CANADA ECONOMICS

OECD

The Globe and Mail. Jun. 07, 2017. OECD urges more Canadian housing measures, warns Ontario may hurt ‘poor and young’
MICHAEL BABAD, Columnist

Briefing highlights

• OECD urges more housing measures
• Rent control may hurt poor, young: OECD
• Group sees brighter economic outlook
• Markets at a glance
• Santander rescues Banco Popular

OECD warns on housing

The OECD is pressing Canada to go beyond the many measures already taken to cool overheated housing markets.

It also warned that Ontario’s recent rent control expansion threatens to dampen rental options, hurting poor and young people.

The call for further housing measures by the Organization for Economic Co-operation and Development, part of a global economic outlook released Wednesday, comes on the heels of a similar recommendation from the International Monetary Fund last week.

It also follows a downgrade of Canada’s major banks by Moody’s Investor Service, which, like other observers, cited record consumer debt levels and inflated home prices.

Concerns focus on Vancouver and Toronto, despite moves taken by the B.C. and Ontario governments and at the federal level to tame those markets.

“Raising interest rates will reduce overheating in housing markets, which poses economic and financial stability risks and has made housing increasingly unaffordable, especially in Toronto and Vancouver,” the OECD said, projecting that the Bank of Canada will move on rates later this year and that home price growth in those two cities will slow.

Still, the group added, “greater use should be made of macroprudential policies, particularly tools such as debt-to-income constraints under which a national rule is more restrictive in regions where house prices are inflated relative to fundamentals.”

It cited the measures already taken by B.C. and Ontario, notably the tax on foreign buyers of Vancouver-area properties and a similar levy on speculative purchases aimed at cooling down markets in and around Toronto.

“Some short-term reprieve in house price growth is likely, but speculation-fueled price increases may resume and the expansion of rent control risks discouraging the supply of new rental housing,” the OECD said of the Ontario measures.

“Low rental supply would hamper labour mobility – particularly for the poor and the young – which will make adjustment to globalization more costly and prolonged.”

The OECD is not alone in suggesting Ontario’s move to hose down Toronto may amount to little more than instant gratification.

True, Toronto home sales tumbled in May and prices eased as listings surged, as The Globe and Mail’s Janet McFarland reported this week, but some analysts suggest the impact may be temporary.

That certainly appears to be the case in Vancouver, which is rebounding from its short slump.

“Overheating concerns in Vancouver are about to enter the housing conversation again,” warned Royal Bank of Canada senior economist Robert Hogue.

Not only that, some economists believe the Bank of Canada won’t start raising rates until 2018, rather than this year, as the OECD forecast.

Still, other observers are more hopeful that the cooling in the Greater Toronto Area may have more staying power than the easing in the Greater Vancouver Area.

“While early yet, a key difference between current patterns in the GTA and last year’s GVA experience is the jump in resale supply in the former market,” Toronto-Dominion Bank economists Michael Dolega and Diana Petramala said in a report Tuesday.

“While most measures still point to balanced market conditions in the Toronto region as of May, the additional supply on the market is likely to contribute to a slowdown in home price growth going forward,” they added.

“As such, the deceleration in home price growth is likely to be more broad in the GTA than has been the case in the GVA.”

They also projected a 40-basis-point rise in the yield on the five-year government bond later this year, which would lead mortgage rates higher.

Despite all of this, though, Mr. Dolega and Ms. Petramala still projected that home sales in Toronto will hold above their five-year average, while average prices ease only modestly.

“The corollary is that a significant degree of overvaluation in the GTA market is likely to persist over the medium term.”

The OECD is not alone in suggesting Ontario’s move to hose down Toronto may amount to little more than instant gratification.

True, Toronto home sales tumbled in May and prices eased as listings surged, as The Globe and Mail’s Janet McFarland reported this week, but some analysts suggest the impact may be temporary.

That certainly appears to be the case in Vancouver, which is rebounding from its short slump.

“Overheating concerns in Vancouver are about to enter the housing conversation again,” warned Royal Bank of Canada senior economist Robert Hogue.

Not only that, some economists believe the Bank of Canada won’t start raising rates until 2018, rather than this year, as the OECD forecast.

Still, other observers are more hopeful that the cooling in the Greater Toronto Area may have more staying power than the easing in the Greater Vancouver Area.

“While early yet, a key difference between current patterns in the GTA and last year’s GVA experience is the jump in resale supply in the former market,” Toronto-Dominion Bank economists Michael Dolega and Diana Petramala said in a report Tuesday.

“While most measures still point to balanced market conditions in the Toronto region as of May, the additional supply on the market is likely to contribute to a slowdown in home price growth going forward,” they added.

“As such, the deceleration in home price growth is likely to be more broad in the GTA than has been the case in the GVA.”

They also projected a 40-basis-point rise in the yield on the five-year government bond later this year, which would lead mortgage rates higher.

Despite all of this, though, Mr. Dolega and Ms. Petramala still projected that home sales in Toronto will hold above their five-year average, while average prices ease only modestly.

“The corollary is that a significant degree of overvaluation in the GTA market is likely to persist over the medium term.”

Brighter outlook

The OECD has more than just a gloomy housing message for Canada: It also painted a brighter overall outlook, noting that central bank and federal government policies are adding juice to the economy.

“Economic growth is projected to increase in 2017, driven by expansionary fiscal policy, household wealth gains and a resumption in business investment, in particular in the resource sector following the rebound in commodity prices,” the group said.

“In 2018, growth is likely to ease but remain robust, as government spending increases taper off.”

The OECD also cited improvements in the jobs market, and projected a gradual rise in exports.

“Growth is set to shift from private consumption, housing investment and government spending toward business investment and exports,” it said.

“Very recent increases in consumption are unsustainable as they have not been matched by increases in income or output.”

There are, of course, potential troubles, notably in trade with a newly protectionist U.S., where Canada is concerned.

“Recent increases in federal investment in physical infrastructure, social housing, education and innovation will improve Canada’s capacity to adjust to globalization in an inclusive and efficient way,” the OECD said.

“Adjustment pressures would be exacerbated in affected industries if the shift toward more protectionist trade policy in the United States continues.”

The OECD took pains in the broader report to stress the benefits of global trade flows, warning the “backlash against international trade has been rising and political support for more protectionism has gained popularity in OECD countries, despite a marked lull in the pace of trade integration since the crisis.”

It also projected global economic growth of 3.5 per cent this year, and 3.6 per cent next.

HOUSING BUBBLE

The Globe and Mail. Jun. 07, 2017. How to play Toronto’s falling real estate prices
ROB CARRICK

In an expensive housing market, it only takes a small price drop to help buyers save big time.

Someone who bought an average-priced home in Toronto in May instead of April would have saved $56,881. That’s a substantial $234 a month for someone who made a 10-per-cent down payment on the average Toronto home in May and borrowed the rest at 2.5 per cent over a term of five years.

