CANADA ECONOMICS

VENEZUELA

Global Affairs Canada. October 6, 2017. Canada condemns National Electoral Council’s violation of Venezuela’s elections law

Ottawa, Ontario - The Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement:

“Venezuelans have a constitutional right to choose their leaders through free, fair, and transparent elections.

“Canada condemns yesterday’s decision by the National Electoral Authority to refuse to allow the substitution of candidates, which heavily and illegally favours the Maduro regime.

“This action violates Venezuela’s electoral law and further erodes the democratic rights of the people of Venezuela. Canada will continue to stand with the people of Venezuela in the face of the Maduro regime’s descent into dictatorship.”

Quick Facts

• October 5th was the deadline for the National Electoral Council (CNE) to allow political parties to substitute candidates for the regional elections as per Venezuelan law.  The CNE did not grant these permissions.
• Also on October 5th, Venezuela’s Supreme Court issued an interpretation confirming the law.
• Canada will be hosting the next meeting of the Lima Group of countries this month in Toronto.

NAFTA

GLOBAL AFFAIRS. October 6, 2017. Media registration for NAFTA negotiations - Round four

Ottawa, ON – The fourth round of North American Free Trade Agreement (NAFTA) modernization will take place in Arlington, Virginia, United States starting on October 11, 2017.

As this event is led by Office of the United States Trade Representative (USTR), it is solely responsible for the registration process. Media should register online by 23:59 ET October 8, 2017.

Department of Finance Canada. October 6, 2017. Minister Morneau Hosts Roundtable on the Economic Implications of the North American Free Trade Agreement Modernization

Toronto, Ontario – The Government of Canada is committed to a progressive trade agenda and a modernized North American Free Trade Agreement (NAFTA) to create jobs and opportunities for the middle class and those working hard to join it.

As part of these efforts, Finance Minister Bill Morneau today hosted a roundtable in Toronto with business leaders, economists and industry representatives to discuss the broader economic implications of modernizing NAFTA.

Negotiations for a modernized NAFTA started on August 16, 2017. The fourth round of negotiations will be held from October 11 to 15, 2017. The Government of Canada is consulting broadly with Canadians on an ongoing basis to inform its positions and proposals, as well as its objectives and approach, in renegotiating NAFTA.

During the roundtable, Minister Morneau highlighted the importance of free and open trade, and ensuring an updated NAFTA that will strengthen North America as a region and help Canadian businesses become more competitive in today’s international context.

Quote

“Our Government’s overarching objectives are clear: protect NAFTA’s record as an engine of job creation and economic growth; make NAFTA more progressive; and uphold the elements in NAFTA that are key to our national economic interest. These negotiations are also a valuable opportunity to cut red tape and promote regulatory cooperation, to the benefit of our businesses.”

- Bill Morneau, Minister of Finance

Quick Facts

• In 1993, trilateral trade within the North American region was USD$289 billion. In 2016, trilateral trade reached USD$1 trillion—nearly a fourfold increase.
• Canada and the United States share one of the largest trading relationships in the world. Bilateral trade between the two countries was valued at nearly $882 billion in 2016, and Canada is the largest secure supplier of energy to the U.S.
• The two countries share the longest, secure border in the world, over which 400,000 people and $2.4 billion worth of goods and services cross daily.
• Canada is the number one export destination for most American states, and cross-border trade and investment supports nearly nine million jobs in the United States.
• Canada and Mexico are among each other’s largest two-way trading partners, and bilateral trade between the two countries, valued at over $40 billion in 2016, continues to grow annually.

REUTERS. OCTOBER 6, 2017. U.S. Chamber warns against Trump's 'highly dangerous' NAFTA demands
David Lawder

WASHINGTON (Reuters) - The U.S. Chamber of Commerce warned on Friday that the Trump administration was making “highly dangerous demands” in the North American Free Trade Agreement modernization talks that could erode U.S. business support and torpedo the negotiations.

John Murphy, the chamber’s senior vice president for international policy, said the largest U.S. business lobby was urging the administration to drop some of its more controversial NAFTA proposals, including raising rules of origin thresholds to “extreme” levels.

“We’re increasingly concerned about the state of play in negotiations,” Murphy told reporters.

