Ottawa reconsiders Boeing purchases amid accusations against Bombardier
Plan to buy Super Hornet jets under threat after Boeing accuses Ottawa of subsidizing Bombardier
The federal government hinted Thursday that Boeing should not take future military contracts with Canada for granted, considered by some military and defence industry officials as a veiled threat that coincided with a spat between the aerospace giant and rival Bombardier.
U.S. jet maker Boeing alleged this week that the Canadian government is unfairly subsidizing its CSeries jets, which allows the company to sell them at below-market prices.
"The U.S. market is the most open in the world, but we must take action if our rules are being broken," U.S. Commerce Secretary Wilbur Ross said in a statement after a hearing in Washington began into Boeing's claim.
- Bombardier inks deal with Air Canada for at least 45 CSeries jets
- Brazil's Embraer launches WTO complaints over Ottawa's Bombardier support
On Thursday, Canadian Foreign Affairs Minister Chrystia Freeland said the allegations are unhelpful to ongoing trade negotiations.
"The aerospace industries of Canada and the United States are highly integrated and support good, middle class jobs on both sides of the border," the minister said.
"We strongly disagree with the U.S. Department of Commerce's decision."
Freeland's statement also added that Ottawa is now "reviewing current military procurement that relates to Boeing."
Military officials and defence industry representatives contacted by The Canadian Press on Thursday were united in assuming that Freeland's warning related to Ottawa's planned purchase of 18 Boeing Super Hornets to temporarily replace its aging fleet of CF-18s, a deal that could be worth up to $2 billion.
"Our government will defend the interests of Bombardier, the Canadian aerospace industry, and our aerospace workers," Freeland's statement read.
Aerospace analyst Richard Aboulafia of the Teal Group said the Canadian government's move was inevitable, putting into question Boeing's strategy in taking on Bombardier.
"If Boeing is smart it'll press the do-over button and walk away," he said in an interview, adding the aeronautics powerhouse has much more to risk from losing military contracts than the tiny gain from a successful trade complaint.
Historically, Bombardier has been a bigger player in the smaller jet market, well below the capacity of Boeing's pancontinential 7-series planes. But with the CSeries, the company says its goal is to grab half the international market share for 100-to-150-seat aircraft.
Boeing vice-president Raymond Conner told the hearing in D.C. that Bombardier's recent deal with Delta Air Lines for 125 CSeries helped build momentum for its Canadian rival. If Bombardier reaches its stated goal, he said, it would squeeze Boeing from that market and cost the company $330 million US a year in annual sales.
"Today we are at a critical moment," Conner told the seven-member U.S. International Trade Commission. "If you don't fix it now, it will be too late to do anything about it later."
Boeing has petitioned the U.S. Commerce Department and the U.S. International Trade Commission to investigate subsidies of Bombardier's CSeries aircraft that it says have allowed the company to export planes at well below cost. A preliminary determination on the petition is expected by June 12.
If the ITC determines there is a threat of injury to the U.S. industry, preliminary countervailing duties could be announced in July, followed in October by preliminary anti-dumping duties, unless the deadlines are extended. Final determinations are scheduled for October and December.
Boeing is calling for countervailing duties of 79.41 per cent and anti-dumping charges of 79.82 per cent.
It complains that Bombardier has received more than $3 billion US in government subsidies so far that have allowed it to engage in "predatory pricing."
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