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House of Lords Hansard
10 October 2017
Volume 785

    Statement

  • My Lords, with the leave of the House I shall now repeat a Statement made in the other place by my right honourable friend the Secretary of State for Business, Energy and Industrial Strategy. The Statement is as follows:

    “With permission, Mr Speaker, I want to update the House on the trade dispute brought by Boeing against Bombardier. The case has serious implications for the workers at Bombardier Aerostructures & Engineering Services—Short Brothers—in Belfast, where the wings for the C Series aircraft are manufactured. Following a complaint by Boeing Inc, the US Department of Commerce has made two provisional determinations in the case, calculating duties of 220% in relation to alleged subsidies for Bombardier and of nearly 80% in relation to alleged mis-selling by Bombardier into the US market. These initial determinations are bitterly disappointing, but they are only the first step in the process: a final ruling in the investigation is due in February and would be subject to further appeal. This Government have been working tirelessly to bring the case to a satisfactory resolution.

    In filing its petition, Boeing asserted three claims: first, that without Canadian and UK Government subsidies Bombardier would have been unable to develop the C Series; secondly, that Bombardier is selling at or below production cost its C Series aircraft in the US; and thirdly, as a result, that this is causing the threat of imminent material injury to the US domestic aerospace industry. This action followed Bombardier securing an order from Delta Airlines for 75 aircraft. The Boeing petition makes allegations about funding support from the Canadian federal Government and the Government of the Province of Quebec for the Bombardier C Series. It also alleges that the UK Government’s provision of £113 million of repayable launch investment funding, committed to Bombardier Short Brothers in 2009 to support the development of the composite wings, contravened trade rules. We strongly and robustly refute this accusation.

    I want to make the Government’s position very clear: we consider this action by Boeing to be totally unjustified, unwarranted and incompatible with the conduct we would expect of a company with a long-term business relationship with the United Kingdom. Boeing does not manufacture a competing aircraft, so although Boeing claims harm in respect of the Delta aircraft order, it has no product in the 100 to 125-seat sector. Furthermore, this system of launch investment for the development of new aircraft reflects that of all major commercial aircraft programmes in their early years, including the Boeing 787. We refute entirely any suggestion that our support contravenes international rules.

    The Shorts factory in Belfast employs more than 4,200 skilled workers, with almost a quarter of those working on the C Series. It also supports a supply chain of hundreds of companies and many more jobs in the UK, as well as supporting nearly 23,000 workers in the US, where 53% of the content of the C Series is produced by US-based companies. We will continue to work tirelessly to safeguard jobs, innovation and livelihoods in Northern Ireland.

    From the outset this has been a dispute that joins Canada and the UK, and we have been assiduous in working closely with the Government of Canada in our response. The Prime Minister has discussed the case with Prime Minister Trudeau, and I have been in regular contact with Canadian Foreign Minister, Chrystia Freeland, to co-ordinate our response and actions. We have had intensive engagement from across government at the highest levels. The Prime Minister has discussed the matter twice with President Trump, stressing the crucial importance of Bombardier’s operations in Belfast and asking the US Government to do all they can to encourage Boeing to drop its complaint. My Cabinet colleagues, my right honourable friends the Foreign Secretary, the Defence Secretary, the Chancellor of the Exchequer, the Trade Secretary and the Northern Ireland Secretary, and myself have reinforced our serious concerns with the US Secretary of Commerce, the US Secretary of State, the US Treasury Secretary, the US Trade Representative and other members of the Administration, as well as with the EU Trade Commissioner. The Minister for Energy and Industry has met Boeing International’s president, and I travelled to Chicago to meet Boeing’s president and chief executive to make clear the impact of this on our future relationship with the company.

    I am grateful for the consistent and indefatigable efforts of the honourable Member for Belfast East and the whole community in Northern Ireland, who are united in opposition to this action. We will continue vigorously and robustly to defend UK interests in support of Bombardier, its workforce in Belfast and those in its UK supply chain. We will continue to work jointly and collectively with the Canadian Government. We will work closely with Bombardier, its workforce and its trade unions, and we will do everything we can to bring about a credible, early resolution of this totally unjustified case. The initial determinations are the first step in the process, but we completely understand the worry and uncertainty facing the workforce, which means that the earlier this issue can be resolved, the better. To that end, I expect to have further discussions with Boeing, Bombardier, the Canadian Government and the US Government in the days ahead. The House should be aware that neither the Government nor our counterpart in Canada will rest until this groundless action is ended. I commend this Statement to the House”.

