As oilpatch aches, Ottawa's loan to Bombardier becomes easy target in the West

The Bombardier deal is easy to criticize, but the western alienation argument is a misguided attack, since experts say it lacks credibility and distracts from the important debates about the need for an industrial strategy in Canada.

Western alienation argument diverts from important debate about the need for Canadian industrial strategy

The federal government's decision this week to give Bombardier $372.5 million in interest-free loans elicited criticism over concerns that the company was being unfairly subsidized. Much of that criticism was sharpest in the West. (How Hwee Young/EPA)

The federal government's $372-million loan to Bombardier this week attracted widespread criticism across the country. But it's an easy target in the West in particular — like shooting a basketball into a swimming pool.

It's little surprise that critics pounced immediately, particularly those looking to make political hay.

Now that things are going significantly better for Bombardier, a lot of people are saying, 'Wait a minute, why did you just do this?- Martha Hall Findlay, Canada West Foundation

Those people unhappy with the federal government's decision point to the repeated bailouts Bombardier has received, saying it amounts to the government picking winners and losers, and a wasted opportunity to spend the money elsewhere in the economy.

Some of the company's supporters are also disappointed and say the cash infusion comes too little, too late, since Bombardier asked for $1 billion US about a year ago when its financial health was in a critical state.

For some in Alberta, the interest-free deal summoned up always-simmering feelings of Western alienation, the long-standing narrative that Ottawa favours central Canada and repeatedly turns its back on the West, leaving the four provinces in the later time zones to fend for themselves. 

While the deal is easy to criticize, experts say there is no evidence the West is being left behind and the Western alienation argument detracts from a more important debate about the need for an industrial strategy in Canada.

A subsidy-heavy industry

This isn't the first time the federal government has given financial assistance to Bombardier — and it probably won't be the last. Not only is the Montreal-based manufacturer a large company providing well-paying jobs, it also produces a high-value product that is exported around the world.

And Bombardier plays in an industry littered with government incentives.

Companies like U.S.-based Boeing, Brazil's Embraer and France's Airbus all get government support, according to Karl Moore, with McGill University's Desautels Faculty of Management.

Innovation Minister Navdeep Bains, Bombardier President and CEO Alain Bellemare and Transport Minister Marc Garneau are shown at Tuesday's announcement of the $372.5-million loan. (Paul Chiasson/Canadian Press)

The money and subsidies from the Quebec and Canadian governments help level the playing field for Bombardier in a globally competitive industry.

"They all have government support. So if you want to play in the big leagues in this industry, different from many industries, you need government support," Moore said.

The government assistance is not only necessary, he said, but appropriate.

"Bombardier is probably Canada's greatest global competitor in terms of the number of jobs and the sure fact that it exports the vast majority of its products outside of Canada."

Oilpatch gets its own help

That argument doesn't fly as well out West, where many would like nothing better to see Bombardier cut off, left to sink or swim on its own.

Bombardier's last plea for assistance in late 2015 came in the middle of a severe downturn in the oilpatch, when tens of thousands of workers were losing their jobs, companies were going belly up, and the provincial economies of Saskatchewan and Alberta fell into recession.

That's why Alberta politicians, like former Conservative MP Jason Kenney and Wildrose Leader Brian Jean, were quick to criticize the Bombardier loan this week, suggesting Ottawa is disrespecting those suffering in the West.

But there lies a fault in stoking this alienation fire because Ottawa has given the oilpatch plenty during the oil-price collapse.

One year ago, Scott Darling was in the midst of layoffs at his small oilfield-service company in Red Deer, Alta. He was abundantly clear at the time about not wanting a bailout, like Bombardier or Air Canada have received in the past. Rather he wanted the federal government to approve a new export pipeline. A new pipe wouldn't immediately help his company, but it would benefit the industry if producers could fetch a higher return for the oil they pump out of the ground.

Justin Trudeau and his government signed off on two major pipelines, Kinder Morgan's Trans Mountain and Enbridge's Line 3, which will pump nearly a million more barrels of oil a day from Alberta's oilsands. (Nati Harnik/Associated Press)

Fast forward to today: the federal government has approved two major export pipelines and the revival of Keystone XL south of the border could translate into three conduits for shipping oil out of Canada.

That's more than the oilpatch was expecting.

"The prime minister's announcement of support for two of the pipelines took a lot of the sting out of that argument," says Ian Lee, of Carleton University's Sprott School of Business. 

"The criticism now has been muted. It's not as strong as it would have been three or six months ago, if those intervening acts had not occurred."

The federal government has also enhanced employment insurance benefits for some regions in the West and decided in its last budget to delay a campaign promise to "phase out subsidies to the fossil fuel industry over the medium-term" because of the plunge in oil prices.

The oil industry contributes significantly to the Canadian economy and, in return, has received a variety of considerable subsidies.

While pipeline approvals don't cost the government any money, the Liberals may take a hit in terms of political capital in other parts of the country, as the decision didn't sit will with those who favour protecting the environment over further fossil-fuel development. 

"Let's figure out how to do this ahead of time and really determine what that industrial strategy should look like," says Hall Findlay, the president of the Canada West Foundation. 1:59

Ditching the one-off bailouts

Critics question how and why the federal government makes decisions about which companies are winners and which losers. Are some industries more important than others?

Martha Hall Findlay — the former Toronto Liberal MP who now serves as president of the Canada West Foundation, a Calgary-based think-tank — describes the Bombardier deal as reactive, squeaky-wheel politics, saying an agreement like this only encourages frustration by other industries and regions.

It doesn't help that Bombardier is no longer in dire straits and expects to make between $530 million and $630 million US next year, before taxes and interest.

"Now that things are going significantly better for Bombardier, a lot of people are saying, 'Wait a minute, why did you just do this?'" she said.

Hall Findlay says it's fine to help make a particular industry, like aerospace or agri-food, a priority, but there should be a long-term game plan when it comes to the private sector.

"No matter where you are, I think the question ends up being, why are we doing this one-off stuff all the time?"

The federal government's actions as they relate to the oilpatch make sense in that regard, as the prime minister has made it clear he wants a healthy oil-and-gas sector now to help finance the country's shift toward renewable energy over the next few decades.

It's unclear where the Bombardier deal fits into an existing strategy, which is perhaps why people were so quick to criticize. 

"It's easy to get angry. I don't think it is particularly constructive," says Hall Findlay. "Let's figure out how to do this ahead of time and really determine what that industrial strategy should look like."

Rex shares his thoughts on Bombardier’s bailout 3:14


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