CANADA ECONOMICS

INTERNATIONAL TRADE ON APRIL 2017

StatCan. 2017-06-02. Canadian international merchandise trade, April 2017

Imports
$48.1 billion, April 2017
0.6% increase (monthly change)

Exports
$47.7 billion, April 2017
1.8% increase (monthly change)

Trade balance
-$370 million, April 2017

Source(s): CANSIM table 228-0069

Canada's merchandise trade balance with the world narrowed to a $370 million deficit in April, from a revised $936 million deficit in March. Exports rose 1.8% to $47.7 billion, led by higher exports of passenger cars and light trucks. Imports were up 0.6% to $48.1 billion, on the strength of import prices.

Canada's trade activity has been strong in recent months, with Canada's total merchandise trade (exports plus imports) reaching a record high $95.7 billion in April. Year over year, Canada's total trade rose 10.9%.

Chart 1   Chart 1: Merchandise exports and imports
Merchandise exports and imports



Record high exports led by passenger cars and light trucks

Following a 3.2% increase in March, total exports rose 1.8% to a record high $47.7 billion in April, with advances in 8 of 11 sections. Volumes were up 1.1% and prices increased 0.7%. Motor vehicles and parts, energy products, and forestry products and building packaging materials drove the gain in exports for the month. Exports excluding energy products rose 1.7%. Year over year, total exports increased 14.7%.

Exports of motor vehicles and parts were up 4.4% in April to $8.1 billion. Passenger cars and light trucks led the increase, up 5.4% to $5.6 billion. This growth coincided with a third consecutive monthly increase in imports of motor vehicle engines and motor vehicle parts and a larger ramp-up in US auto inventories in April. For the section as a whole, volumes rose 2.8% and prices increased 1.6%.

Also contributing to the overall increase were higher exports of energy products, up 2.5% in April to $8.8 billion. Exports of natural gas led the increase, rising 18.5% to $1.1 billion, mostly on higher prices. Other energy products (+13.9%) also increased, mainly on higher exports of coal to the Netherlands. Coal exports have been strong in recent months as Australia's coal industry continues to recover from Cyclone Debbie.

Exports of forestry products and building and packaging materials rose 4.7% in April to $3.7 billion. Following a 6.4% increase in March, lumber and other sawmill and millwork products rose 8.0% in April to $1.5 billion. Volumes for this group rose 4.3% and prices were up 3.6%. There were higher exports of softwood lumber to the United States in April. This increase preceded the decision by the US Department of Commerce to impose countervailing duties on imports of Canadian softwood lumber into the US, effective April 28.

Record high imports on higher prices

Total imports rose 0.6% to a record high $48.1 billion in April, a fifth consecutive monthly increase, with gains in 7 of 11 sections. Prices increased 1.0%, while volumes were down 0.3%. Year over year, total imports were up 7.4%.

Higher imports of consumer goods, electronic and electrical equipment and parts, and basic and industrial chemical, plastic and rubber products were responsible for the increase in April.

Meanwhile, imports of aircraft and other transportation equipment and parts were down 24.6% in April to $1.3 billion. Fewer imports of aircrafts from the United States and ships from the Netherlands and Poland led the decrease.

Imports of energy products (-14.0%) also decreased in April, to $2.3 billion, mainly on lower volumes. Crude oil and crude bitumen were responsible for the decline, down 22.9% to $1.3 billion, mainly on lower imports from Nigeria and Saudi Arabia.

Increased trade with the United States

Exports to the United States rose 5.4% to a record high $36.1 billion in April, mostly on passenger cars, natural gas and softwood lumber. Imports from the United States were up 1.1% to $31.1 billion.

As a result, Canada's trade surplus with the United States widened from $3.4 billion in March to $5.0 billion in April, the largest surplus since May 2014. The Canadian dollar fell 0.3 cents US relative to the American dollar in April.

