December 18, 2017
Canada Cancels Boeing Deal
Canada is in the midst of a trade dispute with the United States. The primary victim of this disagreement is Boeing. Initially, the country had made plans to purchase new F/A-18 Super Hornet fighters from Boeing. Now the country has pulled back, saying they will purchase older jets from Australia instead.
The change is no minor switch. It will cost Boeing more than $5 billion, and that has a lot of heads turning and people paying attention.
Speaking at a news conference as reported by CNN, Canadian Defense Minister Harjit Sajjan said, “We received a formal offer from the government of Australia, and we intend to pursue it…”
So, what’s the beef behind Boeing’s big loss?
Boeing brought a trade complaint against Canadian aerospace maker Bombardier. Canadian Prime Minister Justin Trudeau threatened to “stop doing business with Boeing” according to CNN, if the company didn’t drop the trade complaint. Boeing did not, and Trudeau made good on his word.
Boeing’s complaint stems from the sale of airliners to Delta Air Lines. Boeing says Bombardier offered Delta “absurdly low prices,” and the United States Commerce Department placed some tariffs on Bombardier jets to make the offered deal less palatable for Delta. All of this is ongoing, with neither Delta nor Bombardier acquiescing to the tariffs, which will be decided in court next February.
In a public statement, Boeing said, essentially, ‘no hard feelings’ about the canceled order. “Although we will not have the opportunity to grow our supply base, industrial partnerships, and jobs in Canada the way we would if Canada purchased new Super Hornets, we will continue to look to find productive ways to work together in the future…”
If you read some thick shade in that statement, you are not alone. Many interpreted Boeing’s response as an accusation that Trudeau’s move would cost Canadian jobs, hoping to pressure the president to change his stance.
And, in the end, all of this may just be posturing. Canada is in the process of replacing its entire war fleet. To do so, the country will need to swap out many more jets than Australia can provide. That means, likely, coming back to Boeing in the relatively near future. Will the two sides have things patched up by then? That may depend on how the tariff case goes in February. If it goes against Bombardier, Canada may be looking for another jet supplier for the next phase of its replacement program.
If not, the large amounts of shade the two sides are currently throwing could be replaced with large amounts of currency.