Boeing’s Clash With Ottawa Threatens US-Canada Defense Relationship
The trade dispute between the Canadian government and American defense contractor Boeing has placed the lucrative defense relationship in jeopardy, as Canadian authorities seek foreign defense contractors to fill the gap and European firms begin to close in.
It all started when the US Department of Commerce began investigating a Boeing complaint that Ottawa has allowed Quebec-based aerospace contractor Bombardier Aerospace to sell their C-series commercial aircraft at below-market prices.
Boeing claims that Bombardier has received $3 billion in Canadian government subsidies that give it unfair advantages on the international marketplace.
The details of the disagreement between Boeing and Bombardier has primarily taken place behind closed doors.
Brazil, home to aerospace contractor and Bombardier rival Embraer, has filed a complaint with the World Trade Organization over alleged Canadian subsidies.
In 2016, the Quebecois government invested $1 billion into Bombardier in exchange for a 49.5 percent stake in the C Series.
Bombardier then won a contract to build 75 C-series planes for US-based Delta Airlines.
They deny that Boeing competed with them for that contract.
In response to the Boeing complaint, Canada broke off discussions with Boeing to hash out a purchase of 18 Super Hornet fighter jets.
"We have suspended discussions with Boeing and that is what we have decided," said Steve MacKinnon, a spokesman for Canada's Ministry of Public Works, to reporters on Thursday.
Canada is expected to release a new defense policy June 7, including their planned purchases of equipment from foreign contractors.
Boeing had been sniffing around many of these lucrative contracts for equipment such as tactical helicopters and UAVs, but their trade complaint may have jeopardized that.
"We call on all of our industry partners to speak with one voice about the interconnectedness of the defense industry supply chain between Canada and the United States," Canadian Defense Minister Harjit Sajjan said to industry officials at the May 31 CANSEC defense trade show.
Sajjan added that defense firms should help the Canadian government make "the clear case of ensuring goods continue to flow freely across our two countries," he added.
"We need your voices to articulate the consequences should our borders be closed."
Boeing's complaint and the US response have hurt their relationships with Canada, said Sajjan, who called on Boeing to withdraw their complaint against Bombardier.
"It is not the behavior of a trusted partner," he said.
Boeing has not backed down. On June 1 they cancelled a planned announcement to name the members of the team that would contribute to the Super Hornet program.
"Due to the current climate, today is not the most opportune time to share this good news story," they wrote in a statement.
If Boeing is not a "trusted partner," that opens the door for other contractors to fill the niche opened in Canadian defense – including European defense firms.
Italian contractor Leonardo SpA was present at CANSEC and has announced that they will cooperate with Canadian firms to modernize the Royal Canadian Air Force's search-and-rescue aircraft.
"The trade dispute with the Americans has potential to open up new opportunities," said an anonymous European industry source to Defense News.
"We are keen to see how this plays out in the coming months."
Boeing operations account for 14 percent of Canada's aerospace industry.