The world market in commercial passenger aircraft is not exactly an advertisement for the virtues of free trade. Unless governments refrain from overt or hidden state aids to exporters, there is no level playing field. But all governments subsidise their aircraft manufacturing industries (if they have one) and the current spat between the US and Canada, which threatens the Bombardier plant in Belfast, is just the latest eruption of the subsidy war.

The world market is dominated by just two manufacturers, Boeing in the US and Airbus, a collaboration of European companies. These two supply virtually all of the medium-sized and large airliners on the market. Smaller passenger jets are available from Brazil’s Embraer and the Canadian company Bombardier, where the federal government and the province of Quebec provided substantial public funds for the launch of their C-series model, some components of which are manufactured in Belfast with UK government support. There are rules about subsidies overseen by the World Trade Organisation as well as in bilateral free trade agreements such as the Canada-US deal. When the US carrier Delta Airlines placed a big order with the Canadians for the C-series, Boeing cried foul and the US Commerce Department has threatened a 219% tariff, which could kill the project: the US market is critical for any passenger jet.

Boeing has itself been accused by the Europeans of benefitting from subsidies and has in turn accused Airbus. The accusations are entirely credible. Both the Russian and Chinese governments are encouraging the development of their own commercial aircraft industries so the subsidy war is likely to expand. For a small country with no aircraft industry this is all good news: if other people wish to waste taxpayers’ money subsidising the cost of your imports, this can only be welcomed.

The matter is not resolved: Bombardier is appealing the ruling, the UK government has threatened to cancel orders from Boeing for military aircraft and a good old-fashioned trade war is in prospect. The European Commission has been investigating alleged hidden subsidies to Boeing for many years and the Americans counter-claim that Airbus enjoys generous treatment too.

Boeing does not even manufacture an aircraft in the size category of the C-series ordered by Delta

There are ironies in the whole story at many levels, a chorus of kettles calling one another black. Boeing does not even manufacture an aircraft in the size category of the C-series ordered by Delta: these are planes that carry approximately 150 passengers, comparable to Boeing’s discontinued 737-300 model. Boeing currently offers somewhat larger planes and could not deliver what Delta requires. The only direct competition for Bombardier is one of the Brazilian Embraer variants.

Threat to jobs

Aside from the threat to jobs in Belfast this row has a broader significance. If the UK leaves both the EU’s single market and the customs union, the losses in European trade are supposed to be compensated by the freedom to conclude new trade deals outside Europe. This is the ‘‘Global Britain’’ agenda beloved of the ultra-Brexiteers in the Conservative party. For the policy to succeed it is necessary to believe that a spirit of free trade is building and that Britain, newly unshackled from the constraints of the common EU trade policy, will find welcoming partners elsewhere.

The biggest deal which might be open for Britain in this brave new world would be with none other than the US, which has initiated this latest protectionist squabble

The biggest deal which might be open for Britain in this brave new world would be with none other than the US, which has initiated this latest protectionist squabble. Moreover, the squabble is with Canada, a partner with the US and Mexico in NAFTA, the North American free trade agreement and a model for what Britain might hope to negotiate. The British might be wise to regard NAFTA, on which Donald Trump has repeatedly threatened to renege (remember the wall), as a warning rather than a model.

For Northern Ireland, the demise of the Bombardier business in Belfast would be a serious blow. It may never happen but reliance for 4,000 jobs on a single firm, dependent on UK government support and the vagaries of trade policy in an increasingly protectionist US, is not a nice place to be. The broader lesson though is for post-Brexit UK trade policy. It has become a profession of faith, almost a test of patriotism, to believe that Britain can leave the customs union without cost or risk.

Faith-based policy

Whatever about quitting the EU, which people voted to do, the UK government still has a choice about the customs union. Moving outside confers the freedom to conclude trade deals with the whole wide world but the terms of those deals are in the gift of others. There is no concrete basis for the belief that deals can be done with the US, China or anyone else which would compensate for lost trade in Europe. It is a faith-based policy, which moreover makes the retention of an open border in Ireland more difficult.

Read more

Anger on the streets as the IFA protest on Mercosur deal