Exports to countries other than the United States declined 7.8% in April to $11.6 billion, partially offsetting the gain in exports to the United States. Lower exports to the United Kingdom (unwrought nickel and gold), China (unwrought gold), Spain (crude oil and iron ores) and Switzerland (unwrought gold) contributed most to the decline.

Imports from countries other than the United States edged down 0.2%, as widespread declines were partially offset by higher imports from Norway (crude oil and energy transmission cables) and Turkey (crude oil).

As a result, Canada's trade deficit with countries other than the United States widened from $4.4 billion in March to $5.3 billion in April.

Real trade surplus widens in April

In real (or volume) terms, exports were up 1.1% and imports were down 0.3% in April. Consequently, Canada's trade surplus in real terms widened from $239 million in March to $843 million in April.

Revisions to March imports and exports

Revisions reflected initial estimates being updated with or replaced by administrative and survey data as they became available, as well as amendments made for late documentation of high-value transactions. Exports in March, originally reported as $47.0 billion in last month's release, were revised to $46.8 billion in the April release. Imports, originally reported as $47.1 billion in last month's release, were revised to $47.8 billion in the April release.

Chart 2   Chart 2: International merchandise trade balance
International merchandise trade balance



FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170602/dq170602a-eng.pdf

Global Affairs Canada. June 2, 2017. Global Affairs Canada helps Canadian communities attract job-creating investment

Ottawa, Ontario - International trade and investment are vital to Canada’s economic growth and prosperity. More international investments in Canada mean more jobs for Canadian workers, more growth for our economy and a stronger middle class.

On behalf of the Honourable François-Philippe Champagne, Minister of International Trade, the Honourable Andrew Leslie, Parliamentary Secretary to the Minister of Foreign Affairs (Canada-U.S. Relations), will announce June 3 that the Government of Canada is providing $3.5 million to 77 communities across the country to support initiatives to attract retain or expand investment. This will help communities across Canada grow and prosper. More trade means more growth and more growth means better jobs for the middle class. The Parliamentary Secretary will make the announcement while speaking to mayors, councillors and officials from communities across Canada at the annual general meeting of the Federation of Canadian Municipalities (FCM) in Ottawa, Ontario.

Funding is being provided through Invest Canada – Community Initiatives (ICCI), a Global Affairs Canada program. It helps Canadian communities and local economic-development agencies market themselves better as locations of choice for international investors and job creation. Communities use ICCI contributions in a number of ways, including for supporting strategic planning and analysis, finding prospective investors, developing marketing material, training personnel and providing ongoing post-investment support.

Canada already offers investors many competitive advantages. Canada is a great place for doing business: its business taxes and overall business costs are among the lowest in the G7 and it has free trade agreements with major world markets.

In late 2017, the Government of Canada will expand its global investment-attraction efforts with the launch of a new investment-promotion agency led by a chief executive officer. With a $218-million allocation over five years, the new investment hub will work in cooperation with federal, provincial and municipal partners to ensure that Canada makes the most of every opportunity to attract global investment and the jobs that come with it.

Quotes

“Attracting foreign investors is key to Canada’s prosperity and growing the middle class. The ICCI program helps our communities sell the business advantages they offer and why Canadian towns, cities and regions from coast to coast to coast are among the best places in the world to do business.”

- François-Philippe Champagne, Minister of International Trade

“Municipalities are important drivers of the national economy. When they succeed in attracting investment, the benefits translate into good middle class jobs and a high quality of life for Canadians. The ICCI program helps connect our cities and towns with global investors.”

- Andrew Leslie, Parliamentary Secretary to the Minister of Foreign Affairs (Canada-U.S. Relations)

Quick facts

• One in eight jobs in Canada is linked to foreign investment.
• Foreign-owned multinational enterprises (MNEs) employed 1.9 million Canadians in 2014, accounting for 12 percent of all jobs and 30 percent of all manufacturing jobs in Canada.
• MNEs account for almost half of Canada’s merchandise exports and are responsible for 38 percent of business expenditures in research and development.
• Nearly two thirds of Canada’s working-age population has a post-secondary education, the highest proportion among members of the Organisation for Economic Co-operation and Development.

