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Friday, June 2, 2017

Ottawa suspends talks with Boeing over Super Hornet jet purchase

By: STEVEN CHASE AND NICOLAS VAN PRAET The Globe and Mail

The Trudeau government has suspended negotiations with Boeing Co. to purchase fighter planes as it continues to play hardball with the Chicago company over a U.S. trade complaint the firm lodged against Montreal aircraft maker Bombardier Inc.

Steven MacKinnon, parliamentary secretary to Public Services and Procurement Minister Judy Foote, announced Thursday that Canada has paused talks with Boeing as the dispute shows no signs of winding down.

The Liberals have long planned to buy 18 Boeing Super Hornet jet fighters to fill what they say is a gap in Royal Canadian Air Force capabilities while Ottawa deliberates on a longer-term plan to replace this country's aging CF-18 warplanes.

"We have a capability gap, we outlined a process, our partner in that process is not acting like a valued partner right now, so we've suspended discussions with that partner," Mr. MacKinnon told reporters after a speech at the CANSEC arms fair in Ottawa, sponsored by the Canadian Association of Defence and Security Industries.

There have been no meetings between the Trudeau Liberals and Boeing since the company first threatened to jettison the contract, a person familiar with the matter told The Globe and Mail.

Scott Day, a spokesman for Boeing, said direct communication is important but the company would not necessarily be communicating regularly with the Canadian government on the Super Hornet purchase in any case because it is a government-to-government transaction.

"There are different avenues to get to a foreign military sale," Mr. Day said. "Sometimes, the contractor is involved in those sale purchases and sometimes they're not."

Mr. Day said Boeing continues to work with the U.S. Navy, its American government partner, on concluding the sale to Canada. "We've not been told to stop producing materials for the Navy," Mr. Day said. "We're happy to answer questions when the government of Canada has them for us."

News of the impasse comes one day after Canada's Defence Minister doubled down on Ottawa's threat to jettison the multibillion-dollar purchase if Boeing doesn't withdraw a complaint with U.S. trade regulators that could lead to duties being slapped on Bombardier planes. Harjit Sajjan suggested in a speech Wednesday that Boeing – which has benefited from billions of dollars of sales to Canada over the decades – is not behaving like a "trusted partner" of Canada .

On Thursday, Boeing cancelled an announcement it was going to make about the Super Hornet jets at the arms fair in Ottawa. The plane maker was set to provide details about Canadian-based suppliers benefiting if the contract was finalized, but scrapped the announcement "due to the current climate," it said in a statement. Boeing has roughly 560 aerospace suppliers in Canada and says its commitment to the country remains unwavering.

In May, the U.S. Department of Commerce announced it will investigate accusations from Boeing that sales of Bombardier's new C Series jetliner constitute dumping into the U.S. market at "absurdly low prices," because the plane is subsidized by the Canadian and Quebec governments.

The Department of Commerce and the U.S. International Trade Commission are probing the allegations. A preliminary determination on Boeing's petition is expected by June 12.

In a written response to Mr. Sajjan's speech Wednesday, Boeing offered no indication that it was considering backing down on its trade complaint against Bombardier. The company said its complaint is a commercial matter that it is seeking to address through proper channels.

Canada's initial purchase of these Super Hornets could cost $2-billion, but their maintenance, support and upgrades could cost as much as $10-billion over the full period of their use. That could mean billions of dollars more in parts and support for Boeing beyond the initial capital investment.