Skip to main content

A Bombardier CS300 C Series aircraft, manufactured by Bombardier Inc., lands after a flying display on day two of the 51st International Paris Air Show in Paris, France, on Tuesday, June 16, 2015.Jasper Juinen/Bloomberg

The next potential Canada-U.S. trade dispute unfolded on Thursday as aerospace giants clashed at a Washington hearing that marked the formal launch of investigations into Boeing Co.'s allegations that Bombardier Inc. received subsidies allowing it to sell its C Series planes at below-market prices.

"The U.S. market is the most open in the world, but we must take action if our rules are being broken," U.S. Commerce Secretary Wilbur Ross said in a statement after the hearing began.

"While assuring the case is decided strictly on a full and fair assessment of the facts, we will do everything in our power to stand up for American companies and their workers."

U.S. aeronautics powerhouse Boeing argued at the hearing that duties should be imposed on Bombardier aircraft, insisting its smaller Montreal-based rival receives government subsidies that give it an illicit toehold in the international market.

Lobbyists, lawyers and aerospace executives crowded the room for a little battle playing out in the broader context of the day's larger trade news: the U.S. announcement that North American free-trade agreement renegotiations will start in the next 90 days.

Bombardier has made it clear that its true goal is to grab half the international market share for 100-to-150-seat aircraft, according to Boeing, which argues its rival has received an unfair head start from Canadian taxpayers.

Boeing vice-president Raymond Conner said the sale of cheap, subsidized planes to Delta Air Lines helped build momentum for Bombardier to enter a new market. If Bombardier reaches its stated goal, he said, it would squeeze Boeing from that market and cost the company $330-million (U.S.) a year in annual sales.

"Today, we are at a critical moment," Mr. Conner told the seven-member U.S. International Trade Commission. "If you don't fix it now, it will be too late to do anything about it later. … What we want is competition that is fair … You guys can fix this before it is too late."

Boeing has petitioned the U.S. Commerce Department and the U.S. International Trade Commission to investigate subsidies of Bombardier's C Series aircraft that it says have allowed the company to export planes at well below cost. A preliminary determination on the petition is expected by June 12.

If the ITC determines there is a threat of injury to the U.S. industry, preliminary countervailing duties could be announced in July, followed in October by preliminary anti-dumping duties, unless the deadlines are extended. Final determinations are scheduled for October and December.

Boeing is calling for countervailing duties of 79.41 per cent and anti-dumping charges of 79.82 per cent.

The process is similar to the one that has led to duties on Canadian softwood lumber. These are among the looming trade disputes with the United States, as NAFTA talks could raise the heat on differences over dairy, dispute resolution auto parts and other issues.

Boeing complains that Bombardier has received more than $3-billion in government subsidies so far that have allowed Bombardier to engage in "predatory pricing."

Lawyers for the U.S. aerospace giant argued on Thursday that Bombardier's own words prove it was rescued financially by multibillion-dollar assistance from the Quebec government, which last year invested $1-billion in exchange for a 49.5-per-cent stake in the C Series. The company also shored up its finances by selling a 30-per-cent stake in its railway division to pension fund manager Caisse de depot for $1.5-billion.

The federal government recently provided a $372.5-million (Canadian) loan. That's on top of about $1-billion received in 2008 from Ottawa, Quebec and Britain to develop the C Series.

Bombardier representatives countered that their planes never competed with Boeing in a sale to Delta – which the American rival describes as a seminal moment.

Bombardier lawyer Peter Lichtenbaum said the plaintiff is a global powerhouse that hasn't lost any sales as a result of Bombardier, has an enviable order backlog and doesn't even compete with Bombardier in the sales campaigns it has complained about because the C Series is smaller than Boeing's 737-800 and Max 8 planes.

"Boeing's petition in this case is unprecedented in its overreach," he said. "If this is a case of David versus Goliath, Boeing has cast itself in the wrong role."

The Caisse said it will prove that its investments in Bombardier were always done on commercial terms and don't represent a subsidy.

"The allegations targeting the Caisse are baseless and outrageous," Kim Thomassin, executive vice-president legal affairs, said in a news release. "We will refute them while offering our full co-operation to U.S. agencies to bring this matter to a quick and satisfactory resolution."

Boeing's annual sales were $94.6-billion (U.S.) last year. That means the $330-million Mr. Conner expressed concern about amounts to one-third of 1 per cent of its annual sales.

Bombardier's Global 7000 is getting $250-million in funds from the federal government to help with its research and development

Report an editorial error

Report a technical issue

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 7:00pm EDT.

SymbolName% changeLast
BA-N
Boeing Company
+0.54%192.99

Interact with The Globe