Reuters. Jun. 02, 2017. Strong Canadian trade, productivity data bolster economic recovery
DAVID LJUNGGREN

OTTAWA — Canadian exports climbed to a record in April and first-quarter labor productivity approached a three-year high, further evidence that the economy is recovering after a long slump caused by low oil prices.

Statistics Canada said on Friday that the April trade deficit narrowed to $370-million as exports outpaced imports for a second straight month on shipments of motor vehicles and parts.

After struggling for years to adjust to sharply lower prices of crude oil, Canada’s economy appears finally to be on a sustainable path to recovery.

In particular, the export sector, long a cause of concern for the Bank of Canada, is showing strength.

For subscribers: Canada’s manufacturing rebound shows signs of sticking around

“The Bank of Canada has been looking for that for the length of 2016 but has been largely disappointed, but maybe it is starting to materialize as we move into 2017,” said Paul Ferley, assistant chief economist at Royal Bank of Canada.

Exports, which jumped 3.2 per cent in March, increased by 1.8 per cent in April to $47.69-billion. Exports of motor vehicles and parts grew 4.4 per cent while energy shipments posted a 2.5 per cent gain.

“It’s a very strong trend... we see this continuing because there is strong U.S. growth,” said Ross Prusakowski, a senior economist at Export Development Canada.

Imports also hit a record high, edging up 0.6 per cent to $48.06-billion – the fifth consecutive monthly increase – thanks in part to increased inflows of consumer goods, electronic and electrical equipment and parts.

In a note to clients, CIBC economist Nick Exarhos said “trade is likely to be a more significant source of growth in the second quarter than it has in recent quarters.”

Figures released this week show first-quarter annualized growth of 3.7 per cent, the best in the Group of Seven leading industrialized nations.

The Canadian dollar strengthened slightly to $1.3505 to the U.S. dollar, or 74.05 U.S. cents, up from $1.3526, or 73.93 U.S. cents.

Exports to the United States, which accounted for 75.7 per cent of all Canadian exports in April, soared 5.4 per cent while imports grew 1.1 per cent.

As a result, Canada’s trade surplus with the United States expanded to $4.95-billion – the largest since May 2014 – from $3.44-billion in March.

Separately, Statscan said the labor productivity of businesses grew 1.4 per cent in the first quarter, the most in almost three years.

BLOOMBERG. 2017 M06 2. Canadian Trade Disappoints With April Deficit, March Markdown
by Greg Quinn

• Surplus with the U.S. grows to its widest since 2014
• Lumber and auto exports rise as companies import gear

Canada’s trade deficit was wider than forecast in April, and there was further disappointment in revised figures showing larger gaps in the prior two months.

Imports exceeded exports by C$370 million ($274 million) in April, Statistics Canada said Friday in Ottawa. The median forecast in a Bloomberg survey of economists was for a shortfall of C$20 million.

Key Points

• In addition to the April setback, the agency boosted the March deficit to C$936 million from an initial reading of C$135 million. It also increased February’s shortfall to C$1.41 billion from C$1.08 billion.
• Exports grew 1.8 percent in April to C$47.7 billion, faster than the 0.6 percent rise in imports to C$48.1 billion; both figures were record highs. Export gains were led by a 4.4 percent rise in automobiles and parts, and a 4.7 percent rise in forestry before U.S. duties on softwood lumber took effect at the end of the month.
• The report showed some building momentum in trade, with exports rising 14.7 percent in April from a year earlier, almost double the 7.4 percent gain in imports.

Big Picture

The latest trade figures are another signal of Canada’s complicated transition after an oil shock, where exports and business investment have been weak spots while consumers keep borrowing and spending. Policy makers have said a long period of above-average production is needed to restore the economy to full health. Questions around further delays in the recovery may discourage the Bank of Canada from raising its key lending rate above 0.5 percent, where it’s been since July 2015.