Any millennial home buyers out there who are waiting to buy a home until prices become affordable? Watch Toronto – it’s a model of the favourable buying economics that result when prices move lower.

Prices in the city fell 6.2 per cent from April to May, which suggests that measures recently introduced by the Ontario government to cool the housing market are having their intended effect. Average Toronto home prices last month were still pretty much double what they were as recently as 2010, and they were 15 per cent ahead of the level in May, 2016. But the month-to-month trend is the one to watch right now because it best captures the latest market conditions.

There’s a definite sense of a cooling market in Toronto that goes beyond the quieting of bidding wars and chatter about people trying to back out of deals. Worried about losing out on high prices, more people are listing their homes for sale. Meanwhile, the number of houses sold was down on both a monthly and annual basis.

The difficulty for buyers is in deciding whether the May numbers represent a short-term blip or the beginning of a larger pullback that will let them buy a home at prices far below what buyers are paying today. CIBC Economics issued a commentary earlier in the week predicting the May decline will be short-lived in the same way as Vancouver’s market seems to have slowed only temporarily after measures taken there last year to limit price increases.

It’s agony to strategize when you’re desperate to buy a house and affordability may finally be coming into reach. If you buy today in Toronto, the market could tank soon after and leave you with a massive case of buyer’s regret. If you wait, further price gains could delay your path to home ownership indefinitely while you save more. Call it procrastinator’s regret.

The best approach might be to focus more on affordability than speculation about what will happen to prices. Use our Real Life Ratio calculator to find the house price that allows you to afford your mortgage, utilities, property taxes, home maintenance, daycare, car payments and saving for retirement. For example, you might find that your household income and expenses would allow you to carry a mortgage of $825,000. In Toronto, a further decline in prices of 5 per cent would get you just below that threshold. You could buy at the level with the assurance of knowing you are able to handle it financially.

Because houses are so expensive in cities such as Victoria, Vancouver, Toronto and Hamilton, a small percentage decline can have a helpful impact in dollar terms. The Toronto-area average house price fell to $863,910 in May from $920,791 in April, which would lower your total mortgage costs over five years by just over $14,000 in combined principal and interest.

The underlying assumption here is that mortgage rates stay put. There is currently no upward pressure on fixed-term mortgage rates, but that could change if the strong growth numbers the economy has produced lately continue. Even if you’re just musing about buying in a falling housing market, get a lender to hold a rate for you. Some will go as long as 120 days.

CIBC believes there will be more downward pressure on prices in the next few months. But given the lack of an “external shock,” the decline is expected to be temporary. Examples of such shocks would be a big increase in interest rates, or a sharp rise in the unemployment rate.

For aspiring buyers, this outlook should dampen any hopes of a sharp price decline in the near term. Modest price declines such as the one we saw in Toronto last month may be the best you get. Fortunately, a little price decline goes a long way in an expensive market.

REUTERS. Jun 7, 2017. Indebted Canadians using 'homes as ATMs,' consumer agency warns

OTTAWA (Reuters) - Canadians are borrowing against their homes in increasing numbers and many are not making regular payments against the principal, adding financial stress to households already carrying a record level of debt, a consumer agency warned on Wednesday.

The number of households that have taken a home equity line of credit (HELOC) on top of their mortgage has soared nearly 40 percent since 2011, the Financial Consumer Agency of Canada said in a report that stoked concerns about consumer debt linked to Canada's slowing housing market.

"At a time when consumers are carrying record amounts of debt, the persistence of HELOC debt may add stress to the financial well-being of Canadian households," the agency's commissioner, Lucie Tedesco, said in a statement.

"HELOCs may lead Canadians to use their homes as ATMs, making it easier for them to borrow more than they can afford," she added.

Outstanding HELOC balances reached C$211 billion ($156.2 billion)in 2016, according to the report. There are about three million HELOC accounts in Canada, with an average outstanding balance of C$70,000.

Canada's debt-to-income ratio has risen to record levels in recent quarters to levels surpassing those seen in the United States prior to the 2008-09 housing crash, and policymakers have repeatedly warned that households are vulnerable to an unforeseen event or economic shock.

The report by the consumer agency showed some 40 percent of consumers do not make regular payments toward their HELOC principal, and most consumer do not repay their HELOC in full until they sell their home.

It said banks and other lenders are increasingly offering readvanceable mortgages, which combine term mortgages with HELOCs and other credit products, to customers. The complexity and risks of such products are often not well understood by indebted consumers, the agency said.

"Banks reported to FCAC that a readvanceable mortgage is now the default option offered to credit-worthy mortgage customers with down payments of at least 20 percent," the report noted.

Canada's long housing boom and double-digit price gains in cities like Toronto and Vancouver have led to fears of a housing bubble. But the country's big banks and federal policymakers have often said Canada does not have much of a subprime mortgage market or the kind of innovative credit products that came back to haunt borrowers in the U.S. housing crash.

(Reporting by Andrea Hopkins, editing by G Crosse)

NAFTA

The Globe and Mail. Jun. 07, 2017. Get ready for long haul on NAFTA talks, panel says
JOSH O’KANE

Now that President Donald Trump has turned trade from a Wall Street issue to a Main Street concern, long-time economic and trade analyst Laura Dawson says Canadian industry must join government officials in fanning across U.S. communities to remind politicians of Canada’s importance on a local level.

“We really need to see Canadian businesses in particular going to Gary, Indiana, into Buffalo, to Seattle, all the border communities, and reminding folks in their home districts that … the Canadian economic relationship is vital to your livelihood,” said Dr. Dawson, director of the Canada Institute at the D.C.-based Wilson Center think tank, at a Wednesday-morning panel discussing the North American free-trade agreement at The Globe and Mail Centre in Toronto.

After months of teasing by Mr. Trump – who campaigned on a promise to rip up NAFTA and strike a deal better aligned with American interests – the U.S. government last month pulled the trigger on a clause in the agreement that would open it up for renegotiation in 90 days. Wednesday’s Globe Talks panel came as the Canadian Chamber of Commerce met with its U.S. and Mexican counterparts in Washington to plot the launch of the North American Economic Alliance, a platform they’ll use to protect the countries’ common interests.

With the official announcement of the alliance Wednesday morning, and with Canada’s position at the NAFTA negotiating table soon to be clarified, opportunities are arising to lobby American politicians at a grassroots level to remind them of Canada’s importance to local economies.

Dr. Dawson joined Dan Ciuriak, director and principal of Ciuriak Consulting Inc.; Michael Kergin, strategic adviser for international affairs at Bennett Jones; Joanna Slater, The Globe’s U.S. correspondent; and moderator Barrie McKenna, The Globe’s national business correspondent.