  • My Lords, I thank the Minister for repeating the Statement made by the Secretary of State in the other place. It sets out the case very well indeed. I am sure the whole House welcomes the Government’s commitment to resolve this trade dispute between Boeing and Bombardier as swiftly as possible.

    Indeed, this dispute is of great concern to the 4,200 Bombardier employees in Northern Ireland, their families and the communities in East Belfast, Newtownabbey, Dunmurry and Newtownards. For so many jobs at one of Northern Ireland’s largest employers to be placed at risk is a matter of real concern, as are the wider potential economic impact and, in the case of Northern Ireland, the potential political repercussions. Bombardier represents 8% of Northern Ireland’s GDP and 40% of its manufacturing base and supports 20,000 more jobs in the wider supply chain across the country. There is a great deal at risk. Bombardier acquired the Shorts facility in 1989. The Shorts heritage goes back over 100 years and the Belfast base was established in 1948. It is a centre of excellence and many other leading businesses in the aviation and defence sectors owe their excellent performance and existence to the Shorts—now Bombardier—facility.

    The aviation sector is important to our country and it has great potential. We have Airbus facilities, a Boeing facility in Sheffield and the Bombardier facility. Aviation expertise, world-leading engineers and an experienced and seasoned workforce create the potential for this sector to be a real opportunity for us. This dispute and recent news regarding BAE and Monarch do not represent the collapse of the aviation industry but do not bode well for those of us who want to see it thrive in the years ahead. Does the Minister agree that a sector deal, with a particular focus on supply-chain issues and infrastructure requirements, would be helpful in this context?

    I want to make it very clear that we on these Benches unreservedly take the view that Bombardier is being challenged on a case that has no merits and that the US Department of Commerce’s initial determinations are flawed and without justifiable foundation. It is clearly specious to suggest that there is harm or potential harm to Boeing in a sector where it does not have a competitor product; nor can there be any doubt that the UK’s vigorous adherence to state aid rules means that any support provided to the Bombardier facility does not contravene trade rules.

    We hope that the key actors in this see sense and either withdraw the complaint or abandon the US Government’s flawed process, and that this is resolved as quickly as possible to ensure that any harm is minimised. But hope is not enough and we need to be steadfast in our action. We offer the Government our support and help and we recognise that there has been some considerable effort: 24 interactions with the US Government, including two with the President, as well as 12 with Boeing and 10 with other key actors, including the EU. But we have concerns about the effectiveness of the approach and would like some assessment from the Government of whether they feel that anyone is listening or even that the process itself is fair. We acknowledge the role of Canada, as well as the help of the trade unions, but we would be grateful if the Minister could also tell us how much support, and to what level, the Government are seeking from the European institutions. Have the Government asked the EU to consider taking steps in relation to its trade with the US?

    We recognise that Boeing is a very welcome inward investor to the UK and we have a significant and long-standing relationship. We would like it to increase the size, scale and scope of its Sheffield facility, and to see it flourish. But the conduct we have seen from it is not what we would expect of a supplier. We would be grateful if we could understand from the Minister what further interactions we have had with Boeing and when the most recent ones were.

    In relation to the US Government, have the Government taken a view on whether or not this process has been used because of the weakness of the merits of the case? It is noticeable that unlike most disputes in the aviation sector, which take place at the WTO, this one is a US government approach. Surely the US Commerce Secretary’s recent comments in support of the action and the determination of the tariffs suggest that this process may have been used for a reason. In discussions with the US Government, have Ministers seen any evidence of US government encouragement of Boeing? Can the Minister tell us, in the case of such disputes, on how many occasions, either by number or percentage, has the final decision overturned a provisional decision? Can the Government suggest what their plan would be if the final decision confirmed the provisional declaration? What would be the strategy in the United States? Have the Government sought the advice of expert US trade lawyers or advisers?