U.S., Canadian and Mexican negotiators are preparing for a fourth round of talks to update the 23-year-old trade pact next week in a Washington suburb, Oct. 11-15.

U.S. companies large and small were worried about a proposal by U.S. Trade Representative Robert Lighthizer to add a five-year termination clause to NAFTA, Murphy said.

He said there was also concern about Lighthizer’s proposal to reduce Canadian and Mexican companies’ access to U.S. public procurement contracts, and to include a U.S.-specific content requirement for autos and auto parts.

“We see these proposals as highly dangerous, and even one of them could be significant enough to move the business and agriculture community to oppose an agreement,” Murphy said.

Inside U.S. Trade, a trade publication, stirred concerns among auto industry groups by quoting unnamed sources as saying that the Trump administration was also moving forward with a bid to increase North American content requirements for autos to 85 percent from the current 62.5 percent, with a 50 percent U.S. content requirement.

U.S. Trade Represententative (USTR) spokeswoman Emily Davis declined to comment on the report, but said President Donald Trump had been clear about the need to shake up the agreement governing one of the world’s biggest trade blocs.

“NAFTA has been a disaster for many Americans, and achieving his objectives requires substantial change,” she said. “These changes of course will be opposed by entrenched Washington lobbyists and trade associations.”

Officials from auto industry trade groups said they had not seen a rules of origin proposal with such stringent targets.

“Forcing unrealistic rules of origin on businesses would leave the U.S. unable to compete by increasing the cost of manufacturing and raising prices for consumers,” said Cindy Sebrell, a spokeswoman for the Motor Equipment Manufacturers Association, which represents auto parts manufacturers.

Karen Antebi, the trade counselor at Mexico’s embassy in Washington, told a forum on Friday that while there were “rumors” of a 50 U.S. percent content demand for autos, formal texts had not been proposed on rules of origin.

“Mexico has been firm and consistent that country specific rules of origin within the NAFTA would be unacceptable,” she said.

Reporting by David Lawder; Editing by Tom Brown

BLOOMBERG. 6 October 2017. U.S. Chamber Warns of ‘Dangerous’ Trump Nafta Proposals
By Andrew Mayeda

• Chamber of Commerce increasingly concerned about Nafta talks
• Zoellick says better than even chance that Trump withdraws

A car assembly plant in Toluca, Mexico. Photographer: Susana Gonzalez/Bloomberg
The biggest business organization in the U.S. is opposing key proposals by the Trump administration to overhaul the North American Free Trade Agreement, adding to growing tensions over the ongoing negotiations.

“We’re increasingly concerned about the state of play in negotiations,” John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, told reporters Friday in Washington. U.S. businesses are unnerved by proposals by American negotiators to add a five-year termination clause to Nafta, roll back the access of Canadian and Mexican firms to U.S. procurement contracts, and raise so-called rules of origin thresholds to “extreme” levels, Murphy said.

“We see these proposals as highly dangerous, and even one of them could be significant enough to move the business and agriculture community to oppose an agreement,” he said, adding that it’s possible talks with Canada and Mexico may collapse. The fourth round of negotiations takes place Oct. 11-15 near Washington.

The warning is the latest sign that negotiations are on the verge of derailing, less than two months after talks began. U.S. demands on issues such as procurement and textiles were opposed by Canadian and Mexican officials at the last round in Ottawa last month. The industry publication Inside Trade reported Thursday that the U.S. is proposing to raise the minimum for North American content in the auto sector to 85 percent from 62.5 percent, while adding a requirement for 50 percent U.S. content.

“The president’s objectives with the Nafta renegotiation are to create great jobs for Americans and reduce an unconscionable trade deficit,” Emily Davis, a spokeswoman for the U.S. Trade Representative, said in an email. “The president has been clear that Nafta has been a disaster for many Americans, and achieving his objectives requires substantial change.”

She said it’s natural that such changes “will be opposed by entrenched Washington lobbyists and trade associations.” “We have always understood that draining the swamp would be controversial in Washington,” said Davis, referring to President Donald Trump’s promise to “drain the swamp” of vested interests in the nation’s capital.