Mr. Kergin, a former Canadian ambassador to the U.S., said that despite the tumult emanating almost daily from the White House, “we still have a pretty functioning democracy [in the U.S.] in terms of peoples’ ability to influence their House members and the Senate.”

Given the federal government’s claim that Canada is the most important foreign market for 35 U.S. states, Canadian industry and governments have plenty of opportunity to get in front of those U.S. politicians, but it’ll take a lot of work. “It’s not instant coffee – it’s something that has to brew,” Mr. Kergin said.

Throughout Mr. Trump’s campaign and presidency, local job losses from trade relationships have become a sore spot for U.S. voters, but Mr. Ciuriak said that’s a red herring, one that Canada can easily argue against. Thorough analysis, he said, indicates that globalization is “a small factor” versus the combined power of low interest rates and technological development. “If you lower the carrying cost of capital to zero in our economy, workers compete with machines for jobs,” said Mr. Ciuriak, former deputy chief economist with the Department of Foreign Affairs and International Trade.

Mr. Kergin noted that Mr. Trump’s oft-swinging mind could make negotiations rocky when they begin later this summer.

“You might start to get a bit of consensus developing in a negotiation – thinking that Congress is going to push in one direction, and some of the contours of the agreement start to come out,” he said. “And all of a sudden Trump comes out and undercuts the negotiators entirely, saying ‘This is a bad deal.’ ”

But the complex nature of the negotiations, Dr. Dawson said, might actually prevent such wild swings: “My greatest faith is in the power of bureaucratic inertia.”

The sheer size of NAFTA, she said, ensures that it will in fact take much longer than Mr. Trump thinks to get anywhere with renegotiations. “I just don’t see any possible way that all of the mechanics and legal requirements of those negotiations can be covered off in four months and actually produce any kind of an agreement – let alone a robust agreement,” she said.

ENERGY

The Globe and Mail. Jun. 06, 2017. Canadian Solar faces threat of U.S. trade action as global industry struggles
SHAWN MCCARTHY - GLOBAL ENERGY REPORTER

OTTAWA — Guelph, Ont.-based Canadian Solar Inc. is facing the threat of American trade action against its Asian manufacturing operations as the global solar-energy industry struggles with tough competition and plummeting costs.

In a conference call Tuesday, Canadian Solar chief executive Shawn Qu said the company is weathering the storm by driving down its own costs and increasing the productivity of its solar modules, even as it sells solar-energy projects it had developed.

“We appreciate that a potential industry overcapacity is a subject of concern for investors,” Mr. Qu told analysts, as he emphasized that the company is following a conservative business plan. “Please rest assured that, as Canadian Solar’s largest shareholder, I have been watching it as well. We have never rushed into a market and never pursued a strategy of overbuilding.”

The company – whose largest manufacturing operations are now in Asia – is one of a number of offshore producers that could be hit by a trade complaint launched by Georgia-based manufacturer Suniva Inc., which filed for bankruptcy protection in April and petitioned the U.S. International Trade Commission to impose tariffs on imported solar cells and modules.

Another U.S.-based manufacturer, German-owned SolarWorld AG, filed for insolvency last month and joined the Suniva petition.

Solar-project developers in the United States oppose the duty, worried that punitive tariffs will erode the enviable competitive position the industry now boasts.

The price for solar components has dropped dramatically in recent years as Asian – and particularly Chinese – companies increased production and improved the efficiency of their panels. Solar energy is now seen as a low-cost source of power in many markets as utilities find ways to manage its intermittent electricity production.

Despite the troubles faced by some manufacturers, the solar industry boomed in the United States last year, nearly doubling the amount of capacity installed in 2015. However, project development has slowed in Canada, as Ontario cancelled a planned renewable procurement last year.

Canadian Solar – the world’s largest solar company last year with revenue of $2.85-billion (U.S.) – has reduced its exposure to the U.S. market over the past year. In the first quarter of 2017, the Americas accounted for 30 per cent of its revenue while Asia provided 58 per cent; in the corresponding quarter last year, the split was 43 per cent for the Americas and 44 per cent for Asia.

Still, “the U.S. market is an important market for Canadian Solar,” Mr. Qu said. “It is unfortunate that the marketplace is once again trying to punish companies that are competitive and innovative.

“We hope that cooler heads will prevail and industry will be allowed to compete in an opening marketplace with quality, technology and customer service.”

With the purchase of Recurrent Energy in 2015, the company expanded its reach and became a global solar-energy-project developer. That diversification will help it survive any U.S. trade action, said Jeffrey Osborne, analyst at Cowen and Co. LLC.

“They can pivot their resources elsewhere given the Recurrent Energy acquisition,” Mr. Osborne said in an interview. “I don’t think [the potential for U.S. tariffs] is the end of the world for them but it certainly would be an uphill battle.”

He said the company is pursuing a prudent course by investing new technology to reduce the costs of the solar components while at the same time increasing the energy efficiency of the panels.

“It’s a cut-throat industry and they are making the needed improvements to drive down their cost structure,” he said.

Mr. Qu is still bullish on the future of the solar industry, and said Canadian Solar’s margins remain between 13 per cent and 15 per cent in the second quarter.

The company lost money in the first quarter as revenues fell 6 per cent from the corresponding quarter in 2016. For the three months ending March 31, the company lost $13.7-million (U.S.), compared to a net income of $23.8-million (U.S.) in the first quarter of 2016.

The company forecasts that solar will grow in the next 13 years from providing 1 per cent of the world’s power needs to 10 per cent. However, average growth of installed capacity will slow from nearly 40 per cent since 2009 to around 11 per cent over the next four years.

The Globe and Mail. Jun. 06, 2017. A deal’s a deal – at least until the next election
JEFFREY JONES

CALGARY — A hot trend is sweeping the worlds of energy, environment and politics.

That is, an agreement is valid only as long as the government in the jurisdiction that signs it does not get voted out in an election.

This is very troubling. Or it’s reason to cheer. Maybe it’s both, depending on which side of an issue one supports. One thing’s for sure: This fad heaps huge risks on investors as they try to guess which deal will hold up and which ones will fall apart for political reasons.

Take Paris. There was global condemnation of U.S. President Donald Trump’s move to pull out of the international accord aimed at reversing the man-made causes of global warming, a deal that had included all but a few countries.

His reasons for reneging on U.S. participation in the important pact followed the same themes as those he’s used to threaten allies that have counted on long-existing trade deals, including Canada and Mexico. They were all central to his campaign platform, and he’s repeated them often since he won the White House.

The United States is being short-changed because of bad past negotiations, he’s bellowed. In Mr. Trump’s America First oeuvre, deals get torn up and those allies just have to deal with it, regardless of any damage that results.

