Canada Reviewing Potential Boeing Deals After U.S. Opens Probe Into Bombardier Pricing -- Update
May 18 2017 - 6:20PM
Dow Jones News
By Doug Cameron
The Canadian government said Thursday it was reviewing potential
defense deals with Boeing Co. in the wake of U.S. trade officials
launching a probe into alleged subsidies and unfair discounts of
passenger jets made by Bombardier Inc.
The Commerce Department said it could introduce tariffs as soon
as this year on the Bombardier CS100 jets, drawing a strong rebuke
from Canada's foreign minister after a move that inflamed already
simmering trade tensions between the two nations that could impact
a multibillion-dollar sale of Boeing combat jets.
The Commerce Department investigation followed a complaint in
April from Boeing alleging Bombardier was "dumping" its new CSeries
jet with customers including Delta Air Lines Inc. in an effort to
win market share, harming the U.S. company and domestic
workers.
Canadian Foreign Minister Chrystia Freeland said the government
"strongly disagrees" with the department's decision and added it is
now reviewing current military procurement that relates to
Boeing.
"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," she said in a statement.
The Boeing charge has been widely criticized by many aviation
analysts as plane makers routinely sell initial aircraft at
below-cost prices to win market traction, while Bombardier is
offering a jet with little or no overlap to the U.S. company's own
products.
Analysts had also warned Boeing's push against Bombardier could
backfire by upsetting Delta -- which is also a big Boeing customer
-- as well as the potential sale of 18 of the company's F/A-18
Super Hornet jets to Canada.
Ms. Freeland didn't identify the jet talks, but it is the only
large-scale contract the country is discussing with Boeing.
Canada's potential purchase of the planes and sales to Kuwait
and Qatar are central to extending the life of Boeing's combat-jet
production lines.
Boeing didn't comment on the status of the sales talks with
Canada, but said it values the country as a "customer and
supplier-partner."
The Commerce Department announced its investigation during a
hearing about the charges at the International Trade Commission
before Bombardier or Delta had started their testimony, with Boeing
officials still pressing their case.
Bombardier has called for the case to be dismissed and said its
planes don't compete directly with the Boeing aircraft. Canada has
denied it provided Bombardier with illegal subsidies.
The department said its probe will run parallel with the
commission's investigation, which is due to report by June 12. If
Bombardier is found to have broken U.S. rules, the Commerce
Department said it could start collecting import tariffs this
year.
The move adds to existing trade tensions between the U.S. and
Canada, centered on the lumber and dairy industries.
Boeing filed a petition with the Commerce Department and the ITC
alleging Canadian state subsidies created an unfair competitive
threat to its own 737 Max 7 passenger jets, which are smaller than
the CSeries
Brazil has also lodged a complaint with the World Trade
Organization over Canada's support for Bombardier, which competes
with plane maker Embraer SA.
Boeing wants the U.S. to impose antidumping duties on imports of
Canadian passenger jets. The ITC offers a potentially quicker route
than through the WTO. The U.S. and the European Union have been
embroiled for years in disputes related to subsidies provided to
Boeing and Airbus SE.
Delta last year placed an order for 75 CSeries jets, providing
the program with a marquee customer after years of sluggish sales.
It is due to receive the first planes in the second half of
2018.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
May 18, 2017 19:05 ET (23:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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