Former U.S. Trade Representative Robert Zoellick said Thursday there’s an increasing chance Trump will make good on his repeated threats to withdraw the U.S. from the 23-year-old accord because it will be difficult for his administration to deliver on promises to reduce the U.S. trade deficit, especially with Mexico. “There’s at least a 50 percent chance that Trump pulls out of this thing over the next year.”

The sides are aiming to secure a deal by year-end before the political calendar fills up in 2018 with Mexican presidential elections and U.S. Congressional mid-terms.

Nafta watchers should take seriously the president’s threat to withdraw from the deal, said Dan DiMicco, a former steel executive who advised Trump during the election.

“The president is not making an idle threat,” he said. “If we can’t negotiate a deal to make trade more balanced, the only option is to walk away.”

The Chamber of Commerce should “get the hell out of” the way of U.S. negotiators trying to rebalance America’s trade relationships, he said. “Right now, it’s a win for the multinationals who moved production to Mexico, not American workers.”

An auto-industry official based in Canada suggested the tough U.S. proposal on rules of origin may be a negotiating tactic. “Sometimes someone will threaten a swarm of locusts, but that party will presumably know how vulnerable their own crops are before proceeding,” said Flavio Volpe, president of the Automotive Parts Manufacturers Association in Toronto.

— With assistance by Josh Wingrove

INTERNATIONAL TRADE

Global Affairs Canada. October 6, 2017. International Trade Minister to promote Canada’s progressive trade agenda at World Trade Organization meeting in Morocco

Marrakesh, Morocco - Progressive trade is about making trade work for people, for middle-class Canadians to provide for their families and build their future prosperity.

Canada’s vision for the future of the World Trade Organization (WTO) is one where the global trading system reflects an inclusive, progressive approach—one that puts the middle class front and centre by incorporating issues like gender and the needs of micro-, small and medium-sized enterprises. One that will ensure the benefits of trade are more equitably distributed among all WTO members and, more importantly, the people who should benefit the most.

On October 9 and 10, 2017, the Honourable François-Philippe Champagne, Minister of International Trade, will participate in the WTO meeting in Marrakesh, Morocco.

The meeting will be the third, and last, gathering of trade ministers before the WTO’s 11th Ministerial Conference in Buenos Aires, Argentina, in December 2017.

While in Marrakesh, Minister Champagne will also meet with several of his counterparts to discuss Canada’s continued support for the multilateral trading system and the Canadian progressive trade agenda. Minister Champagne will also meet his Moroccan counterpart and pursue opportunities for more trade and investment that will help create good middle-class jobs for Canadians.

Quotes

“The WTO plays a central role in guaranteeing and maintaining the rules-based trading system we all depend on for our collective prosperity. We must keep pace with evolving technologies, demographic trends and consumption patterns if we are all to ensure that this system works for developed and developing countries alike. I look forward to discussing new opportunities for collaboration with my counterparts in order to make trade more responsive to the needs of entrepreneurs and small-business owners, in particular women.”

- François-Philippe Champagne, Minister of International Trade

Quick facts

• The WTO, with 164 member countries, was created on January 1, 1995.
• The ministerial conferences are the highest decision-making body of the WTO. Conferences are held at least once every two years and are attended by trade ministers of WTO member countries.

Canadian Heritage. 06/10/2017. Backgrounder — Minister Joly Announces Her Intention to Lead Canada’s First Creative Industries Trade Mission to China in April 2018

The Honourable Mélanie Joly, Minister of Canadian Heritage, has announced her intention to lead Canada’s first creative industries trade mission to China in April 2018. Canadian artists, entrepreneurs, creators and business owners from creative sectors (music, books, audio-visual, visual arts, performing arts and new technologies, among others) are thriving on the international scene. The creative industries trade mission will support businesses and organizations in the creative industry who are looking to further new partnerships and build business-to-business relationships in China.

Mission objectives

• Facilitate market entry for high-potential SMEs that are export-ready and have an ability to enter the Chinese market.
• Establish new partnerships between Canada and China’s creators and creative entrepreneurs.
• Create opportunities to learn from Canadian companies who have achieved success in the Chinese market and leverage their networks.
• Promote Canada as an investment partner and destination.
• Strengthen cultural and economic relationships between Canada and China.