    Does the Minister agree with me that actually, the fundamental problem here is one of market structure? Boeing has such a large market share that it prices on the basis of monopolistic control, actively supported by eye-watering subsidies from the US Government— a rather familiar tale of locking everyone out to favour the dominant incumbent. This country has benefited from a more open market, with Airbus, Boeing and Bombardier having meaningful facilities here, and this US-led action demonstrates not only its determination in defending its interests but how quickly it can sometimes apply protectionism. It raises questions about its commitment to a new, fair and reasonable trade deal. Finally, can the Minister confirm that this point has been forcefully made to the US Government during the discussions?

  • My Lords, I draw your Lordships’ attention to my declared interests. I thank the Minister for repeating the comprehensive Statement, which I think has support right across the House. There is a danger that this is a bellwether moment for Bombardier, Northern Ireland’s industry and, perhaps, Britain’s future trading relationships. It is an important example and possibly a glimpse of what life outside the European Union might look like.

    As the Statement rightly says, this unilateral and disproportionate response by the US Department of Commerce is over a variety of plane that Boeing itself does not manufacture. Does the Minister agree that this is perhaps a more symbolic gesture, with an eye on other manufacturers in other places—a warning shot, perhaps—with Bombardier as the innocent victim of a larger global power play in plane manufacturing? It also demonstrates in style how the US is going to administer multilateral organisations. It sets out in stark contrast what life could be like after Brexit as we adopt WTO rules, just as the Trump Administration step up their attack on that institution, not least through the vetoing of appointments to the WTO’s appellate body, denying it the ability to deal with such trade disputes.

    Canada has long demonstrated through its actions that it views Bombardier as a strategic Canadian resource. In Northern Ireland, as the noble Lord, Lord Mendelsohn, stated, it has a very important economic as well as symbolic position within the community. I will not repeat what he has just said, except to reaffirm that its loss would be a savage blow to the drive for economic development that is absolutely essential to support the Good Friday agreement and everything that has gone before. But it is also strategic to the UK aerospace industry. We have to remember that wings are a very important part of what we do in this country, and that is what Bombardier does, so there is a very strong need to defend that technology as well.

    Of course, the US action is at an early stage. In due course, as it progresses through the courts and winds its way towards the WTO, I dare say—largely because it has no merit—that Bombardier may have success in overturning the ruling. But these things take years—years and years. What kind of shape would this business be in after going through this process? No company Bombardier’s size could withstand a process of that length. Can the Minister tell us the status of the Delta sales? Are they on hold or do they go ahead as normal until the appeals process is complete? The Minister set out the co-operation that is coming from Canada but we should remember that the parent company is Canadian and if it starts to seek to preserve the overall concern, where will it cut first—in Canada or in Northern Ireland? It is very important that the Government seek assurances from Bombardier that it will continue to support the Belfast operation.

    Finally on this point, we can expect the Chinese to heat up their bid for Bombardier. What line do Her Majesty’s Government have into that process? What advance warning are they likely to get in the event that a bid from the Chinese or someone else comes along?

    I welcome the seriousness with which the Government are taking this; it is imperative that that seriousness continue. I am sure the Government will take the time to explain to Boeing the caustic effect it is having on what has been a burgeoning relationship in this country. I am sure the Government are reminding it about the Apache and Chinook helicopters and Poseidon aircraft that are currently on order from the MoD. Will the Minister say what contingency plans are being put in place to ring-fence the skills we have in Belfast in the event that they start to leech out? We are glad to hear that the Minister is working tirelessly, but what exactly is he now doing? We have heard that he talked to a wide variety of opposite partners in Canada and the US, but what levers does he have to pull? Can the Minister assure us that while we are cosying up, trying to negotiate a trade deal with the US, we will not ease back or soften our approach to the defence of Bombardier? The Minister has a long list of people he has talked to, so far to no effect. What is the next step?

  • I thank the noble Lords, Lord Mendelsohn and Lord Fox, for their contributions and for their general support for the Government’s approach in what I think the House will acknowledge is a challenging situation.

    The noble Lord, Lord Mendelsohn, emphasised the importance of the operation in Northern Ireland, particularly the Bombardier—formerly Shorts—factory. It is important for Northern Ireland. I think I mentioned that 1,000 or so jobs out of a total of 4,000 are particularly focused on making the wings for the C Series. The noble Lord made a valuable point about the importance of the supply chain. It is not just the 1,000 workers in the aircraft factory itself. It goes well beyond that. We are well aware of that and are focusing on all the jobs that could be affected down the line if the issue went further.