Economist Reaction

Economists weighed the weaker headline trade balance against the second month of growth in exports, after some weakness in the first quarter. “Trade appears to be beginning to get traction,” according to Benjamin Reitzes, a Canadian rates and macro strategist at BMO Capital Markets in Toronto. “The second quarter is going to look a lot better” than the first one, he said by phone.

Other Details

• The surplus with the U.S. widened to C$5 billion in April from C$3.4 billion a month earlier, the largest since May 2014. The deficit with countries other than the U.S. widened to C$5.3 billion from C$4.4 billion.
• The volume of exports advanced 1.1 percent and import volumes fell 0.3 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth, and in volume terms there was a trade surplus that widened to C$843 million from C$239 million.
• There were mixed signs on whether companies are importing more gear to boost their production capacity. Inbound shipments of industrial machinery, equipment and parts were unchanged, while electronics imports gained 4.6 percent.
• Most of the boost to the March deficit was linked to imports, part of which came from crude oil and bitumen.

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ENVIRONMENT

Environment and Climate Change Canada. June 1, 2017. Statements. Government of Canada Response to the U.S. Decision to Withdraw from the Paris Agreement on Climate Change.

Gatineau, Quebec –  “Canada's Environment and Climate Change Minister, the Honourable Catherine McKenna, released the following statement today in response to the decision by the United States to withdraw from the Paris Agreement on climate change:

“While Canada is deeply disappointed that the United States has chosen to withdraw from the Paris Agreement, we remain steadfast in our commitment to work with our global partners to address climate change and promote clean growth. It is the right thing to do for future generations and will create good jobs as we grow a clean economy.

Canada will continue to take leadership on climate change.

In September, we will co-host a Ministerial meeting with China and the European Union in Canada to move forward on the Paris Agreement and clean growth.

The Paris Agreement, negotiated by 195 countries, sent an important signal to the market. In fact, it has opened up $23 trillion in clean innovation opportunities for climate-smart investments in emerging markets between now and 2030.

Not only are countries around the world acting on climate change, so are businesses. They understand that tackling climate change is the right thing to do. It is good for business. Provinces, states, cities and Indigenous and local communities are also acting to protect our planet.

With or without the United States, the momentum around the Paris Agreement and climate action is unstoppable.

We are proud that last year, we announced the Pan-Canadian Framework on Clean Growth and Climate Change that demonstrates the commitment of the federal government and the provinces to work with Indigenous peoples, business, environmentalists and all Canadians to grow the economy, reduce greenhouse gas emissions and help our communities adapt to the changing climate.

Canada will continue to take a leadership role to tackle climate change at home and abroad.

We understand the clear economic opportunity. We also understand that we need to leave a more sustainable planet to our children and grandchildren.”

The Globe and Mail. Reuters.  Jun. 02, 2017. Oil slides as U.S. climate withdrawal compounds glut concerns
LIBBY GEORGE

LONDON — Brent crude tumbled below $50 on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump’s decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut.

Benchmark Brent crude futures were off by 1.8 per cent at $49.73 per barrel at 1415 GMT, down 90 cents from the previous close. U.S. West Texas Intermediate crude futures fell 84 cents to $47.54 per barrel.

Both contracts were on track for weekly losses of at least 4 per cent.

The U.S. withdrawal from the landmark 2015 global agreement to fight climate change drew condemnation from Washington’s allies – and sparked fears that U.S. oil production could expand even more rapidly.

“I think we will see a United States that is about to go crazy in terms of producing fossil fuels,” said Matt Stanley, a fuel broker at Freight Services International in Dubai, adding other producers could do the same. “Why wouldn’t they ramp up production when producers like the U.S. have an open invite to do as they please?”

U.S. crude production last week was up by nearly 500,000 barrels per day (bpd) from year-earlier levels, straining OPEC’s efforts to reduce global oversupply.

A week ago, the Organization of the Petroleum Exporting Countries and a number of non-OPEC producers met in Vienna to extend a deal to cut 1.8 million bpd from the market until March 2018.