Targeted sectors                                                                                                         

The creative industries trade mission is aiming to leverage existing networks, play to Canada’s strengths and complement the Chinese market. The following four sectors may be targeted for the recruitment of candidates (but are not limited to):

• film/audio-visual (including animation and visual effects);
• video games and virtual reality/augmented reality (VR/AR);
• digital content for public/creative spaces/museums; and
• performing arts.

Who should participate?

There is a growing demand for creative and cultural products and services in China. However, China remains a complex business environment, which can present unique challenges. Strong candidates for this trade mission include Canadian businesses and organizations with export experience, high potential, and readiness for the Chinese market.

Selection criteria

The following criteria will be considered when selecting applicants:

• Operations in one of the above-mentioned targeted sectors;
• Experience targeting China as part of their international business strategy, either to export, establish a presence in the country or to seek investment capital;
• Candidates that are already negotiating with Chinese companies, and could benefit from a Minister-led trade mission to facilitate new partnerships;
• Those that have not yet entered the Chinese market but demonstrate a strong interest, potential and readiness to be introduced to the market and key stakeholders;
• Candidates that would benefit from mentoring opportunities with the Trade Commissioner Service as well as with companies that have already achieved success in China.

In collaboration with its partners from the industry, portfolio organizations or other government departments, the Department of Canadian Heritage will assess candidates’ suitability for participation, based on the criteria and the mission’s objectives.

Canadian Heritage. October 5, 2017. Minister Joly Announces Her Intention to Lead Canada’s First Creative Industries Trade Mission to China in April 2018

VANCOUVER - Cultural exchange has always been an important aspect of diplomacy, deepening mutual understanding and facilitating collaboration. With China’s vibrant cultural scene growing rapidly, the Government of Canada is committed to helping Canada’s creative industries expand their already significant presence in the Chinese market.

Today at the Vancouver International Film Festival, the Honourable Mélanie Joly, Minister of Canadian Heritage, announced her intention to lead Canada’s first creative industries trade mission to China in April 2018. This mission will support Canadian creators and businesses in the creative industries who are looking to further new partnerships and build business-to-business relationships in China and strengthen the cultural and economic relationships between Canada and China. This announcement was made as part of Creative Canada, the Government of Canada’s vision for the future of our creative industries. This trade mission is part of the commitment to promoting the discovery and distribution of Canadian creative content in global markets.

With this creative industries trade mission, the Government will seek to establish greater commercial ties and opportunities for Canadian companies in the creative industries that wish to export and engage with the Chinese market in the following four sectors: film and audiovisual (including animation and visual effects); video games and virtual reality/augmented reality (VR/AR); digital content for public creative spaces and museums; and performing arts.

Minister Joly also announced the release of A Snapshot of China’s Creative Industries, a market study commissioned by the Department of Canadian Heritage, in partnership with the Trade Commissioner Service of Canada. The market study highlights the tremendous opportunities for Canadian artistic and cultural content in China.

The Government of Canada recognizes that Canadian creative industries are an important driver of our economy. Opening new markets for creators and creative entrepreneurs will contribute to inclusive growth, create jobs and strengthen the middle class and those working hard to join it.

To express your interest in participating in this creative industries trade mission, please contact pch.missionchine-chinamission.pch@canada.ca.

Quotes

“Canada has tremendous talent, ingenuity and leadership in our creative industries and those industries make a significant contribution to our economy. Our government is committed to helping Canadian creators and creative entrepreneurs seize opportunities in key global markets, including China, where there is a growing demand for creative products and services. Our goal is to support Canadian creators and creative entrepreneurs in increasing their competitive position on the international stage so that they can reach new markets and contribute directly to Canada’s overall economic and social prosperity.”

—The Honourable Mélanie Joly, Minister of Canadian Heritage

ECONOMY

Department of Finance Canada. October 5, 2017. Minister Morneau Meets With Private Sector Economists

Toronto, Ontario – Canada has the fastest growing economy among G7 nations, with second-quarter gross domestic product (GDP) growth hitting 4.5 per cent. The Government of Canada is committed to creating the conditions for all Canadians to succeed in a changing economy.

Through consultations and open dialogue with stakeholders across the country, and with the needs of families as our highest priority, the Government is building an economy that works for the middle class, and those working hard to join it.