The other signatories to the climate deal – non-binding though it is – are dismayed at Mr. Trump’s “Parexit.” Theirs is an imperfect agreement, one that many environmentalists blasted for not going far enough to slash carbon emissions. But it is the only game in town, hammered out among 197 parties, including the United States. Hell, they had a deal.

The President even turned his back on an unlikely faction – chief executives of major oil companies Exxon Mobil and ConocoPhillips, who urged him to remain at the climate table to make sure the United States maintains influence over future moves.

Mr. Trump’s loyal supporters, many of whom back his early view that the concept of climate change is a hoax perpetrated on U.S. business to render it uncompetitive, cheered the decision to bail, not least because former president Barack Obama saw the Paris Agreement as a crowning achievement of his time in office. They see no reason to live up to an agreement signed by a two-term president they did not like.

Given that Mr. Trump’s move actually starts a four-year exit process, the decision on Paris stands to be reversed again.

Another agreement now hanging by a thread shows an uncomfortable turn of the tables. It’s almost certain that British Columbia will be governed by a New Democratic Party-Green Party alliance following a provincial election in May in which Premier Christy Clark’s Liberals lost their majority in the legislature. Ms. Clark had gone through a years-long process to make pipelines to ship Alberta’s heavy crude oil to the West Coast as palatable as possible.

Her government ended up removing its opposition to Kinder Morgan Inc.’s $7.4-billion Trans Mountain pipeline expansion, after wresting concessions that included beefed-up safety measures to protect coastal waters as well as $1-billion in payments to the province over 20 years. Alberta Premier Rachel Notley applauded the move, after she took big political risks by establishing a wide-reaching policy to limit carbon through taxes, limits on emissions from the oil sands and a deadline on coal-fired power.

Now, the deal may be off. As they look set for power, the BC NDP, led by John Horgan, and the Greens, headed by Andrew Weaver, have said they will use whatever tools available to them to block the Trans Mountain expansion. If they are successful, there’s talk of a potential North American free-trade agreement challenge by Houston-based Kinder Morgan (leaving aside any NAFTA renegotiation under Mr. Trump).

It gets tricky. There are supporters of the Paris accord who would also like to see Trans Mountain kiboshed, given that they see both things as positive moves for the environment. And vice versa – for anyone who believes there is no need to act on emissions, the United States abandoning Paris is totally fine, and so is getting Alberta oil to more diverse foreign markets. Both stances require breaking at least one agreement.

The Globe and Mail. Reuters. Jun. 07, 2017. Oil slides as rising U.S. crude, gasoline inventories surprise
DAVID GAFFEN

NEW YORK — Oil prices slid more than 3 per cent on Wednesday after the U.S. government reported an unexpected increase in inventories of crude and gasoline, fanning fears that output cuts by major world oil producers have not drained the global crude glut very much.

Crude stocks in the United States grew 3.3 million barrels to 513 million barrels, according to the U.S. Energy Information Administration (EIA). That confounded forecasters who had predicted a drop of 3.5 million barrels, especially a day after preliminary data from the American Petroleum Institute indicated an even bigger drop.

Gasoline inventories also unexpectedly rose, imports increased, and exports dropped, the EIA data showed.

U.S. crude futures fell 4.3 per cent, or $2.04 a barrel, to $46.16 a barrel, as of 11:18 a.m. EDT. Crude slid to its lowest level since May 9, with U.S. benchmark futures down more than 10 per cent in 10 days of trading.

Brent crude prices were at $48.40 per barrel, down 3.4 per cent, or $1.72 a barrel.

Gasoline futures tumbled 3.6 per cent to $1.4969 a gallon, the lowest since May 10, as rising inventories fed worries about weak demand. Overall gasoline demand is down 0.7 per cent for the past four weeks from a year ago, the EIA said.

“Flagging gasoline demand continues to bedevil the market. With gasoline currently the seasonal leader of the complex, its weakness is dragging everything down,” said John Kilduff, partner at Again Capital in New York.

Prices slid even as some in the market remained concerned about the move by OPEC members Saudi Arabia and the United Arab Emirates to cut diplomatic and transport ties with Qatar, an OPEC member that had agreed to cut only about 30,000 barrels a day as part of Organization of the Petroleum Exporting Countries agreement to reduce output.

However, analysts saw a risk that rivalries between OPEC members could weaken the production cut agreement. Some were already concerned about rising production from Libya and Nigeria, which are exempt from the agreement.

OPEC has pledged to cut almost 1.8 million barrels per day (bpd) to help reduce global inventories.

Royal Dutch Shell lifted force majeure on exports of Nigeria’s Forcados crude oil, bringing all the country’s oil exports fully online for the first time in 16 months.

Analysts said Qatar’s isolation caused trade disruptions that offered some short-term support for oil prices.

“Port restrictions on Qatari flagged vessels are going to cause loading disruptions,” said Jeffrey Halley, analyst at brokerage OANDA.

FOREIGN POLICY

The Globe and Mail. Jun. 06, 2017. Special. Chrystia Freeland must turn vision into reality
STEPHANIE CARVIN, assistant professor at the Norman Paterson School of International Affairs, Carleton University

If Minister of Foreign Affairs Chrystia Freeland had one message for Canada in her speech to the House of Commons on Tuesday, it is that the world is now entering a post-American phase and Canada needs to figure out how to navigate it – and fast.

Essentially, Ms. Freeland’s post-American world is one where the United States no longer seeks to lead or be a guarantor of the post-1945 global order. Historically, this order has always been essential to Canada (and other middle powers), as it established the rule of law and stability, the fostering of international trade and the creation of international institutions where Canada has a voice at the table. Even if the United States has clearly not always played by its own rules, its diplomacy, military might and willingness to engage in free trade have underpinned a global system which has been largely peaceful and has fostered prosperity.

The dilemma Ms. Freeland put forward is essentially simple: The assumptions upon which Canada’s prosperity have rested have been rocked as Donald Trump has sown the seeds of U.S. retrenchment. In language that is extremely blunt for a minister, Ms. Freeland makes it clear that she believes what is going on in the United States is a failure to respond to the challenges of a changing global order and populism. As such, Canada must move to protect its sovereignty and shore up the world order while the United States drops the “mantle of global leadership.”

It remains to be seen if this strong rhetoric will be noticed south of the border. Perhaps the Trudeau government is gambling that an easily distracted Mr. Trump will not see Ms. Freeland’s comments on Fox News. Alternatively, they may have given up on achieving any kind of ambitious agenda with Mr. Trump, short of surviving new NAFTA talks.

But in contextualizing Canada’s current dilemma, Ms. Freeland’s speech accomplished three things. First, it is a recommitment to the ideals of the 2015 Liberal platform. On the surface, this may not be terribly surprising, but the election of Mr. Trump put many things into doubt. Does it still make sense for Canada to pursue a UN Security Council seat post-Trump? Ms. Freeland clearly says yes.