    I want to give a little more information about what the Government are doing. The noble Lord, Lord Mendelsohn, mentioned a few figures. Greg Clark and the Minister for Aerospace, Richard Harrington, have been tireless in contacting a number of people across government, particularly in the US. There have been 24 calls or meetings with US administrators, Members of Congress and other US politicians, 15 calls or meetings with Bombardier in the UK and Canada and 12 calls or meetings with Boeing—that answers one of the questions asked by the noble Lord, Lord Mendelsohn. Keeping a line in with Boeing and keeping pressure up to ask it to overturn its decision is very important. There have also been 20 calls or meetings with the Canadian Government or officials.

    The noble Lord asked about the EU. I think I mentioned in the Statement that in addition to the EU Commissioner, who is being kept fully involved, other levels within the EU are also being kept involved within the same area. I think that is a good approach.

    The noble Lord, Lord Mendelsohn, asked what might happen with the final decision. We want this decision to be withdrawn by Boeing. That is what we expect. It is unjustified, and I think I have made it quite clear that we are going to work very hard to ensure that that happens. The final decision will be undertaken in February, if it gets that far, and then it is subject to appeal, so there is a process to be undergone, and I should say again that the unfortunate, disappointing decision that has just been made is the first step of the process. We will continue to press Boeing. The amount of meetings that have been had up to date will continue.

    The noble Lord, Lord Fox, spoke about plane manufacturing. As he will know from his role, aerospace manufacturing in the UK is incredibly important. Boeing’s strategy is most disappointing. We should point out that Boeing has a considerable interest in the UK, and we want to be sure that the long-term relationships and partnerships we have with Boeing continue. No doubt they will, with what we are currently working on, but its action does not help with potential future deals. We want that to work out.

    We see this as a specific issue between the US, Canada and the UK Government, not broader than that, so I do not think there is any mileage in extending it to the EU, which the noble Lord, Lord Fox, mentioned.

    I do not want to comment on Delta’s thinking; that is for Delta to comment on. I can only assume that it will continue to commit to its order for the CS100. I understand that they are due to be delivered in the spring of 2018, and as far as I know, that will continue. We will do all we can to support Bombardier and all the workers in Northern Ireland—a point raised by the noble Lord, Lord Fox. Every effort will be made, and we have some very strong lines in to those running the factory and those on the trade union side. I pay tribute to those in Northern Ireland, particularly the Northern Ireland politicians, who are working assiduously with us and with others involved in Northern Ireland.

  • My Lords, I welcome the robust position in the Minister’s Statement. I particularly welcome the fact that this position has been endorsed by all sides of the House. I have a personal interest in this because I went to Seattle and met the board of Boeing when they worked very closely with Shorts, so they have no excuse for saying they do not know much about the situation in Northern Ireland. There is a long history of collaboration. In my time as Secretary of State, I also arranged the sale of Shorts to Bombardier, and I am very proud indeed of the success it has been over the years, the employment it has given and the importance it has for the Northern Ireland economy.

    I take very well the point made by the noble Lord, Lord Fox, that this could drag on for a long time and be extremely damaging. We are told that President Trump is very keen on US jobs. I was interested to hear in the Statement that there are 23,000 US jobs involved in the Bombardier aeroplane, if the Statement is correct, so there is that defence, as presumably those people could lose their jobs.

    I think that at last Boeing is beginning to realise the damage this is doing to its reputation. Anybody who looks at today’s Evening Standard will find a four-page wrap-round paid for by Boeing about its importance to the UK and what it is doing. I think the PR advisers in Boeing have just woken up to the damage that this is doing to Boeing. The earlier that Boeing can use its influence on the various authorities—it has some influence there—the better. Boeing did not quote for this plane. No US jobs are put at risk by Delta buying these planes. There is no evidence that they could come from an alternative American supplier, as far as I am aware. Against that background, I strongly hope that we can put this behind us. Boeing is a wonderful company. It does a lot of good work, and it has made a very silly move on this occasion, and the sooner it withdraws it, the better.