Today in Toronto, Finance Minister Bill Morneau met with a group of Canada's leading private sector economists to gather their views on the Canadian and global economies.

The private sector economic forecasts have been used as the basis for fiscal planning since 1994. This practice, which is supported by the International Monetary Fund, ensures objectivity in the fiscal forecast.

Quick Facts

• Canada's underlying economic and fiscal fundamentals remain sound: over the last four quarters, real GDP has grown at an average rate of 3.7 per cent—the strongest four-quarter period of expansion since 2006. The labour market has also been strong, with nearly 400,000 new jobs created in the last year.
• The Government of Canada has taken significant steps towards helping families regain the confidence needed to help drive the economy forward. This includes cutting taxes for 9 million Canadians, introducing a new Canada Child Benefit, and strengthening the Canada Pension Plan so that future generations of workers can retire with dignity.
• The Government is committed to sound fiscal management as it continues to make investments to support long-term economic growth and a strong middle class, while preserving Canada's low-debt advantage for current and future generations.

Department of Finance Canada. October 4, 2017. Official International Reserves. All 2017 Official International Reserves

Ottawa - The Department of Finance Canada announced today that Canada's official international reserves decreased by an amount equivalent to US$764 million during September to US$84,339 million.

Details on the level and composition of Canada's reserves as of September 29, 2017, as well as the major factors underlying the change in reserves, are provided below. All figures are in millions of US dollars unless otherwise noted.

Foreign Currency Reserves

	Millions of US dollars
Securities	64,400
Deposits	9,862
Total securities and deposits (liquid reserves):	74,262
Gold	0
Special drawing rights (SDRs)	7,900
Reserve position in the IMF	2,177
Total:
September 30, 2017	84,339
August 31, 2017	85,103
Net change:	-764

FULL DOCUMENT: http://www.fin.gc.ca/n17/17-092-eng.asp

AVIATION - BOEING X BOMBARDIER

DoC. USITC. 10/06/2017. U.S. Department of Commerce Issues Affirmative Preliminary Antidumping Duty Determination on Imports of 100- to 150-Seat Large Civil Aircraft From Canada

Today, U.S. Secretary of Commerce Wilbur Ross announced the affirmative preliminary determination in the antidumping duty (AD) investigation of 100- to 150-seat large civil aircraft from Canada. As AFA, Commerce applied the sole dumping margin calculated in the petition for Canadian exports of aircraft, which is 79.82 percent. This rate will apply to all other producers/exporters as well.

The Commerce Department will instruct U.S. Customs and Border Protection to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on this preliminary rate.

“The United States is committed to free, fair and reciprocal trade with Canada, but this is not our idea of a properly functioning trading relationship,” said Secretary Ross. “We will continue to verify the accuracy of this decision, while do everything in our power to stand up for American companies and their workers.”

Although Canadian civil aircraft subject to this investigation have not yet been imported, an April 2016 press release announcing the sale of Canadian civil aircraft to a U.S. airline valued the order to be in excess of $5 billion.

The petitioner is The Boeing Company (IL).

Enforcement of U.S. trade law is a prime focus of the Trump administration. From January 20 through October 5, 2017, the Commerce Department has initiated 65 AD and countervailing duty (CVD) investigations – a 48 percent increase from the previous year, and a 16-year peak in the number of investigations initiated in a single fiscal year. The Commerce Department currently maintains 411 AD and CVD duty orders which provide relief to American companies and industries impacted by unfair trade. Antidumping laws provide U.S. businesses and workers with an internationally accepted mechanism to seek relief from the harmful effects of dumping unfairly priced products into the United States.

Commerce is currently scheduled to announce its final AD determination in this investigation on December 19, 2017.

If the Commerce Department makes an affirmative final determination of dumping and the U.S. International Trade Commission (ITC) makes an affirmative final injury determination, Commerce will issue an AD order. If the Commerce Department makes a negative final determination of dumping or the ITC makes a negative final determination of injury, the investigation will be terminated and no order will be issued.

The U.S. Department of Commerce’s Enforcement and Compliance unit within the International Trade Administration is responsible for vigorously enforcing U.S. trade laws and does so through an impartial, transparent process that abides by international rules and is based solely on factual evidence.