Second, her speech offered a broad articulation of four very broad priorities:

The defence of multilateral institutionalism (a possible rebuke of former foreign minister John Baird’s refrain “we don’t go along to get along”);
Defence spending and the “principled use of force,” which was given considerable time in the speech – possibly to prepare Canadians for a new mission abroad;
A defence of a rules-based international order – and the contextualization of Canada’s current missions abroad as a support for international borders;
Perhaps least surprisingly, a defence of free trade. (Although one of the bigger surprises of the speech was the lack of a mention of a free-trade agreement with China.)
Third, Ms. Freeland offered a vision of Canada in an unstable world that most Canadians will identify with. To be sure, there will not be much that the Conservative Party will like, and the NDP will probably chafe at the support of military spending. But according to an Abacus Data poll released in May, approximately 60 per cent of Canadians see themselves as “globalist” in orientation, and will likely approve of Ms. Freeland’s vision and ideas.

What is missing, of course, is specifics. Ms. Freeland has done very well to explain to Canadians where we are and where we need to go, but it is still not clear how we are going to get there. She has set goals, but foreign policy is about the means to achieve them. It is true that we are awaiting the results of the Defence Policy and International Development Reviews (the former to be released Wednesday), but we have yet to see the government articulate a foreign policy or set priorities in more concrete terms. More than a year and a half into the Trudeau government, it is time to see some tangible ideas.

It is important for Ms. Freeland to articulate an understanding of where she believes Canada to be in a fast-changing world. On Tuesday, she did so convincingly.

But the true test of her skills as a minister will be putting this vision into practice and successfully navigating Canada through Mr. Trump’s choppy waters.

The Globe and Mail. Jun. 06, 2017. Freeland questions U.S. leadership, says Canada must set own course
ROBERT FIFE AND MICHELLE ZILIO

OTTAWA — Foreign Affairs Minister Chrystia Freeland says Ottawa will forge its own path on the world stage because Canada can no longer rely on Washington for global leadership.

In a major speech setting the stage for Wednesday’s release of a new multibillion-dollar blueprint for the Canadian Armed Forces, Ms. Freeland rejected Donald Trump’s “America First” foreign policy and its dismissal of free trade, global warming and the value of Western alliances in countering Russian adventurism and the Islamic State.

While she did not mention the U.S. President by name, Ms. Freeland expressed deep concern about the desire of many American voters to “shrug off the burden of world leadership.”

“The fact that our friend and ally has come to question the very worth of its mantle of global leadership puts in sharper focus the need for the rest of us to set our own clear and sovereign course,” she told the House of Commons on Tuesday. “To say this is not controversial: It is a fact.”

The Liberal government’s decision to publicly question U.S. leadership echoes criticism last week by German Chancellor Angela Merkel, who said Europe has to take on a larger role on the global stage as Washington was no longer a reliable partner. Prime Minister Justin Trudeau spoke by phone with Ms. Merkel on Tuesday and they reaffirmed their commitment to the Paris climate treaty and to multilateralism.

Ms. Freeland said Canada has been able to count on the powerful U.S. military to provide a protective shield since the end of the Second World War, but the United States’ turn inwards requires a new Canadian approach to defend liberal democracies.

“To rely solely on the U.S. security umbrella would make us a client state,” she said. “To put it plainly: Canadian diplomacy and development sometimes require the backing of hard power.”

Giving Canada’s military “hard power” will allow it to meet global challenges, she said, listing North Korea, the civil war in Syria, the Islamic State, Russian aggression in the Ukraine and Baltic states and climate change as major threats to the world order.

“We will make the necessary investments in our military, to not only address years of neglect and underfunding, but also to place the Canadian Armed Forces on a new footing – with new equipment, training, resources and consistent and predictable funding,” she said.

Wednesday’s defence-policy review is expected to lay out the military’s priorities for future overseas deployments, and outline Ottawa’s 20-year plan for spending billions of dollars to upgrade warships and fighter jets, among other things.

Ms. Freeland said Canada will step up militarily and diplomatically to boost its international voice while, at the same time, urging the United States to recognize the important role its plays in fostering peace as the world’s biggest military and economic power.

“We seek and will continue to seek to persuade our friends that their continued international leadership is very much in their national interest – as well as that of the rest of the world,” she said.

Ms. Freeland, who has emerged as one of Mr. Trudeau’s more capable cabinet ministers, expressed the Liberal government’s disappointment with Mr. Trump’s decision to pull out of the Paris climate treaty, calling on the world to show “renewed, uncommon resolve” to combat climate change. Mr. Trump campaigned as a global-warming denier, calling it a hoax.

“Turning aside from our responsibilities is not an option. Instead we must think carefully and deeply about what is happening, and find a way forward,” she told MPs.

Ms. Freeland also championed the benefits of free trade, now under challenge with the rise of U.S. protectionism led by the Trump White House. Free trade isn’t responsible for the gap between the rich and poor in developed nations of the world, she said.

“International trade is the wrong target,” she said. “The real culprit is domestic policy that fails to appreciate that continued growth, and political stability, depend on domestic measures that share the wealth.”

Outside the Commons, Ms. Freeland sidestepped questions about the wisdom of taking indirect potshots at Mr. Trump – who issued an angry tweet against Ms. Merkel last week.

“I was careful to only refer to Canadian sources and Canadian examples,” she told reporters. “This is about us standing on our own two feet, having a foreign policy that expresses as an independent and sovereign country what we need to achieve in the world.”

Conservative foreign-policy critic Peter Kent said Ms. Freeland’s manifesto was “unremarkable,” calling it a last-minute scramble by the Prime Minister’s Office to set up Wednesday’s defence-policy review.

“The foreign-policy consultation, as far as I know, is non-existent. That speech was written over in the Langevin Block [in Mr. Trudeau’s office] and it’s sort of a last-minute chicken to lay the defence-policy-review egg tomorrow morning, which is going to have a lot more detail,” Mr. Kent said.

NDP foreign-affairs critic Hélène Laverdière called on the government to outline its plans for Canadian peacekeeping and set a deadline for Canada to meet the United Nations standards for foreign-aid spending. The government currently spends only 0.26 per cent of economic output on foreign aid – a far cry from the UN target of 0.7 per cent.

Ms. Freeland’s speech comes days ahead of the launch of what the government is calling “Canada’s first feminist international assistance policy.” International Development Minister Marie-Claude Bibeau will announce a new policy Friday, which is expected to focus on women’s rights and gender equality.

Fen Hampson, director of global security and politics at the Centre for International Governance Innovation, said Ms. Freeland handled the government’s disappointment toward the Trump administration in a “judicious, measured” way.

“It was rather hard-hitting, I would say, in terms of here’s what we’ve got to do,” he said. “We can’t rely on the Americans to carry the freight when it comes to global security. We’re going to have to do more.”