  • I tend to agree with my noble friend. It is interesting to hear about his direct involvement in Shorts going back a number of years. He is right that it is perhaps rather ironic that there are so many jobs—23,000 is the correct figure—in the US. I would argue that Boeing taking this view is an own goal.

    However, Boeing remains very important to us in the UK. Its contribution to the UK is considerable. There are 2,200 people directly employed by Boeing, and that figure is expected to rise to 4,000 by 2025. The annual supply chain spend is £2.1 billion and the annual UK R&D spend is £11 million per annum. The House may know that Boeing has a new civil aerospace manufacturing facility in Sheffield. It is Boeing’s first civil factory in Europe. There is also a hangar in Gatwick and a repair facility in Lossiemouth. It is important for us to continue to develop the long-term partnership with Boeing, and as I said earlier, its action, which is inexplicable, must be overturned. I hope, as my noble friend said, that Boeing will see sense and withdraw its petition.

  • My Lords, so far in this matter the Government do not seem to have had much or indeed any influence with Boeing, despite the billions of pounds that we spend every year from our defence procurement budget on its excellent products. The Prime Minister does not seem to have had much or indeed any influence with President Trump, and the government proposal for her to go to Beijing does not seem to be much of a priority for Xi Jinping. The Government’s main priority at the moment seems to be to split up with the European Union, turning 27 countries that have traditionally been friends and partners of ours into opposite numbers in an increasingly divisive negotiation. The whole picture is not a very encouraging one, is it, from the point of view of British influence in the world?

  • I completely disagree with the noble Lord. He is not right to put it in this way. I have made it clear that the Prime Minister has been in touch twice with President Trump and have highlighted all the calls and meetings so far. Her Majesty’s Government are working tirelessly, and will continue to do so, in conjunction with counterparts in the Canadian Government, to encourage Boeing to withdraw its complaint and to seek a negotiated settlement with Bombardier. The Prime Minister, as I mentioned earlier, has been discussing the issue constantly with Prime Minister Trudeau, and Greg Clark has also had a number of conversations with Canada’s Minister for Foreign Affairs, Chrystia Freeland. An enormous amount is going on, and I refute what the noble Lord is saying about alleged inaction from our side.

  • My Lords, I welcome the Statement by the Minister concerning the future of Bombardier in Northern Ireland. Indeed, the robust efforts being made by the Government on its behalf should be commended. The company is the biggest private sector manufacturing employer in Northern Ireland, and we have heard that 4,000 jobs, directly and indirectly, depend on the parent factory in Belfast. This is an important matter and it is a worrying time for the employees in Northern Ireland. The United States Government have recently imposed a further import tax of 80%, and negotiations do not appear to be proceeding in a spirit of compromise. Given these circumstances, would the Minister agree that it might be appropriate for the Government to adopt the position taken by the Canadian Government, who have stated that they will not do business with Boeing unless the matter is satisfactorily resolved?

  • I thank the noble Lord for his input. I understand his point of view, but we do not see that as being the way forward. I should say again that the interim statement we heard is bitterly disappointing but it is only the first step. We will continue to strongly defend UK interests in support of Bombardier at the very highest level, because, as the noble Lord has said, the adverse outcome risks jobs and livelihoods among the 4,000 or so skilled workers in Belfast. I can only say that we will continue urgently to work hard at resolving this important matter.

  • My Lords, I wholeheartedly support the attitude of the Government, as I think does every noble Lord who has contributed to this short debate, but will the Government take into account three important elements? First, Boeing enjoys very considerable influence both on Capitol Hill and in the White House. Secondly, traditionally, consecutive United States Governments have been assiduous in their defence of the American aerospace industry. Thirdly, even if the United States Government were well disposed to a trade deal, might the action of Boeing not be illustrative of the attitude of American industry towards such a deal, if Brexit ever takes place?

  • On the noble Lord’s third point, I do not agree with what he said to the extent that, as I said earlier, I see this as being a challenging issue between the US, Canadian and UK Governments that is specific to the Boeing/Bombardier matter. It is right to ring-fence that and to look at it and work on it as assiduously as we are. We will continue to do that. I would not want to comment on the influence of Boeing on Capitol Hill. I suspect that it is quite strong over there; equally, we know that and we will continue to work very hard on contacting US congressmen to work through and convince them to convince Boeing to withdraw its petition.

