Trump's Trade-Bashing Hurts the U.S.

(Bloomberg View) -- Until now, the defining feature of the Trump administration's trade policy has been a worrisome yet vague recklessness. The U.S. Commerce Department's new ruling on Boeing's dispute with Bombardier, a Canadian aircraft maker, shows the harm that comes when the administration gets specific.

The rules that regulate trade can't work without restraint and a commitment to a liberal economic order. President Donald Trump's administration lacks both.

Boeing's complaint charges that the Canadian and British governments are subsidizing a new passenger aircraft in contravention of trade rules and that Bombardier is "dumping" it (selling it below cost) in the U.S. market. This week's preliminary finding proposes an absurdly high tariff -- more than 200 percent -- as a remedy for the subsidy complaint. The finding on dumping, with the possibility of additional tariffs, will follow shortly.

If the final rulings, expected next year, affirm this judgement, the U.S. is in effect banning Bombardier's plane from its market. Already, the threatened action wounds the company severely, putting many jobs at risk immediately in Canada and the U.K, and even in the U.S. (where parts for the plane are made). Retaliation is likely, threatening a mutually destructive spiral of protectionist action. The future of the North American Free Trade Agreement, which the U.S., Canada and Mexico are working to revise, would be again cast into doubt.

The basis for the ruling hasn't been explained, but it looks questionable at best. Canada's government does support Bombardier -- just as, in one way or another, the U.S. government supports Boeing. But the idea that this support has harmed Boeing is a stretch, bearing in mind that it doesn't make an aircraft that directly competes with the one in question, and that Boeing's share of the worldwide passenger-aircraft market is vastly bigger than Bombardier's.

The U.S. company's complaint looks like the action of a well-connected quasi-monopolist intent on killing off a pipsqueak challenger. And the Commerce Department appears to be saying, "We're here to help." 

Smart trade policy puts consumers' interests above producers' interests. Competition is good for consumers -- but established producers don't like it, and will try to limit it where they can. If governments forget this, and put themselves at the service of their producers, then competition, innovation and living standards are all in jeopardy.

The liberal trading order is not self-sustaining. Its rules aren't sufficient to stop governments from pursuing a drive toward beggar-thy-neighbor mercantilism. President Trump may think his approach to trade is good for the U.S. He couldn't be more wrong.

--Editors: Clive Crook, Michael Newman.

To contact the senior editor responsible for Bloomberg View's editorials: David Shipley at davidshipley@bloomberg.net.

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