On Friday, Igor Sechin, chief of Russia’s largest oil producer, Rosneft, said U.S. oil producers could add up to 1.5 million bpd to world oil output next year.

Oil prices are down some 10 per cent since OPEC’s May 25 decision to extend the cuts.

Rising output from OPEC members Nigeria and Libya, which are exempt from the output reduction deal, is also undercutting attempts to limit production. On Friday, Nigeria issued a loading plan for the long-closed Forcados export stream that could push exports to at least 15-month highs in June.

OPEC last week discussed reducing output by a further 1 to 1.5 per cent, and could revisit the proposal should inventories remain high, sources told Reuters.

On Friday, demand for bearish puts expiring in March 2018 spiked, indicating traders and investors are already protecting against a more aggressive drop in price once OPEC’s joint supply deal expires.

Still, oil markets received some support from official U.S. data which showed crude inventories fell sharply last week as refining and exports surged to record highs.

Crude stockpiles were down by 6.4 million barrels in the week to May 26, compared with analysts’ expectations for a fall of 2.5 million barrels.

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HOUSING BUBBLE

StatCan. 2017-06-02. Residential construction investment, first quarter 2017

Residential construction investment — Canada
$28,212.3 million, First quarter 2017
7.6% increase (year-over-year change)
Source(s): CANSIM table 026-0013

Investment in residential construction totalled $28.2 billion in the first quarter, up 7.6% from the same quarter of 2016.

Higher investment in single-family dwellings (+13.7% to $6.5 billion) accounted for nearly 40% of the change at the national level. Renovation work (+5.5% to $12.1 billion) and acquisition costs related to new dwellings (+13.4% to $3.4 billion) also largely contributed to the gain.

Investment in residential construction increased year over year in eight provinces in the first quarter, with Ontario (up $1.1 billion) accounting for more than half (56.8%) of the total national increase. Quebec also posted a significant increase ($544.4 million). In contrast, Saskatchewan (-$85.0 million) and Newfoundland and Labrador (-$17.1 million) posted losses compared with the first quarter of 2016.

Alberta recorded its first quarterly year-over-year gain (+2.9% to $4.1 billion) in residential construction investments since the second quarter of 2015. This advance was largely attributable to a $362.5 million increase in renovation spending stemming partly from the reconstruction of residences that were destroyed by the 2016 Fort McMurray wildfire.

In Ontario, the gain (+10.4% to $12.0 billion) originated mainly from higher investment in single-family homes (+$591.8 million).

In Quebec, growth (+12.9% to $4.8 billion) was mainly attributable to a $370.9 million increase in renovation work.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/170602/dq170602d-eng.pdf

The Globe and Mail. Reuters. Jun. 02, 2017. Vancouver home prices rise as market recovers from buyers tax

Home sales in the Vancouver region’s once-hot housing market fell in May compared with a year ago, but prices climbed from earlier in the year as the market continued to rebound from a foreign buyers tax implemented in 2016, data showed on Friday.

The benchmark price for all types of residential properties in Greater Vancouver, Canada’s most expensive real estate market, was $967,500 in May, the Real Estate Board of Greater Vancouver said. That was up 2.8 per cent from April and 8.8 per cent higher than a year earlier.

Sales fell 8.5 per cent from a record peak a year earlier, but surged 22.8 per cent from April and were 23.7 per cent above the 10-year sales average for May, the industry group said.


“While sales are inching closer to the record-breaking pace of 2016, the market itself looks different. Sales last year were driven by demand for single-family homes. This year, it’s clear that townhomes and condominiums are leading the way,” the board’s president, Jill Oudil, said in a statement.

“First-time buyers and people looking to downsize from their single-family homes are both competing for these two types of housing,” she added.

Sales in Vancouver’s housing market have slowed since the provincial government of British Columbia imposed a 15 per cent foreign buyers tax in August 2016 amid concern that speculation by global investors, mostly from China, was fuelling a bubble.

New listings for all types of properties were down 3.9 per cent from a year ago but up 23.2 per cent from April.