The Globe and Mail. Jun. 06, 2017. OPINION. Trudeau decides it’s just not worth appeasing Trump in foreign-policy shift
JOHN IBBITSON

OTTAWA — America has left the world, Foreign Affairs Minister Chrystia Freeland signalled in Tuesday’s landmark foreign policy address. Canada and its allies will hang together, she vowed, awaiting its return.

This was a very dangerous thing to say. But we live in dangerous times.

Although Ms. Freeland never mentioned the words “Donald Trump” in her speech to the House, practically every line was informed by the crisis of his rogue presidency. Clearly, something happened at May’s NATO and G7 meetings to make Prime Minister Justin Trudeau conclude there is nothing to be gained by treating with this man.

“Many of the voters in last year’s presidential election cast their ballots, animated in part by a desire to shrug off the burden of world leadership,” Ms. Freeland told a silent House of Commons.

“The fact that our friend and ally has come to question the very worth of its mantle of global leadership puts into sharper focus the need for the rest of us to set our own clear and sovereign course,” Ms. Freeland said. “For Canada, that course must be the renewal, indeed the strengthening, of the postwar multilateral order.”

Welcome to the Trudeau Doctrine: Canadian foreign policy seeks to preserve multilateral institutions and the Western alliance in the wake of America First.

This will not go down well with the prickly – and, it seems, at times paranoid – American President. And it contradicts earlier efforts to preserve good relations with the Trump administration in the lead-up to renegotiating the North American free-trade agreement.

But whether out of frustration or despair, Mr. Trudeau and Ms. Freeland now believe that appeasing Mr. Trump simply isn’t worth the effort, if only because it implies agreeing with his approach.

“You could easily imagine a Canadian view that says, we are safe on our continent, and we have things to do at home, so let’s turn inward. Let’s say Canada First,” Ms. Freeland declared. But “that would be wrong.” As wrong for Canada as it is for the United States.

The Trudeau doctrine will rest on three pillars. The first is military: Ms. Freeland promised major new investments following the release Wednesday of the government’s defence policy review. We’ve heard such promises before. Doctrines are cheap, but it takes money to buy whisky, or warships.

Second, the minister vowed Canada would spare no effort to preserve and strengthen the Western alliance, citing the deployment of Canadian troops to Latvia currently under way. “There can be no clearer sign that NATO and Article Five [which declares an attack on one NATO member to be an attack on all] are at the heart of Canada’s national security policy,” Ms. Freeland stated – a not-so-veiled reference to Mr. Trump’s refusal to endorse Article Five when he harangued the NATO leaders in Brussels two weeks ago.

Third, Canada will aggressively pursue new trade agreements, Ms. Freeland vowed, not needing to state that Mr. Trump has withdrawn from the Trans-Pacific Partnership, is threatening to scrap NAFTA and generally has thrown the entire global trading order into disarray.

“Far from seeing trade as a zero-sum game, we believe in trading relationships that benefit all parties,” she maintained, adding, “we believe in the WTO and will continue our work to make it stronger.” Again, these words were clearly directed at Mr. Trump, who has called the World Trade Organization “a disaster” and threatens to withdraw the United States from it.

This may be the bluntest repudiation of Mr. Trump and his policies yet delivered by a Western government, and it is high-risk. Ms. Freeland’s address is, in effect, a promise to Canada’s European and Asian allies that we are with them, not with the Americans. Mr. Trump may well lump Canada in with everyone else when he seeks to impose tariffs or other punishments.

But the Liberals no longer seem to care. They have decided that the only solution to dealing with Mr. Trump is to wait him out.

For the first time in our country’s history, Canada’s foreign policy is essentially opposed to the foreign policy of the United States. Who would have thought we would live in such times?

The Globe and Mail Jun. 06, 2017. Special. Freeland has woken up to reality. But has Trudeau?
DAVID BERCUSON, director of the Centre for Military, Security and Strategic Studies at the University of Calgary and a fellow of the Canadian Global Affairs Institute.

Sometimes it is amazing what it takes to make Ottawa wake up. This time it is the aberrant, erratic and outright strange behaviour of Donald Trump. The President has shown an almost boundless capacity to attack long-term U.S. allies, undermine American leadership of the Western democratic world, withdraw from international agreements such as the Trans-Pacific Partnership and the Paris climate accord and generally play bull in the china shop in international systems that date back to before the end of the Second World War.

What’s next, Canada may ask? Withdraw from NATO? Destroy the North American Aerospace Defence agreement? Flush the North American free-trade agreement down the drain? Who knows, when Mr. Toad is driving the White House.

And thus we come to Minister of Foreign Affairs Chrystia Freeland’s tough speech in the House of Commons on Tuesday. Echoing German Chancellor Angela Merkel, Ms. Freeland declared that with the possible cratering of who-knows-what-next international institution, we are seeing the United States entering its greatest isolationist phase since the end of the First World War. If we and other Western countries cannot rely on the United States in the age of Mr. Trump, who can we rely on?

We must, she declared, rely far more on ourselves than we have for many decades. And that means, to begin with, a start at a significant rebuild of the Canadian Armed Forces.

How and why should we do it? Would the U.S. ever really allow harm to come to Canada which is, after all, the Americans’ front porch?

Let’s take an obvious example: When Canada first joined the NORAD agreement back in 1959, we contributed about a third of the assets of the bi-national command. Canadian fighter squadrons, radar stations, navigation stations and control centres covered more or less all of Canada’s air space. Today that contribution has slipped to under one-sixth of NORAD assets. Everything else is done by the United States. We contribute about as little as we can get away with. Why? Because we take U.S. protection for granted.

What if we can’t? What if Mr. Trump comes up with some new, ridiculous notion that if we don’t do more, the U.S. won’t cover the slack. After all, he has more or less threatened to do just about the same thing in relation to NATO. And in his meeting with European NATO leaders last week, again failed to give his assurance that the mutual defence article of NATO – Article 5 – was not an unconditional guarantee as far as he is concerned.

Does Mr. Trump actually have a plan to kick-start NATO defence spending to get it to the 2 per cent of GDP that NATO agreed on several years ago? Is all this clever negotiating tactics as far as the self-proclaimed “greatest negotiator in the world” is concerned? Or is Mr. Trump an aberration who knows little about international affairs, is apparently entranced by Russia, and tweets according to whatever he had for dinner the night before or how many hours of sleep he managed before reaching for his smartphone at 4 or 5 a.m.?

Who can tell? But then again, who can gamble?

What is clearly now happening is that Germany, France and Britain are beginning to wake up to the reality of Donald Trump and are starting to take him very seriously indeed. And now, apparently, Ottawa is beginning to do the same.

