19 Sept 2017

A trade dispute has upended Canada's defence plan, announced this Spring, to fill a so-called "capability gap" in the RCAF fleet with Boeing F/A 18 Super Hornet jets before the production line for this platform winds down. 

The dispute began when Boeing accused Bombardier of discounting its jets to Delta Airlines, which had placed a firm order last year for 75 of the Montreal company’s smaller CS100 models, and optioned 50 more (some of which could be the larger CS300). The deal was reported to be worth US$5.6 billion, and Boeing is challenging the agreement, citing "illegal" government subsidies.

Canada will “push back” against any move by the U.S. Department of Commerce to impose tariffs or other financial penalties on Bombardier’s sale of C-Series passenger jets to Delta Airlines and, on September 19th, Prime Minister Justin Trudeau clarified that this "push back" could include abandoning efforts to buy F/A18 Super Hornets from Boeing.

Carriers typically pay below list, and early customers – Delta was the first U.S. operator to order the C-Series – generally get good deals when any major original equipment manufacturer (OEM) is trying to penetrate new markets. Even though all OEMs discount early adopters, Boeing insists that the Canadian and Quebec governments are subsidizing Bombardier through loans and equity positions.

In a statement the day before, Boeing repeated its accusation that Bombardier was involved in a “classic case of dumping” by discounting the C-Series “at absurdly low prices” when it had “sold poorly” internationally. “No one is saying Bombardier cannot sell its aircraft anywhere in the world,” Boeing added. “But sales must be according to globally accepted trade law, not violating those rules seeking to boost flatlining business artificially.”

A Commerce ruling against Bombardier, expected to be handed down in a matter of days, threatens jobs not only in Montreal but also at Bombardier’s large centre in Belfast, Northern Ireland.

“Boeing is trying very hard to put thousands of Canadian aerospace workers out of work, and we are going to stand up for them,” Trudeau told reporters in the National Press Theatre. “We are going to push back. We have been very actively engaged, both directly with Boeing and with the American administration, including governors and congressmen and women and the administration.” 

Insofar as Super Hornet prospects are concerned, Trudeau said during a Sept. 18 news conference in Ottawa with Theresa May, his British counterpart, that although he’s still interested in buying 18 Super Hornets as a stopgap in its plan to acquire a fleet of new fighters, he’s not prepared to do business with Boeing as long as it continues its anti-dumping action.

“We won’t do business with a company that is busy trying to sue us and put our aerospace workers out of business,” he said, adding in French that a successful trade action could eliminate “tens of thousands of jobs.”

Boeing interpreted the PM’s use of “us” as being legal action against Canada. "Boeing is not suing Canada,” it said in a Sept. 19 statement. “This is a commercial dispute with Bombardier.” Bombardier immediately accused Boeing of “hypocrisy” for its claimed commitment to a “level playing field” without government subsidies. “In this case, they were not even on the field” because they had stopped building aircraft of the size preferred by Delta. “The U.S. government should reject Boeing’s attempt to tilt the playing field in its favor and impose an indirect tax on the U.S. flying public through unjustified import tariffs.”

May said she had not only made her feelings clear already in a phone call with U.S. President Donald Trump but would reiterate her government’s case when they meet Sept. 23 in Washington. “I will be impressing upon him the importance of Bombardier to the United Kingdom, and particularly, obviously, to jobs in Northern Ireland.”

Bombardier president Alain Bellemare was one of several Canadian business leaders who participated in a roundtable meeting with May, organized by the UK High Commission, but it was unclear whether the Bombardier issue had been specifically discussed. 

New Democratic Party MP James Bezan, the Official Opposition’s defence critic in the House of Commons, said the rhetoric “needs to be toned down” because it had gotten "out of control” on both sides. He said the Commerce decision could result in Canada filing challenges through the North American Free Trade Agreement and possibly through the World Trade Organization. WTO decisions on other disputes in the past have generally been ignored by Washington when they went against U.S. interests.

Bezan also told reporters on Parliament Hill that the PM’s latest words on the Super Hornets showed that last year’s decision to buy “interim” fighters was “ill-informed and irrational […] from the start.”

Bezan urged the government needed to “get back to the basics” in buying replacements for the legacy CF-188 Hornets “as fast as possible” because that would be “in the best interest of taxpayers and […] the pilots who fly our fighter jets.” 

He also said the “rhetoric that’s been going on between Boeing and the government of Canada has not been helpful” to the fighter program. “We want to get to a competition now. That’s the only way we get the right plane for the Royal Canadian Air Force and what’s in the best interests of Canada and our allies. “Almost all of our allies have been able to do competitions in under 12 months, and with all the information that’s already been collected by the previous government, by this government and their surveys of fighter jet manufacturers, they know exactly what the capabilities are that are out there and the way forward and how we replace the entire fleet and make sure that we have enough fighter jets to do the job that Canada is expected to do.”

When Trudeau revisited the issue Sept. 19, he was asked whether he was prepared to abandon the proposed purchase of 18 “interim” Super Hornets as a backup for the remaining legacy CF-188 Hornets still flown by the RCAF.

“We have a capability gap,” he replied. “We cannot fulfill our obligations towards both NORAD and NATO at this point, and we need to fix that. Canadians expect us to do our part in defending North America and in our responsibilities towards NATO, and unfortunately, the extended mess that the previous government made around procurement of fighter jets has left us in a difficult position. We continue to look for options on an interim solution because our forces need to have the equipment that they’re supposed to have to fulfill their responsibilities and to serve their country.

One option being explored is the acquisition of Super Hornets declared surplus to the needs of the Royal Australian Air Force as it transitions to Lockheed Martin F-35 Lighning II stealth fighters.

– Ken Pole