Detached homes led the month-over-month increase in new listings with a jump of 27.1 per cent, while apartment new listings rose 22.7 per cent and townhomes were up 14.1 per cent in the month.

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SOFTWOOD LUMBER

The Globe and Mail. Jun. 02, 2017. U.S. softwood lobby assails Ottawa's aid package, calling it a subsidy
STEVEN CHASE AND BRENT JANG

Ottawa and Vancouver — The American lumber lobby at the heart of the softwood trade dispute is attacking Ottawa’s new $867-million aid package for the Canadian forestry industry as another “government subsidy,” raising the possibility that Washington could impose further punitive duties on producers from Canada.

The Trudeau government unveiled a significant support program for the Canadian softwood industry Thursday to help blunt the pain of American duties on shipments bound for the United States – penalties imposed as the persistent trade dispute with Washington flares up again.

Softwood aid package ‘prudent’: Natural resources minister (The Canadian Press)
“Canada is standing up to the U.S. Canada is standing up for Canadians,” Natural Resources Minister Jim Carr said at a news conference to announce the assistance.

Nearly 70 per cent of the promised federal aid is in the form of loans and loan guarantees that two Crown corporations will extend to forestry companies struggling to cope with a cash crunch caused by the need for duty payments. There are many softwood producers in rural Canada that are critical to the economies of smaller towns and communities.

The federal government insisted the new support does not breach international trade rules because the loans will be made on commercial terms and that the measures “will stand the test of scrutiny.”

This support arrives shortly after punitive U.S. duties began to bite into Canadian softwood producers’ bottom lines. Preliminary countervailing duties were applied effective April 28 and higher penalties are expected in the months ahead.

The U.S. Lumber Coalition, responsible for triggering the softwood lumber dispute, was quick to lash out at the Canadian aid package Thursday, calling it “a new government subsidy for Canadian softwood-lumber producers.”

Coalition executive director Zoltan van Heyningen said the $867-million in aid “only further tilts the trade scale in Canada’s favour, threatening more than 350,000 jobs in communities across the United States.”

Asked if the American lumber lobby will push for higher duties as a result of the aid package, Mr. van Heyningen said that is for the U.S. Department of Commerce to decide. “We will continue to insist on the full enforcement of the trade laws.”

Mark Warner, a Toronto lawyer who previously worked on trade matters for the Ontario government, warned that this sort of financing could very well trigger further retaliatory action from the United States in the form of higher duties.

Mr. Warner said Canada may well be able to defend these loans and loan guarantees at trade tribunals, but this could take a long time. “Maybe five years later, a World Trade Organization panel might agree with Canada,” Mr. Warner said. In the interim, however, Canada may have to shoulder increased duties.

The United States alleges that Canadian provinces unfairly subsidize exports by undercharging lumber producers for cutting on Crown land and, in the case of British Columbia, by restricting log exports.

The Conference Board of Canada recently warned that the trade dispute could trigger 2,200 forestry job cuts across Canada.

The U.S. Department of Commerce slapped countervailing duties of nearly 20 per cent on most Canadian softwood shipments to the United States after a complaint from the American lumber lobby.

Mr. Carr said on Thursday that Ottawa will continue to fight the U.S. duties vigorously, including through litigation, but he acknowledged that this determination to push back “doesn’t make the uncertain days ahead any easier for these affected.”

The new aid includes more than $600-million in federal loans and loan guarantees that will be made available through two Crown corporations: the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).

EDC will make up to $500-million in commercial financing available, including loans and loan guarantees, to assist forestry companies.

The BDC will make $105-million in financing available to help firms.

As well, Ottawa will earmark $260-million to support efforts to help workers laid off by the dispute to upgrade their skills, to extend the maximum period for work-sharing agreements to 76 weeks from 38 and to help Indigenous organizations pursue new business opportunities.

Toronto trade lawyer Lawrence Herman said he did not believe the Canadian aid measures would contravene international trade rules. “If the loans are unrelated to the exported softwood products, are directed to different company activities and are provided on commercial terms, they would likely not be countervailable.” He said the Canadian government examined this very carefully in constructing the assistance programs.

