputes which invariably follows these deals will turn out be bad for Britain. A majority of trade deals which the UK can do with profit can only be with the Gulf states. Most trade will be 'arms' deals, an arrangement with few takers with the local British population.

Trump also must show that his “America First” slogan is simply rhetoric. If this is followed up, then things will get slowed down. The ongoing works may freeze as well.


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Danny Abramov



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