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Export snags highlight growing economic risk of U.S. shutdown

The Bombardier CRJ 900 aircraft.


The partial U.S. government shutdown is frustrating at least one major Canadian exporter, even though the border is officially open for business, a situation that threatens to spread if the feud in Washington doesn't abate.

Montreal-based aircraft maker Bombardier Inc. said it can't get two of its planes delivered to U.S. customers because of the halt on most non-essential services, including registration of new aircraft by the U.S. Federal Aviation Administration. One of the planes is a CRJ-900 regional jet destined for Delta Air Lines Inc. and the other is a Q400 turboprop for Republic Airways.

Bombardier planes slated for delivery to U.S. customers over the next few weeks could also be grounded, said Bombardier Aerospace spokesman Marc Duchesne.

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While most of the U.S. Customs and Border Protection's 59,000-strong staff remain on duty, Bombardier's delayed shipment shows that the temporary furlough of workers in some "non-essential" government bodies could crimp trade, and possibly economic growth.

"Of course we don't enjoy the situation," said Mr. Duchesne, adding that the matter, while not dire now, could become so if the shutdown drags on.

"We have two aircraft waiting for their FAA registration number. It's necessary to close the financing. It's the last step before we receive the money," he said. "We've contacted the FAA people. They've told us to wait."

Aircraft makers aren't the only businesses taking a hit. Birgit Matthiesen, a Washington-based special adviser to the Canadian Manufacturers and Exporters, said "vulnerable sectors" are being affected that depend on either government contracts or U.S. government approvals to introduce new products.

That includes pharmaceutical companies, food processors and companies seeking approval from the U.S. Securities and Exchange Commission for mergers and acquisitions, Ms. Matthiesen said.

Border crossings are largely unaffected by the shutdown because the vast majority of U.S. Customs and Border Protection's 59,000 employees are deemed essential and remain on the job.

Maple Leaf Foods Inc. has not seen any slowdown in its U.S. shipments, which comprise about 10 per cent of overall sales, spokesman David Bauer said.

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Various programs that shippers use to expedite border crossings are also still running in spite of the shutdown, including the Free and Secure Trade Program (FAST) and the U.S. Department of Agriculture inspections of agrifood imports.

The shutdown is likely to knock a tenth of a percentage-point off Canadian economic growth in the fourth quarter under a "base-case" scenario, according to a report Thursday by CIBC World Markets.

CIBC economist Avery Shenfeld warned that the GDP hit could extend into next year if the Republican-held Congress and the Obama administration reach a compromise on the country's debt ceiling that further cuts government spending.

Failure by the two sides to reach a deal in time to raise the debt ceiling by the Oct. 17 cut-off would cause the U.S. to miss payments on its debt and lead to more serious consequences for Canada.

"Treasury yields could spike, and the repo market could freeze up, representing a hit to financial sector liquidity," Mr. Shenfeld said in a research note. "Given the scale of that shock, it could put Canada into recession or close to one."

That could lead to lower commodity prices and a spike in the Canadian dollar as investors seek out a safe haven currency – bad news for Canadian exporters.

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Bombardier is not alone in experiencing aircraft-delivery delays.

AMR Corp.'s American Airlines is waiting on an Airbus SAS A319 that was supposed to be delivered Thursday.

Other Airbus jets slated for delivery to customers JetBlue Airways Corp. and US Airways Group Inc. are also stuck on the ground, says the report.

George Hamlin of Hamlin Transportation Consulting in Fairfax, Va. said that the air carriers have so far not been affected by the shutdown, but added that the situation might hurt operations if it lasts long enough to delay planned fleet upgrades.

For now, he said, "the manufacturers, they're the ones who are all at risk. If you can't deliver the product you don't get paid."

With files from reporter Eric Atkins in Toronto.

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About the Authors
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More


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