  • My Lords, I also welcome the Minister’s Statement, in which he outlined the extent of the contact that had taken place between the UK and Canadian Governments. It cannot be stated too often that this company is absolutely essential to the Northern Ireland economy and that the threat to Bombardier could have simply devastating consequences for this part of the United Kingdom. It is essential that concerted efforts continue to be made to ensure that Bombardier’s future in Belfast building wings for the C Series aircraft is secured. I trust that the Boeing directors will note the Minister’s words when he stated that,

    “we consider this action by Boeing to be totally unjustified, unwarranted and incompatible with the conduct we would expect of a company with a long-term business relationship with the United Kingdom”.

    The Government have the complete support of the Ulster Unionist Party in these endeavours to resolve this dispute.

  • I thank the noble Lord for his unconditional support for our approach. He is absolutely right that the Bombardier factory and all the attached supply-chain jobs are very important to Northern Ireland. I hope I have been able to make that clear to the House; others have said the same. For example, the £530 million put into the C Series facility in Belfast represented Northern Ireland’s largest ever inward investment, and this must be protected. The C Series is a fantastic plane from what I have understood in the last few hours, and a great product. We must protect the jobs and ensure that the factory and Bombardier continue there. As an aside, I would say that Bombardier is of course very active in Derby. It is obviously a different sector, but it is making carriages for the East Anglian franchise, and I think that it has won a contract with South West Trains. It will be constructing trains for Crossrail, I hope, and there is HS2. That side is also important, although I realise we are talking about Northern Ireland in this Statement.

  • My Lords, I draw your Lordships’ attention to my entry in the register of interests as leader of Wiltshire Council. Could the Minister confirm the Government’s continued support for the important project between Boeing and QinetiQ at Boscombe Down in Wiltshire?

  • I will have to write to my noble friend about that specific point, as it is not in my brief. I will certainly write and give her a full briefing on that.

  • My Lords, I very much welcome the Government’s strong approach, but it is very optimistic to say that this is a ring-fenced issue. If the Government are speaking to the United States Administration, will they also raise the matter of the American challenge to tariff-rate quotas and the breaking-up of the agreement that has been made between the UK and Europe over tariff-rate quotas on agricultural agreements? This too could be very detrimental to this country in our Brexit negotiations, but is something that the United States Government have taken to the WTO quite aggressively.

  • We are talking here about the aerospace sector, but as the noble Lord has broadened this debate, I will say more generally that of course what we are looking for is a tariff-free global trading area. There is no sense in having tariffs put on, because a market is thereby skewed, so we are looking in the future to have a tariff-free approach. Coming back to Boeing, I hope that we can persuade it to withdraw. The US needs to understand too that a tariff-free approach to trade is the way forward.

  • My Lords, I thank the Minister for repeating the Statement to the House this afternoon. I thank the Government, Her Majesty’s Opposition and the Liberal Democrats for their support for Bombardier—all-party support in our national Parliament. More interestingly, in Northern Ireland not only have the unionist parties supported Bombardier but Sinn Fein has done so as well. As one who negotiated the Belfast agreement, I am concerned that if thousands of people lose their jobs at Bombardier, that will have an unsettling impact on the ground in Northern Ireland. That should be taken into account.

    I noticed that the Foreign Minister for the Republic of Ireland raised the issue of Bombardier when he was in the US last week. Have we had any feedback from the southern Irish Government as to what he achieved or what was said? Has it been encouraging or discouraging, or does it not exist at all? Since we are still in the EU for another few years, and since it controls all trading matters, I ask: has the EU really spoken out for Bombardier in Belfast?

  • It is good that the noble Lord has reiterated the fact that there is all-party support. I take his point. It is interesting, bearing in mind the political challenges in Northern Ireland, that unionists and Sinn Fein are also behind our efforts to find a resolution to this problem. He is right, as I said before, that the impact on the ground if Boeing were not to withdraw its petition would be profound indeed, but I say again that we are at the first stage of this difficult process and we will work as hard as possible to ensure that it is overturned. Again, we say it is unjustified and we do not think it is right, and we will continue to work at all levels to resolve it. On the noble Lord’s point about feedback from the southern Irish Government, there is nothing specific to mention. We continue our engagement with the southern Irish Government but there is nothing to give feedback on.