Ottawa reconsiders Boeing purchases amid accusations against Bombardier

The federal government hinted Thursday that Boeing should not take future military contracts with Canada for granted, considered by some military and defence industry officials as a veiled threat that coincided with a spat between the aerospace giant and rival Bombardier.

U.S. jet maker Boeing alleged this week that the Canadian government is unfairly subsidizing itsCSeriesjets, which allows the company to sell them 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 saidin a statement after a hearing in Washingtonbegan into Boeing's claim.

• Bombardier inks deal with Air Canada for at least 45 CSeries jets
• Brazil's Embraer launches WTO complaints over Ottawa's Bombardier support

On Thursday, Canadian Foreign Affairs Minister Chrystia Freelandsaid the allegations are unhelpful to ongoing trade negotiations.

"The aerospace industries of Canada and the United States are highly integrated and support good, middle class jobs on both sides of the border,"the minister said.

"We strongly disagree with the U.S. Department of Commerce's decision."

Freeland's statement alsoadded that Ottawais now "reviewing current military procurement that relates to Boeing."

Military officials and defence industry representatives contacted by The Canadian Presson Thursdaywere united in assuming that Freeland's warning related to Ottawa'splanned purchase of 18 BoeingSuper Hornets to temporarily replace its aging fleet of CF-18s, a deal that could be worth up to $2 billion.

• Aerospace subsidies to get federal review

"Our government will defend the interests of Bombardier, the Canadian aerospace industry, and our aerospace workers,"Freeland'sstatement read.

Aerospace analyst RichardAboulafiaof the Teal Group said the Canadian government's move was inevitable, putting into question Boeing's strategy in taking on Bombardier.

"If Boeing is smart it'll press the do-over button and walk away," he said in an interview, adding the aeronautics powerhouse has much more to risk from losing military contracts than the tiny gain from a successful trade complaint.

• Ottawa to give $372M to Bombardier

Historically, Bombardier has been a bigger player in the smaller jet market, well below the capacity of Boeing's pancontinential7-series planes. But with the CSeries, the company says its goal is to grabhalf the international market share for 100-to-150-seat aircraft.

Boeing vice-president RaymondConnertold the hearing in D.C. that Bombardier's recent deal with Delta Air Lines for 125 CSeries helped build momentum for its Canadian rival. If Bombardier reaches its stated goal, he said, it would squeeze Boeing from that market and cost the company $330 million US a year in annual sales.

"Today we are at a critical moment,"Connertold 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."

• Bombardier lowers delivery forecast for CSeries jets

Boeing has petitioned the U.S. Commerce Department and the U.S. International Trade Commission to investigate subsidies of Bombardier'sCSeriesaircraft 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.

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