Facing C Series challenge, Canada threatens to review Boeing military procurements

Vowing to defend Canada’s aerospace interests, Foreign Minister Chrystia Freeland on Thursday warned “Canada is reviewing current military procurement that relates to Boeing.”

The threat, issued in a statement from Global Affairs Canada, appeared to be directed at the Liberal government’s proposed purchase of an interim fleet of F/A-18 Super Hornet fighter jets and came as Washington launched separate investigations into Boeing allegations that the Bombardier C Series received unfair government support in its recent sale to U.S.-based Delta Air Lines.

Advertisement

“We strongly disagree with the U.S. Department of Commerce’s decision to initiate antidumping and countervailing duty investigations into imports of Canadian large civil aircraft,” said Freeland.

“Boeing’s petition is clearly aimed at blocking Bombardier’s new aircraft, the C Series, from entering the U.S. market. Boeing admits it does not compete with exports of the CS100 aircraft, so it is all the more difficult to see these allegations as legitimate, particularly with the dominance of the Boeing 737 family in the U.S. market.”

The C Series is considered crucial to Bombardier’s future and the April 2016 deal with Delta, valued at up to $5.6 billion for 75 CS100 aircraft, was hailed as a major breakthrough at a time when initial sales of the aircraft were struggling.

Freeland noted a large portion of the supplier base for the C Series originates in the U.S. and aircraft components are manufactured in, among other states, Connecticut, Florida, New Jersey, Washington, New York, Ohio, Iowa, Kansas, Pennsylvania and Colorado.

“The aerospace industries of Canada and the United States are highly integrated and support good, middle class jobs on both sides of the border,” she said. “Our government will defend the interests of Bombardier, the Canadian aerospace industry, and our aerospace workers.”

In February, Ottawa announced a $372.5 million interest-free loan to Bombardier, to be delivered in instalments over four years, to support the Global 7000 business aircraft program and the C Series. The previous year, the Quebec government made a US$1 billion investment in the C Series in exchange for a 49.5 per cent stake in the program.

“The U.S. market is the most open in the world, but we must take action if our rules are being broken,” said Commerce Secretary Wilbur Ross. “While assuring the case is decided strictly on a full and fair assessment of the facts, we will do everything in our power to stand up for American companies and their workers.”

The Commerce Department inquiry parallels a similar investigation by the U.S. International Trade Commission (ITC) into antidumping allegations of imports from Canada of the 100 to 150-seat civil aircraft, which on Thursday heard from representatives for Boeing, Bombardier and Delta.

Advertisement

In a statement, the Commerce department said that if Bombardier is found to have received unfair government subsidies and/or dumped aircraft into the U.S. market, and the ITC determines those actions are “causing harm to the U.S. industry,” then the department “will impose duties on those imports in the amount of the dumping and/or unfair subsidization found to exist.”

Boeing has alleged an estimated dumping margin of 79.82 per cent and unfair subsidies of 79.41 per cent.

Both the countervailing duty and antidumping investigations are expected to be completed by the end of 2017.

In November 2016, the Canadian government announced discussions with the U.S. and Boeing to acquire an interim fleet of 18 Super Hornets under foreign military sale to supplement the Royal Canadian Air Force’s fleet of 76 legacy Hornets and address an availability shortfall to simultaneously perform both NATO and NORAD operations. The government has said it will launch an open and transparent competition to replace the legacy CF-188 fleet by the end of 2019.

Leave a Reply