The Forest Products Association of Canada welcomed Ottawa’s aid announcement. “We appreciate that the federal government is standing tall for Canadian forestry communities by launching a comprehensive package in the face of trade actions that we believe are without merit,” association chief executive officer Derek Nighbor said in a statement.

The Trudeau Liberals are moving faster and with greater support for Canadian producers than their predecessors initially did 15 years ago during the past Canada-U.S. softwood-lumber dispute.

In the previous trade tussle, it was seven months before cabinet approved an aid package that was initially only $100-million.

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AVIATION

The Globe and Mail. Jun. 01, 2017. Bombardier, Boeing, Ottawa and a whole lot of baloney
KONRAD YAKABUSKI

There is a lot of baloney flying around in Boeing’s highly sensational trade case against Bombardier.

Baloney from Boeing, which claims its very survival is threatened if its Canadian rival’s “subsidy-enabled” C Series is a success. Baloney from Bombardier, which claims the C Series does not even compete with any of Boeing’s planes. And if not baloney, at least egg on the face for the federal government, which has now suspended talks on a deal to buy Super Hornet fighter jets from the U.S. aerospace giant – a likely pressure tactic to get Boeing to lay off a beleaguered Bombardier.

It would be astonishing if the U.S. International Trade Commission – which is currently reviewing Boeing’s anti-dumping petition – swallowed any of this baloney. But that doesn’t mean the USITC will not rule in Boeing’s favour in a preliminary determination, expected on June 12. All it needs to establish by then is that there is “reasonable indication” that Bombardier’s subsidized planes have caused “material injury” to Boeing.

A preliminary finding of injury by the USITC would be a major blow to Bombardier as it seeks to ramp up desperately needed C Series orders. There have been no such deals worth mentioning since Delta Airlines ordered a whopping 75 of the planes in early 2016. And there would likely be none forthcoming – at least from U.S. airlines – with the threat of 160 per cent duties looming.

Bombardier counters Boeing’s complaint represents “unprecedented overreach” by a company several times its size and that “does not even make a product that competes with the aircraft” the Canadian aerospace maker sold to Delta and earlier offered to United Airlines. But Boeing says it beat out Bombardier for the United deal only after “drastically cutting its prices … to compete with Bombardier’s subsidized offering for the CS100.”

Boeing says sales of the 737-700 and its newer version, the 737 MAX 7, have been harmed by the C Series.

Bombardier counters that the CS100s that Delta bought seat only 109 passengers, while the 737 MAX 7 seats 138. Hence, it adds, the two planes are not direct competitors.

But the Delta order includes an option to buy CS300s. That model does directly compete with the 737 MAX 7. And Bombardier has pitched the C Series as an alternative to the MAX 7 in promotional materials. So, its “Who? Us?” claim to have avoided Boeing’s airspace is untenable.

What is really relevant in this case, however, is whether Boeing was forced to sell aircraft at a loss to United, and was subsequently outbid by Bombardier on the Delta order, only because of “illegal” subsidies received by the Canadian company. Boeing contends in its USITC filings that “the C Series would not even exist without subsidies; that subsidies allowed Bombardier to avoid bankruptcy; and that subsidies gave Bombardier the wherewithal to offer United and Delta unprecedented pricing that drastically depressed prices in the entire market.”

Not all subsidies are illegal under international trade law. After its subsidies to Bombardier were successfully challenged more than a decade ago by Brazil’s Embraer, Ottawa restructured aid programs in the aerospace sector to withstand trade complaints. Hence, federal loans to Bombardier that cover research and development expenses are not considered illegal.

The Quebec government’s $1-billion (U.S.) investment in the C Series is more problematic, although its timing (when Bombardier was on the verge of bankruptcy) is more controversial than its actual form (an equity stake, similar to the stakes several European governments hold in Airbus).

