If Canadians Want to Pay For Your Travel, Why Not?
Adam Smith, as he usually did, had it absolutely right when he pointed out in The Wealth of Nations that “(p)eople of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public …”. Except sometimes they manage to engage in such a conspiracy without meeting together, without having a conversation, and without even being on the same side. To wit, Boeing’s anti-dumping petition against Bombardier. It isn’t that Boeing is objecting to mercantilism; just to the fact that someone in addition to themselves is practicing it.
Let’s accept a basic fact central to Boeing’s case: The Canadian aircraft company Bombardier has indeed sought and obtained protectionist rents from Canadian governments, billions in government largesse that has allowed it to cut prices and win a contract from Delta Air Lines for its C Series airplane.
But who are the ultimate beneficiaries of Bombardier’s cut-rate pricing? An American airline company, its shareholders, employees and – and hopefully consumers, who may see some of the benefit of the deal in the form of lower fares and/or better service.
Should the U.S. Department of Commerce pursue the anti-dumping case over subsidies which, after all, benefit Americans? If, for some reason, Canadians are prepared to underwrite Delta’s costs, why shouldn’t the airline take advantage of the generous offer? If the coffee shop around the corner is prepared to offer you lunch for less than it costs them to prepare it, should you refuse to eat it?
In this case, Bombardier’s ‘generosity’ is being paid for by Canadian taxpayers. The company has recently received loans of $1 billion and $372 million from the Quebec and Canadian governments respectively. But this is just the tip of the iceberg. As independent analyst Mark Milke has pointed out, between 1966 and 2015 Bombardier received over C$1.1 billion (adjusted for inflation) since 1966 from one Canadian federal government department alone. That doesn’t include grants and loans from the provinces of Quebec and Ontario, and for that matter Great Britain. In total, the company claims it has repaid just $275 million of previous loans.
Canadian politicians, presumably, engage in these mercantilist practices to stimulate job creation. How has that been going for them? Last year, Bombardier handed out pink slips to 7,000 employees. But not all employees have had to sacrifice. Bombardier’s senior executives saw their compensation rise by nearly 50 percent. Partly, according to a corporate regulatory filing, that was a reward for securing orders for the C Series – heavily subsidized by taxpayers. Maybe taxpayers are the ones who deserve some kind of reward.
No one here has clean hands. It is ironic to hear Boeing whine about Bombardier receiving government loans and grants. Boeing has been a steady recipient of government funds, channeled through the Export-Import Bank. In fact, Ex-Im is sometimes referred to as ‘Boeing’s Bank.’
It would seem that the real victims in all of this is not Boeing, but the taxpayers who are paying for the party. Maybe the answer isn’t to pursue anti-dumping measures, but anti-pork measures. The battle between the two plane makers has focused attention on two swamps that need to be drained, on both sides of the U.S-Canada border.
Once again Adam Smith puts it best. In his first book, The Theory of Moral Sentiments, the Scotsman had some advice that would serve both Americans and Canadians well: “Never complain of that which is at all times in your power to rid yourself.”