Foreign companies that price their products in the U.S. market below the cost of production or below prices in their home markets are subject to antidumping duties.

In fiscal year 2016, the United States collected $1.5 billion in duties on $14 billion of imported goods found to be underpriced, or subsidized by foreign governments.

Fact sheet: http://enforcement.trade.gov/download/factsheets/factsheet-canada-large-civil-aircraft-ad-prelim-100617.pdf

Global Affairs Canada. October 6, 2017. Statement by Minister of Foreign Affairs on U.S. Department of Commerce preliminary anti-dumping determination on large civil aircraft from Canada

Ottawa, Ontario - The Honourable Chrystia Freeland, Minister of Foreign Affairs, today issued the following statement:

“The deeply integrated aerospace industries of Canada and the United States support well-paying, middle-class jobs in both countries and help strengthen the global competitiveness of the North American aerospace sector.

“We are extremely disappointed by and in complete disagreement with the U.S. Department of Commerce’s preliminary determination in the anti-dumping investigation of exports of large aircraft from Canada.

“Given the baseless and absurdly high preliminary countervailing duties announced on September 26, today’s news comes as no surprise. This is the second step in the U.S. Department of Commerce’s multi-step process.

“These anti-dumping duties on Bombardier’s C Series aircraft unfairly target Canada’s highly innovative aerospace sector and its more than 200,000 workers—and put at risk the almost 23,000 U.S. jobs that depend on Bombardier and its suppliers.

“Boeing is manipulating the U.S. trade remedy system to prevent Bombardier’s new aircraft, the C Series, from entering the U.S. market, despite Boeing’s admission that it does not compete with the C Series.

“Our government will continue to vigorously defend the interests of the Canadian aerospace industry and our aerospace workers against irresponsible and protectionist trade measures. We will continue to raise this issue with Boeing and with the U.S. government at the highest levels.”

BOMBARDIER. October 6, 2017. Commercial Aircraft,  Bombardier Inc. Statement on Commerce Department Antidumping Duties Preliminary Decision

Montréal - “We strongly disagree with the Commerce Department’s preliminary decision.  It represents an egregious overreach and misapplication of the U.S. trade laws in an apparent attempt to block the C Series aircraft from entering the U.S. market, irrespective of the negative impacts to the U.S. aerospace industry, U.S. jobs, U.S. airlines, and the U.S. flying public.

The Commerce Department’s approach throughout this investigation has completely ignored aerospace industry realities.  Boeing’s own program cost accounting practices – selling aircraft below production costs for years after launching a program – would fail under Commerce’s approach.  This hypocrisy is appalling, and it should be deeply troubling to any importer of large, complex, and highly engineered products.

Commercial aircraft programs require billions in initial investment and years to provide a return on that investment.  By limiting its antidumping investigation to a short 12-month period at the very beginning of the C Series program, Commerce has taken a path that inevitably would result in a deeply distorted finding.

We remain confident that, at the end of the processes, the U.S. International Trade Commission will reach the right conclusion, which is that the C Series benefits the U.S. aerospace industry and Boeing suffered no injury. There is wide consensus within the industry on this matter, and a growing chorus of voices, including airlines, consumer groups, trade experts, and many others that have come forward to express grave concerns with Boeing’s attempt to force U.S. airlines to buy less efficient planes with configurations they do not want and economics that do not deliver value.

The U.S. government should reject Boeing’s attempt to tilt the playing field unfairly in its favor and to impose an indirect tax on the flying public through unjustified import tariffs.

Commerce’s statement that Bombardier is not cooperating with the investigation is a disingenuous attempt to distract from the agency’s misguided focus on hypothetical production costs and sales prices for aircraft that will be imported into the United States far in the future.

As we have explained repeatedly to the Department, Bombardier cannot provide the production costs for the Delta aircraft for a very simple reason; they have not yet been produced. Commerce’s attempt to create future costs and sales prices by looking at aircraft not imported into the United States is inappropriate and inconsistent with the agency’s past practices. This departure from past precedent and disregard of well-known industry practices is an apparent attempt to deprive U.S. airlines from enjoying the benefits of the C Series, even though Boeing abandoned the segment of the market served by the C Series more than a decade ago.