Still, it’s a stretch for Boeing to claim the C Series is to blame for its current woes in the 100- to 150-seat market, a segment the U.S. giant has largely neglected in recent years. Airlines have taken a pass on the 737 MAX 7 – the last order was in 2013, from Canada’s own WestJet – because it’s an updated version of an older plane considered less attractive than Airbus’s A319neo, and with much higher operating costs than the all-new C Series.

What, then, is Boeing’s end game in launching this trade complaint?

Delivering a warning shot to Bombardier to stay out of the 150-seat-plus market is one likely goal. If the C Series is successful, a stretched version of the C Series – a CS500 – would be the next logical step in Bombardier’s product development pipeline. And a CS500 would constitute a genuine threat to Boeing.

Boeing may also be seeking to gain leverage with Ottawa as it not only negotiates a deal to sell the feds 18 Super Hornets, but positions itself for a much larger contract to replace Canada’s entire fleet of aging CF-18 fighter jets. It’s a bit rich for the Liberal government to threaten to cancel the contract to purchase 18 Super Hornets before it’s even signed, since Prime Minister Justin Trudeau campaigned on a pledge not to buy Lockheed Martin F-35s. And unless Mr. Trudeau is willing to paint himself into an even tighter political corner and risk a procurement boondoggle, pulling the plug on the Super Hornet deal would create far more problems than it solves.

Boeing can still withdraw its complaint against Bombardier. But it won’t do so without getting something in return.

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ENERGY

REUTERS. Jun 2, 2017. Oil slides as U.S. climate withdrawal compounds glut concerns
By Libby George

LONDON (Reuters) - Brent crude tumbled below $50 on Friday, heading for a second straight week of losses, on worries that U.S. President Donald Trump's decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut.

Benchmark Brent crude futures LCOc1 were off by 1.8 percent at $49.73 per barrel at 1415 GMT (10:15 a.m. ET), down 90 cents from the previous close. U.S. West Texas Intermediate crude CLc1 futures fell 84 cents to $47.54 per barrel.

Both contracts were on track for weekly losses of at least 4 percent.

The U.S. withdrawal from the landmark 2015 global agreement to fight climate change drew condemnation from Washington's allies - and sparked fears that U.S. oil production could expand even more rapidly.

"I think we will see a United States that is about to go crazy in terms of producing fossil fuels," said Matt Stanley, a fuel broker at Freight Services International in Dubai, adding other producers could do the same. "Why wouldn't they ramp up production when producers like the U.S. have an open invite to do as they please?"

U.S. crude production last week was up by nearly 500,000 barrels per day (bpd) from year-earlier levels, straining OPEC's efforts to reduce global oversupply. [EIA/S]

A week ago, the Organization of the Petroleum Exporting Countries and a number of non-OPEC producers met in Vienna to extend a deal to cut 1.8 million bpd from the market until March 2018.

On Friday, Igor Sechin, chief of Russia's largest oil producer, Rosneft, said U.S. oil producers could add up to 1.5 million bpd to world oil output next year.

Oil prices are down some 10 percent since OPEC's May 25 decision to extend the cuts.

Rising output from OPEC members Nigeria and Libya, which are exempt from the output reduction deal, is also undercutting attempts to limit production. On Friday, Nigeria issued a loading plan for the long-closed Forcados export stream that could push exports to at least 15-month highs in June.

OPEC last week discussed reducing output by a further 1 to 1.5 percent, and could revisit the proposal should inventories remain high, sources told Reuters.

On Friday, demand for bearish puts expiring in March 2018 spiked, indicating traders and investors are already protecting against a more aggressive drop in price once OPEC's joint supply deal expires.

Still, oil markets received some support from official U.S. data which showed crude inventories fell sharply last week as refining and exports surged to record highs. [EIA/S]

Crude stockpiles were down by 6.4 million barrels in the week to May 26, compared with analysts' expectations for a fall of 2.5 million barrels.

(Additional reporting by Sabina Zawadzki in London and Jane Chung in Seoul; editing by Jason Neely and Adrian Croft)

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LGCJ.: