Boeing and the U.S. Department of Cronyism

Corporate welfare for me, but not for thee.

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Boeing 747-8 first flight Everett, WA.
Boeing Dreamscape/Wikimedia Commons

I have long said that the Department of Commerce should be renamed the Department of Cronyism. First, apart from the Census Bureau and the Patent and Trademark Office, the department mostly functions as a one-stop shop for special interests. Second, in a conflict between consumers and producers, the department always seems to side with the shareholders of large corporations.

The latest example of such behavior is edifying. Last week, as part of a preliminary determination in a countervailing duty investigation, the Commerce Department decided to slap a 220 percent duty on Canadian plane-maker Bombardier to protect its American boy Boeing against "unfair competition." As if that weren't enough, the Commerce Department is expected to announce other duties in a companion anti-dumping case soon. The decision by the U.S. International Trade Commission about whether the duty orders will be imposed is expected in early 2018.

According to a complaint filed by Boeing, Bombardier is distorting trade with the sale of a new series of passenger planes to Delta at a price—$19.6 million—that Boeing alleges is well below the $33 million that the planes should have cost. Boeing also complains that it's unfair because Bombardier is getting help from Canadian taxpayers and, hence, getting an edge over the competition in that market.

Now, it is true that Bombardier is being subsidized like everyone else in this business. It's also true that I would prefer that all subsidies for any corporations be terminated everywhere. However, the Bombardier subsidies mean that American taxpayers are benefiting from cheaper planes. It's a shame for Canadian taxpayers because, though Bombardier may hypothetically benefit from the handouts, economists have shown that on net, their economy will suffer. It means that Canadians should be the ones doing the complaining, and the Commerce Department should care about U.S. consumers, as opposed to caring only about Boeing.

That said, I'd like to pause for a moment and marvel at the arrogance it takes for Boeing to point its finger in disapproval of corporate welfare. The giant exporter is itself the mother of all trade subsidy receivers and the No. 1 beneficiary of the Export-Import Bank, not to mention the other government handouts it receives from state and local governments, such as property tax abatements.

Boeing's complaint about Bombardier's sale to Delta is akin to an abusive queen's passing a decree that if she isn't going to get married, then no one else will, either. Indeed, the Delta sale is happening in a market where Boeing doesn't even compete. (It doesn't produce any aircraft in the 100- to 125-seat range, which is what Delta wanted to buy.) Then Boeing complains over hypothetical harms that it admits won't materialize for years, if at all.

To please Boeing, Delta explained in its brief, it would have to buy much bigger planes, with the main consequence being that it would have to jack up prices for consumers. Indeed, Delta said repeatedly that it chose Bombardier planes to "reduce cost per seat as consumers continue to seek low fares" and because the aircraft offered "next-generation" efficiency, maintenance and "compelling … passenger amenities." Other airlines have filed complaints against Boeing's action making that exact same argument.

For all these reasons, the Cato Institute's Dan Ikenson wrote in Forbes that "Boeing's dumping complaint against Bombardier is … audacious. It takes misappropriation of the antidumping law to a whole new level." He also made a strong case that the math behind the price-dumping claims don't hold water.

Not known to let the facts get in the way of a good free trade infringement and anti-consumer policy, the Commerce Department still thinks that duties of 220 percent should be required to make up for the unfairness of the trade. As mentioned, it will now rule on the anti-dumping part of the complaint and will most likely slap on more duties to make Bombardier planes even less appealing to buyers.

This ruling isn't pleasing anyone except Boeing and those in America who believe that it's totally legitimate for a government to put in place measures that will artificially boost the profits of their friends or protect their playground from competition. It certainly serves as one more example that the Department of Commerce deserves a change in name.

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  1. “It certainly serves as one more example that the Department of Commerce deserves a change in name.”

    Oh, I don’t know, it has a nice Orwellian ring to it.

    Granted, only a libertarian would likely detect it. Sort of like how “Department of Education”, “Department of Homeland Security”, etc., ought rightly to introduce a queasy feeling into the heart of any American but seemingly don’t. So maybe we should rename it something, so that the Uninitiated can hear it too.

    How ’bout… “Committee of Corporate Safety”?

    1. We were forward thinking enough of a Nation to not call them Ministries.

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    2. People tend to go with the status quo. Big government is not something most Americans want but cutting government by 50%+ would cause all media to play sob stories 24 hours a day, so people deal with it.

      If government was cut by 50%+, that would be the status quo and people would deal with it even if it meant working instead of getting welfare.

      The majority of people complaining about a limited government are those who work in said bloated government.

  2. Thought experiment:

    Even if Boeing’s planes were exactly the same as Bombardier’s… But all of Boeing’s planes get the same subsidies… Does not this tariff *replace a Canadian taxpayer subsidy with an American one*?

    Put aside that Boeing’s planes are apparently shitty for this kind of work and thus a tax in themselves: this is a direct substitution of theft from Freedom People for theft from Sludge People.

    Maybe a decent name would be “Department of Non-Forewarned Deficiently Lubricated Double Pentration”.

    1. Double penetration is my word for bipartisan legislation

    2. Does not this tariff *replace a Canadian taxpayer subsidy with an American one*?

      Only if you think it is just to have your government force you to pay more for something because a foreign government forces its taxpayers to make it cheaper.

  3. The Koch brothers and Cato complaining about crony capitalism is kind of like Weigel complaining about ratfuckers.

  4. “However, the Bombardier subsidies mean that American taxpayers are benefiting from cheaper planes.”
    Subsidized products do come in cheaper to the market but in the case of aircraft, I would guarantee the parts make up that difference in price. The strategy with big ticket items is to get the contract as priority #1. After that, prices for parts and support services can change over time.

    Plus, we know the EXIM US bank subsidizes Boeing.

    This topic is just not black and white. Just because a product is on the market and is cheaper because of subsidies, does not mean that you should buy it. I avoid cheaper products all the time, that have been subsidized by China. Mainly because they are crap and a more expensive but better built product is something I won’t have to replace every 1-2 years.

    With that being said, all subsidies should be cut for US companies first so the USA can take the moral high ground.

  5. This is all well and good, but it sure is hard to denounce rat-fucking when the rat getting fucked is Delta. Boeing has some kind of balls whining about subsidies for their competition, but Delta’s balls are just as astounding in whining about government interference in the free market.

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  7. Eliminate all their subsidies, and close down that rat-hole Ex-Im Bank.

  8. This article is based on the false premise that shareholders represent a small financial elite. Now days this is not true. Customers, consumers, mom and pop investors, pensioners all hold significant amounts of shares and are often the deciding factor in shareholder voting. Addressing shareholder’s concerns is the most democratic and egalitarian means by which any policy could be set. In this case, you certainly wouldn’t want to appeal to the Canadians, and definitely not the CEO or unions (they’d just give themselves a raise). The ticket buyers just want cheaper fares, not a better run company or more equitable market environs. Besides, planes are often leased not owned by airlines, and the primary costs of an airline is actually fuel and labor so “cheaper planes” would makes little difference to the ticket buyer. You seem to be advocating that foreign government’s subsidize their businesses so Americans can import cheaper stuff with no regard to the economic vitality that producing those planes domestically creates. Free enterprise only works if there are equitable terms on which to compete and Canada’s exorbitantly high subsidies (far far larger than anything Boeing ever has gotten on a unit cost basis) are not equitable terms. This article has actually strayed quite far from the Libertarian ethic and lacks context.

  9. Think about it: the Ex-Im Bank will subsidize Air India’s financing to buy Boeing airplanes, but not Delta, because Delta is American. Thus, the US government is subsidizing a foreign company for the ultimate benefit of Boeing. Delta is not happy:
    http://tinyurl.com/ycs5ypua

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