January 26, 2018 / 8:05 PM / 9 months ago

UPDATE 3-U.S trade body backs Canadian plane maker Bombardier against Boeing

(Adds comments by Airbus CEO, Canadian foreign minister's secretary, details and context throughout)

By Allison Lampert and David Shepardson

MONTREAL, WASHINGTON Jan 26 (Reuters) - A U.S. trade commission on Friday handed an unexpected victory to Bombardier Inc against Boeing Co, in a ruling that allows the Canadian plane-and-train maker to sell its newest jets to U.S. airlines without heavy duties, sending the company's shares up 15 percent.

The U.S. International Trade Commission's unanimous decision is the latest twist in U.S.-Canadian trade relations that have been complicated by disputes over tariffs on Canadian lumber and U.S. milk and U.S. President Donald Trump's desire to renegotiate or even abandon NAFTA.

Trump, who did not weigh in on the dispute personally, took his "America First" message to the world's elite on Friday, telling a summit that the United States would "no longer turn a blind eye" to what he described as unfair trade practices.

The ITC's commissioners voted 4-0 that Bombardier's prices did not harm Boeing and discarded a U.S. Commerce Department recommendation to slap a near 300-percent duty on sales of the company's 110-to-130-seat CSeries jets for five years. It did not give an immediate reason.

Boeing's shares closed flat.

"It's reassuring to see that facts and evidence matter," said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. "This part of the trade policy process works unimpeded despite President Trump's protectionist rhetoric."

The decision will also help Bombardier sell the CSeries in the United States by removing "a huge amount of uncertainty," at a time when its Brazilian rival Embraer is bringing its new E190-E2 jet to market, a source familiar with the Canadian company's thinking said.

The ITC had been expected to side with Chicago-based Boeing. It alleged it was forced to discount its 737 narrow-bodies to compete with Bombardier, which it said used government subsidies to dump the Cseries during the 2016 sale of 75 jets at "absurdly low" prices to Delta Air Lines.

Bombardier had called the trade case self-serving after Boeing revealed on Dec. 21 that it was discussing a "potential combination" with Embraer. Boeing denied the trade case was motivated by those talks.

BOEING TO CONSIDER ITS OPTIONS

However, the dispute may not be over.

"This can still be appealed by Boeing," Andrew Leslie, parliamentary secretary to Foreign Minister Chrystia Freeland, told reporters in Montreal.

Boeing said it would not consider such options before seeing the ITC’s reasoning in February. It said though that it was disappointed the commission did not recognize "the harm that Boeing has suffered from the billions of dollars in illegal government subsidies that the Department of Commerce found Bombardier received and used to dump aircraft in the U.S. small single-aisle airplane market."

Bombardier, Delta and the U.S. consumer advocacy group Travelers United all called the ITC decision a victory for consumers and airlines.

The decision may also end up helping Trump's plan to boost U.S. jobs as the CSeries jets for U.S. airlines will be built in the United States rather than Canada.

Through a venture with European planemaker Airbus SE , which has agreed to take a majority stake in the CSeries this year, Bombardier plans to assemble CSeries jets in Alabama to be sold to U.S. carriers starting in 2019.

Airbus Chief Executive Tom Enders promised to push ahead "full throttle" with the Alabama plans. “Nothing is sweeter than a surprise, a surprise victory,” he said.

The case had sparked trade tensions between the United States and its allies Canada and the UK. Ottawa last year scrapped plans to buy 18 Super Hornet fighter jets from Boeing.

The well-paid jobs associated with the CSeries are important both to Ottawa and the British government. Bombardier employs about 4,000 workers in Northern Ireland, whose Northern Irish political party is helping keep Prime Minister Theresa May in power.

The British Prime Minister's office said it welcomed the decision "which is good news" for the British industry, while Canada's Innovation Minister said the IRC came to the "right decision" on Bombardier.

Former ITC chairman Dan Pearson praised the decision. "Not a single commissioner was willing to buy Boeing's arguments," he said. "I think 'America First' is a policy of the White House and the Commerce Department. But it's not the policy of an independent agency (like the ITC)."

Reporting by David Shepardson, Lesley Wroughton and Allison Lampert; Additional reporting by Alana Wise and David Ljunggren; Editing by G Crosse, Bill Rigby and Susan Thomas

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