But there is a massive inconsistency between what Minister Freeland declared and the signals the government has been putting out through Prime Minister Justin Trudeau. He has taken every opportunity to declare that Canada can’t be depended on to increase its defence budget and that Canada’s contributions have to be seen within the context of what Canada actually does, and not on how much it spends. That message has been repeated over and over again even though the Defence Policy Review that is to be released Wednesday is bound to call for increased defence spending.

The basic matter at issue is money.  A significant increase in the defence budget – say so much per year over five or ten years – will be necessary to close the ever widening gap between what we ought to do and what we do.  At a time of growing budget deficits that sort of action will take no less than a serious commitment from the government to place defence spending high on the priority list.  From what we have seen so far from this government on defence matters, such a commitment is a long way away.

We know that Mr. Trump has a great deal of trouble telling the truth about almost everything. We will shortly find out whether Ms. Freeland is any more of a straight arrow.

BLOOMBERG. 2017 M06 6. Trudeau Pivots Away From U.S. in Embracing Multilateralism
by Greg Quinn

• Foreign minister lays out Canada’s middle-power vision
• Speech casts nation’s interests in sharp contrast to Trump’s
• Trudeau Pivots Away From U.S. in Multilateralism Embrace

Canada is ready to move ahead without its closest global ally if forced to choose between relying on international partners or an increasingly isolationist U.S., a top minister said.

In the most definitive statement of Prime Minister Justin Trudeau’s foreign policy since the election of President Donald Trump, Foreign Affairs Minister Chrystia Freeland told lawmakers in Ottawa the country will continue to support international alliances -- both commercial and military -- because these ties are in the best interest of a “middle power” like Canada.

“The fact that our friend and ally has come to question the very worth of its mantle of global leadership, puts into sharper focus the need for the rest of us to set our own clear and sovereign course,” Freeland said Tuesday. “For Canada that course must be the renewal, indeed the strengthening, of the postwar multilateral order.”

Trump has rattled global capitals since taking office, drawing sharp criticism from Germany and France last week for his withdrawal from the Paris climate-change accord and his attacks on the effectiveness of the North Atlantic Treaty Organization. The situation is more delicate for Canada, which shares the world’s longest international border with the U.S. and is heavily reliant on it for trade and security.

“It has always been essential for Canada to at least be in sync with its neighbor, but that neighbor is making it difficult,” said Elliot Tepper, a professor of international relations at Carleton University in Ottawa. “Canada has drawn the logical conclusion -- as other states are doing -- that if the U.S. doesn’t wish to lead, Canada and others will do so.”

Climate Dismay

Tuesday’s speech cast Canada’s interests in sharp contrast to those of the Trump administration, which Trudeau has to date been reluctant to criticize. Freeland, however, expressed deep disappointment at the U.S. abandonment of the Paris pact and said the existing international order helps constrain powerful nations.

“Whatever their politics, Canadians understand that, as a middle power living next to the world’s only super power, Canada has a huge interest in an international order based on rules,” Freeland said. “One in which might is not always right. One in which more powerful countries are constrained in their treatment of smaller ones by standards that are internationally respected, enforced and upheld.”

Canadian sovereignty also means Canada must avoid being too dependent on the U.S. for security, she said. Here are some of the other highlights of the speech:

• The government will make a “substantial” investment in the military to be announced Wednesday, seek a seat on the United Nations Security Council, look for progressive trade deals and unveil Canada’s first feminist international assistance policy. That will include supporting abortion rights.
• Freeland said some American voters appeared to “shrug off the burden of world leadership” that has helped along with global partners to underpin decades of global security.
• Trudeau’s top diplomat also said the world must find positive ways to bring emerging nations such as China into the global economic system, avoid blaming the struggles of middle-class workers on “fiendish behavior by foreigners,” and seek to protect immigrants, women and minorities such as gays and lesbians.
• Freeland gave her remarks in a special break from Parliament’s usual schedule, laying out seven decades of global partnerships that Canada helped shape at the end of World War II such as the Bretton Woods agreement that built the global financial system. The country would be “wrong” to embrace a “Canada first” policy now and must build new coalitions to take on security challenges such as terrorism from Islamic State, North Korea’s dictatorship and “Russian military adventurism.” 
• Canada will still seek to work with the U.S. for a “greater” North American Free Trade Agreement and for other opportunities on environmental protection.

AVIATION

REUTERS. Jun 7, 2017. Boeing studies 'mild to wild' design for pivotal mid-market jet
By Tim Hepher

CANCUN, Mexico (Reuters) - Boeing (BA.N: Quote) has looked at options "from mild to wild" for the design of a proposed mid-market jet, a senior executive said, hinting at a breakthrough that industry sources say will create building blocks for future models.

Marketing Vice President Randy Tinseth said Boeing would leapfrog reported plans by Airbus (AIR.N: Quote) to update its hot-selling A321neo, as Boeing eyes a gap between narrow-body jets and long-haul aircraft for a potential new mid-market airplane.

"We have looked at the mild and we have looked at the wild and I can tell you we know that if you are going to address that market, you need a new airplane," Tinseth told Reuters after a two-day meeting of airline leaders in Mexico.

Industry sources have said the mid-market development is pivotal for Boeing since it will spawn the industrial jigsaw, systems and cockpits likely to be used for the next plane after that, a three-aircraft replacement of Boeing's 737 cash cow.

Getting the "production system" right now would partially allow Boeing to develop the next jet, which is expected to revolve around a model carrying 180 passengers, as an industrial spin-off of the mid-market one, albeit with major differences.

This would result in significant cost savings and avoid repeating a patchwork of different production architectures.

Two further derivatives could extend that post-737 jet family to 160-210 seats, based on current market forecasts.

Boeing has not yet talked about its plans beyond the mid-market plane, which is expected to enter service by 2025.

Boeing officials declined comment on the long-term options or specific details of the mid-market project, which one leasing company has dubbed "797".

GOODBYE STEAM ENGINE

For the mid-market jet, industry sources have said Boeing is settling on a family of two wide-body aircraft.

These would effectively combine a twin-aisle cabin sitting on top of the reduced belly space of a single-aisle jet.

The aim is to reduce wind resistance or drag and therefore operating costs.

However, it involves a risky gamble that airlines will not need to carry much paid cargo on the routes for which the airplane is designed, delegates at the airlines meeting in Cancun said.

The two mid-market models, designed to carry about 220-260 passengers over 3,500 to 5,000 nautical miles (6,400-9,260 km), will also have a wing resembling the distinctive stiletto design of the 787 Dreamliner but with significant internal differences.

Seen from the front, the outline of traditional metal airplane fuselages is usually closer to a true circle.

That allows pressurised air inside the cabin to push out uniformly in all directions, easing loads and removing the need for heavy strengthening materials.

That well-tested concept is as old as the steam engine.

Carbon composites allow manufacturers to make complex pieces in one shape and are well suited to the more elliptical design that Boeing has in mind for the new mid-market fuselage.

