WASHINGTON — Boeing clashed with Canadian jet maker Bombardier in a hearing on Monday over a trade dispute that has pitted the United States against Canada, adding to already heightened trade tensions between the two nations.
The case, which centers on a small aircraft that Bombardier plans to sell to American customers, could affect the livelihood of thousands of workers whose jobs traverse the sprawling supply chains of both aircraft manufacturers.
It also has implications for relations between the United States and some of its closest allies, and could further strengthen Canada's resolve to fight changes that the Trump administration is demanding as it seeks to renegotiate the North American Free Trade Agreement.
At the core of the disagreement is a claim by Boeing that Bombardier has cheated American trade rules by accepting subsidies from the Canadian government and selling its CSeries aircraft in the United States at below market prices.
In a series of initial rulings over the last few months, the Commerce Department decided to levy duties of nearly 300 percent on the Bombardier CSeries, an early victory for Boeing that would increase the price of the rival plane in the United States. The Commerce Department will finalize the duties in a decision on Monday or Tuesday.
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The International Trade Commission, an American agency that investigates trade disputes, is expected to issue a ruling on the Commerce Department duties in late January.
In a hearing before the commission on Monday, executives and lawyers from Boeing and Bombardier traded barbs about which country was subsidizing its companies. Officials from Canada and the United Kingdom testified in support of Bombardier's case, including David MacNaughton, Canada's ambassador to the United States, who disputed Boeing's claim of unfair subsidies and argued that Boeing itself was heavily subsidized.
Mr. MacNaughton said that the trade dispute posed "profound negative implications" for aerospace industries in Canada and the United States.
As with many airlines, the supply chain for Bombardier's CSeries jet and its components winds across national borders, employing workers in Canada, Northern Ireland and the United States.
The dispute has escalated to the highest levels of international diplomacy, with Prime Minister Justin Trudeau of Canada and Prime Minister Theresa May of Britain urging President Trump to intervene in the case. Canada announced earlier this month that it would scrap a $5.2 billion purchase of new fighter jets from Boeing and purchase Australian jets instead.
At Monday's hearing, Kim Darroch, the British ambassador to the United States, said that a decision by the United States to levy duties on Bombardier would damage international trade, competition and American airlines and their customers.
The decision could also impact the ongoing renegotiation of Nafta. Among the key sticking points in the discussions is whether the trade pact should contain a mechanism for resolving the type of dispute at the center of Bombardier-Boeing case.
If the United States does decide to tax Bombardier's products, the decision could be appealed through a variety of channels. Canada could ask the World Trade Organization to reconsider the decision, or Bombardier could appeal the decision in a federal court in New York, or through a panel of judges constituted under Nafta.
Canada wants to keep its ability to appeal such trade decisions to a panel of judges from Nafta countries through what is known as Chapter 19, a reference to the Nafta chapter that created the mechanism. But that mechanism is under threat from the United States, which has called for jettisoning the types of quasi-judicial panels that Canada has relied on to resolve trade disputes.
Canada has long used Chapter 19 to fight duties that the United States imposes on its products, including a decades-long dispute over lumber imports. Canadian trade advisers often complain that the United States is particularly litigious when it comes to trade disputes. Under the Trump administration, it has become more so.
Under Mr. Trump, the Commerce Department has shifted its resources from promoting business ties between countries to ramping up its enforcement of American trade rules. So far this year — from Jan. 20 through Dec. 11 — the department initiated 79 antidumping and countervailing duty investigations, a 52 percent increase from 2016, according to official data.
Canadian trade advisers have described keeping Chapter 19 as a red line in their negotiations. The case against Bombardier, an industry of strategic importance for Canada, is likely to further strengthen Canadian resolve to fight the United States in the Nafta negotiation. The latest round of talks over Nafta concluded last week in Washington with Canada, the United States and Mexico still at an impasse over the future of the agreement.
Lawyers for Boeing present the dispute as a classic case of illegal subsidies and dumping, or selling products at below-market prices in foreign countries. They say that Bombardier's sales in the United States pose a significant risk to sales of Boeing's own competing aircraft, known as the Max 7.
Bombardier argues that the Max 7 is significantly larger than its CSeries planes, and that the two jets do not directly compete. It disputes the methodology the Commerce Department has used in determining the duties, and claims that Boeing is merely trying to use the United States government to wall off its market from foreign competition.
The case took another turn in October, when Bombardier announced that it would move production of the CSeries airliner to Alabama in a partnership with French jet maker Airbus. The arrangement could give Bombardier a way to evade duties, if they are levied, although production in the Alabama facility will not start until after the trade case is concluded.
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