The Current

Canada's Bombardier loans: Should public dollars go to private companies?

The Canadian government has offered Bombardier an interest-free loan touted as an investment. But critics see it as a bailout, tinged with pragmatic political considerations — and some claim it's an illegal subsidy.
The federal government says it will give Bombardier $372.5 million in repayable loans over four years to support the Global 7000 and CSeries aircraft projects. (Paul Chiasson/Canadian Press)

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Canada's Trade Minister François-Philippe Champagne announced on Feb. 7, the government will loan Bombardier Inc. $372.5 million over the next four years.

The interest-free loan has its critics. Brazil, for one, has lodged a formal complaint against Canada at the World Trade Organization arguing this gives the Quebec-based aerospace company an unfair competitive advantage.

But the federal government is not backing down — saying the loan is important for securing high-quality Canadian jobs in design, engineering and manufacturing.

And that's all the more important since Bombardier has announced cuts of more than 14,000 positions over the past few years.

Aaron Wudrick, director of the Canadian Taxpayers Federation, has been watching this bailout closely and has concerns with "public dollars going to private enterprise."

"You know at the end of the day, there is no special characteristic about building airplanes," Wudrick tells The Current's guest host Laura Lynch.

"The reality is it is a prestigious field. It seems high-tech. And so I think people are in some cases irrationally attracted to the field — even though economically it may be no different or more important than many other industries."

Wudrick calls it an emotional political issue but what's the financial benefit?

"We know that it's popular to be seen as a politician handing a cheque … it's very good politics."

He adds it's setting a bad precedent for businesses to go the way of approaching governments rather than focusing on the marketplace to become profitable.
Federal Minister of Innovation, Science and Economic Development Navdeep Bains says the government loan to Bombardier will bring back jobs to Canada. (CBC)

For 50 years, Bombardier has been getting bailouts and Wudrick questions why bailouts aren't considered across the board.

"Do we want different rules to apply just because a business is very large?" Wudrick asks.

"I think we get into a dangerous place where there are really bad incentives for companies if we do that."

When it comes to jobs, Wudrick says stick to ones that don't require a subsidy to exist.

"The real private sector job is one that exists because of market demand. It's an economic job," he tells Lynch.

"If you are actually paying people to create the job in the private sector  — the sort of economic impact of that job, especially to the public treasury, is very different. It becomes a cost to the taxpayer rather than a net revenue generator."

But if Canada wants an aerospace industry, former assistant deputy minister and lead negotiator on the Bombardier file in 2008, David Moloney says it's just too expensive to go it alone.

He disagrees with Wudrick that this industry is like any other.

"This is a program that has been often noted as being two years late and as much as a couple of billion dollars over budget. So that means we're talking about a program that is something in the order of 15 years long," Moloney tells Lynch.

"This is not an industry profile that financial markets, banks, private lenders generally are able to accommodate given the large amounts of money. The fact that you won't earn a single cent for something between 10 and 15 years."'

Moloney tells Lynch given the jobs and industrial spinoffs, it's worth supporting Bombardier.

"If Bombardier comes forward with a new, innovative and relevant market proposal, I would expect any government of any political stripe to look at that."

Listen to the full segment at the top of this web post.

This segment ws produced by The Current's Lara O'Brien and Shannon Higgins.