However, composites are more expensive to produce.

Reuters reported last month that the new aircraft could be built using cheaper and faster new production techniques without costly pressurised ovens, or autoclaves.

That technology was used to weave the carbon wings of Russia's new MS-21 jet, which first flew last month.

Airbus this week played down a project called A321neo-plus-plus in response to the Boeing mid-market jet, first reported by Reuters, and said it was always reviewing options.

(Additional reporting by Victoria Bryan; Editing by Susan Fenton)

REUTERS. Jun 6, 2017. Embraer's biggest passenger jet may be its best-seller
By Brad Haynes and Tim Hepher

CANCUN, Mexico (Reuters) - The biggest passenger jet ever made by Brazil's Embraer SA (EMBR3.SA: Quote) may become its top-selling model, emerging from the shadows of smaller siblings due to extra rows and big wings that have changed its economics, a senior executive told Reuters.

The first generation of the 116-seat E195 was outsold more than three-to-one by the 100-seat E190, but a larger, re-engined version entering service in early 2019 as part of the so-called E2 lineup has attracted another level of interest.

"It's fair to say that the E195 features heavily in almost every conversation about the E2 family," John Slattery, head of Embraer's commercial aviation business, said in an interview late on Monday at the International Air Transport Association's annual meeting. "There's a distinct possibility for the E2 that the E195 outsells the E190."

The possible reversal highlights how three additional rows of seats and longer, sweeping wings have forced many airlines to take a second look at Embraer's biggest airliner, now aimed squarely at rival Bombardier Inc's (BBDb.TO: Quote) new CSeries.

For Embraer, the world's third-largest commercial planemaker after Airbus SE (AIR.PA: Quote) and Boeing Co (BA.N: Quote), the E195 is the biggest change in its E2 lineup, which has focused on its core regional aviation market as Bombardier picks bigger fights.

While Bombardier sells larger CSeries aircraft against the lower end of the narrowbody families built by Boeing and Airbus, Embraer has said it has no plans for passenger jets larger than the new E195.

Bombardier's CSeries offers unparalleled range for an aircraft of its size, but even that advantage has shrunk as a new engine boosts the range of the E195 by some 600 miles (966 km) from the first generation.

Last week Embraer extended the range of the E195-E2 to 2,600 miles from a previous estimate of 2,450 miles on better-than-expected aerodynamics of a prototype that started flying in March. Bombardier's CS100 has a maximum range of 3,100 miles.

The CSeries also boasts roomier cabins in a five-abreast layout, compared with Embraer's two-and-two seating.

However, Slattery said the real selling point of the new E195 is an operating cost that rivals Airbus and Boeing narrowbodies on a per-seat basis while costing about 20 percent less per trip. Extra seats and skinny wings have made the new aircraft a "profit hunter," he said.

(Editing by Matthew Lewis)

REUTERS. Jun 6, 2017. Bombardier says trade dispute not slowing CSeries momentum
By Tim Hepher and Brad Haynes

CANCUN, Mexico (Reuters) - Bombardier Inc (BBDb.TO: Quote) said on Tuesday it was confident of winning a trade dispute with Boeing Co (BA.N: Quote) in the United States and dismissed industry suggestions that the row could slow efforts to accelerate sales of its CSeries jet.

Fred Cromer, head of commercial aviation, said a CSeries order by Delta Air Lines Inc (DAL.N: Quote) that triggered a recent Boeing complaint reflected a "launch pricing" discount common in the industry and was not an ongoing commercial strategy.

"Now that the aircraft is in service, the risk profile goes down and the pricing of the aircraft starts to move up," Cromer said on the sidelines of the International Air Transport Association's annual meeting in Mexico.

The U.S. International Trade Commission is expected to make a preliminary ruling by June 12 on Boeing's complaint that Bombardier dumped the CSeries below cost in the U.S. market while benefiting from unfair Canadian subsidies.

Cromer said Bombardier's sales and funding practices were legal and the dispute had not hurt ongoing sales efforts, which were helped by the entry into service of the CS100 last July and the CS300 last December.

He declined to say if he expected to announce any orders at the Paris Air Show this month, but said the purpose of the event was mainly to showcase new products.

"I don't like to predict. I think we're going to build the momentum at the Paris Air Show," Cromer said.

Bombardier has not reported a new CSeries order in nearly a year, leading some analysts to question whether the aggressive response from Boeing's complaint could slow further sales and effectively close its new rival out of the narrowbody market.

Cromer argued the opposite was true.

"It has actually raised the interest level," he said. "This attention is really creating a situation where airlines around the world are saying this airplane is real. It's in service and it's performing well and something to be contended with."

Cromer also said Bombardier was on track to ramp up CSeries production later this year after postponing deliveries at the end of 2016 due to problems at engine maker Pratt & Whitney, a division of United Technologies Corp (UTX.N: Quote).

"We feel very confident that Pratt is going to be there to support that delivery schedule," he said.

"The calendar for 2017 was always a little bit backend-loaded, so ... we expect deliveries, per our plan, to start accelerating in the back half of the year."

(This version of the story corrects date of CS300 entry into service from "last month" to "last December" in 5th paragraph)

(Reporting by Tim Hepher and Brad Haynes; Editing by Richard Chang)

SUGAR (MEXICO-US)

REUTERS. Jun 7, 2017. Mexico sugar lobby says still wants dumping probe of U.S. fructose

MEXICO CITY (Reuters) - Mexican sugar producers still want an investigation into suspected dumping in Mexico by U.S. fructose producers even after a U.S.-Mexico deal on access to the U.S. sugar market, the head of the Mexican sugar industry group said on Wednesday.

The sugar lobby last month said it had asked the Mexican economy ministry to investigate U.S. high-fructose corn syrup imports, saying there was "solid" evidence of dumping.

Mexico on Tuesday conceded to U.S. demands for changes in the terms of Mexican access to the lucrative U.S. sugar market, but U.S. sugar producers refused to endorse the deal.

The agreement would avert possible steep U.S. import duties on Mexican sugar and had been seen as lowering the risk of Mexico slapping its own import duties on U.S. high-fructose corn syrup as a retaliatory measure.

"This issue with the U.S. sugar industry is not over," Juan Cortina, the head of Mexican sugar industry group (CNIAA), told reporters at an event in Mexico City where he said the group would keep pressing for a fructose probe in Mexico.

The sweetener trade has been a long-standing source of disputes between the two countries that are preparing to start talks with Canada to renegotiate the North American Free Trade Agreement.

Mexican Economy Minister Ildefonso Guajardo on June 1 said he was reviewing the request by the Mexican sugar lobby to initiate the investigation.

(Reporting by Adriana Barrera; Editing by W Simon and Meredith Mazzilli)

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LGCJ.: