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A Bombardier CS300 aircraft takes off during the 51st Paris Air Show at Le Bourget airport near Paris on June 15, 2015. (PASCAL ROSSIGNOL/REUTERS)
A Bombardier CS300 aircraft takes off during the 51st Paris Air Show at Le Bourget airport near Paris on June 15, 2015. (PASCAL ROSSIGNOL/REUTERS)

MARK MILKE

Quebec’s Bombardier bailout is not an investment; it’s corporate welfare Add to ...

Mark Milke has written multiple reports on subsidies to business for various Canadian public policy think tanks.

Back in 1966, Lester Pearson was prime minister, the population of Canada was 20 million and the year’s first No. 1 hit, according to Billboard magazine, was The Sound of Silence by Simon and Garfunkel.

It was also the year when Bombardier received its first subsidy from the federal government: a conditionally repayable contribution for $36.9-million (inflation-adjusted).

Bombardier has long been a recipient of what some describe as “investment,” or industrial policy, but which is best known by a more colloquial, non-Orwellian term: corporate welfare. That is, cash sent from governments/taxpayers to corporations not in exchange for some good or service but simply to prop up a failing company, or to ostensibly help an acorn grow into an oak tree.

Bombardier’s latest corporate welfare instalment, about $1.3-billion, is promised courtesy of the Quebec government. The company is also seeking another $1.3-billion from the federal government. For taxpayers curious as to why they should again bail out yet another corporate laggard, that possible $2.6-billion should be added to past federal grants and loans given since 1966.

Access to Information requests to Industry Canada, the main federal department disbursing public money to corporations, reveal that the Quebec-based company has received more than $1.1-billion in the past 49 years. In addition, Bombardier swallowed another airplane manufacturer, de Havilland, in 1992. That company received another $1.1-billion. Bombardier’s current entity has thus received more than $2.2-billion from the department since 1966 (figures adjusted to 2013 dollars).

If Bombardier secures even more help from two levels of government this year, the total will be pushing $5-billion. And that assumes the company hasn’t received other disbursements from Quebec, other provinces, the federal government or other countries.

As for repayments, the record is spotty. In their public responses over the years, Bombardier has trumpeted how, in a few examples, the company paid back more than the initial loan amounts for some jets. But in calculating costs to taxpayers, the company quotes nominal dollars, not inflation-adjusted dollars, ignoring opportunity cost, past grants and its overall repayment record.

In fact, Bombardier doesn’t want taxpayers to know much of anything about its repayments. The company has been in federal court multiple times to block the fulfilment of Access to Information requests that might better shine some light on them.

Stepping back to the wider issue of taxpayer-financed subsidies to business, the justifications for corporate welfare are legion: ostensible higher investment, job creation or preservation, some psychological need for national “champions” (which assumes that can’t happen without subsidies).

Professor Terry Buss, one of the world’s foremost experts on business subsidies, has long found that claims of increased investment, employment and even net tax revenue gains are a mirage.

The claims usually result from correlation-causation errors. Also, as Prof. Buss points out, the claims and the reports on which they are based fail to account for how claimed “gains” to one region (economic growth, jobs, even tax revenues) are counterbalanced by losses in some other province or country because of taxpayer-financed competition.

Simply put, corporate welfare is about the recycling and redistribution of investment, employment and tax revenues, not the net, new creation of such items when the wider economy is considered.

The best bet for prosperity has always been ever-freer trade among countries, not selective subsidies. That is why, including as a practical way to end such subsidies, tougher free-trade agreements that ban taxpayer-financed subsidies to business are the preferred manner in which to advance economically.

Canada should be keen for such agreements. After all, the United States has 320 million people, the European Union 500 million people and China 1.3 billion people. If any of those jurisdictions cares to outbid Canada’s 35 million taxpayers in any sector, any of them can easily do so.

Free-trade agreements with anti-subsidy “teeth” are preferable to yet more corporate welfare for companies that are no longer “acorns,” but ones that have been on the taxpayer dole for half a century.

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