This action also puts thousands of high-technology U.S. jobs at risk given the C Series’ significant U.S. content.  More than half of each aircraft’s content, including its engines and major systems, is sourced from U.S. suppliers. Going forward, the C Series program will generate more than $30 billion in business for U.S. suppliers and support more than 22,700 jobs in the United States.”

The Globe and Mail. OCTOBER 6, 2017. Trump administration punishes Bombardier with another import duty
NICOLAS VAN PRAET, MONTREAL

The Trump administration has punished Canadian plane maker Bombardier with another import duty on its high-tech C Series airliner, cranking up the pressure on Ottawa amid tense renegotiations of the North American free-trade agreement.

In a decision released Friday, the U.S. Department of Commerce ruled to slap an anti-dumping duty of nearly 80 per cent on Bombardier Inc. C Series planes imported into the United States. Boeing Co., whose lawsuit triggered a Commerce investigation into the 100- to 150-seat airliner, had demanded that amount in its initial complaint before later revising it higher. Commerce said it was applying the only dumping margin for which there was a calculation.

The penalty comes on top of a separate countervailing duty of 220 per cent imposed by the department last week. That provoked shock among political leaders in Canada and Britain because of its magnitude – far exceeding the 80 per cent Boeing Co. requested – and put the two countries on notice that the United States intends to aggressively protect its domestic aerospace industry.

Together, the two levies more than triple the price of Bombardier C Series passenger jets shipped to the United States. If finalized, they would put the U.S. market out of reach for the plane and threaten thousands of jobs if the company isn't able to offset U.S. sales with business elsewhere.

"The United States is committed to free, fair and recriprocal trade with Canada but this is not our idea of a properly functioning trade relationship," U.S. Commerce Secretary Wilbur Ross said in a statement. "We will continue to verify the accuracy of this decision while doing everything in our power to stand up for American companies and their workers."

The new duty deepens the fault lines between Canada and its biggest trading partner, undermining hopes that officials will make progress on forging a new NAFTA deal. Last week's decision was among the worst such trade rulings against Canada so far and raises the spectre of a trade war, said David Madani, senior Canada economist at Capital Economics in Toronto. This week's decision makes matters worse, he said.

"This is all about politics now," Mr. Madani said, noting that every major aerospace manufacturer is backed by its home country, given the huge sums involved. "It clearly shows that the U.S. Commerce Department, and the U.S. administration more generally, has got it in for Canada."

U.S. President Donald Trump is said to covet such duties as he tries to put in place an "America first" trade strategy that aims to save manufacturing jobs. Boeing is only one of several U.S. companies that have sued foreign rivals in recent months, aligning itself with the political winds to push its own interests. On Thursday, the U.S. International Trade Commission ruled unanimously that South Korean appliance makers LG and Samsung are importing large residential washers into the United States in such increased quantities that they are a "substantial cause of serious injury" for Whirlpool Corp. and other U.S. manufacturers.

In Ottawa, Chrystia Freeland, Canada's minister of foreign affairs, said she was disappointed by the decision but that it came as no surprise.

"Boeing is manipulating the U.S. trade remedy system to prevent Bombardier's aircraft, the C Series, from entering the U.S. market despite Boeing's admission that it does not compete with the C Series," Ms. Freeland said. "Our government will continue to vigorously defend the interests of the Canadian aerospace industry and our aerospace workers against irresponsible and protectionist trade measures."

The Bombardier decision further squeezes the company as it tries to keep interest in the C Series alive and keep its turnaround effort on track. The aircraft is the company's big bet to drive future revenue in its commercial aerospace business and getting it to market at a cost of $6-billion (U.S.) nearly bankrupted it.

Bombardier executives have said they remain confident they will win several new orders for the plane this year as sales campaigns in Asia and Africa yield results. The jetliner is widely considered a technical achievement and has won praise from airlines now flying it but Boeing, Embraer SA and other rivals are moving aggressively to stop the 100-to-150-seat plane before it wins a solid place in the international market.

The row started this past spring when American plane maker Boeing sued Bombardier for selling 75 C Series planes to Atlanta-based Delta Air Lines at what it says were "absurdly low prices" while benefiting from unfair subsidies from the Canadian, Quebec and British governments. It asked the U.S. government to impose countervailing and anti-dumping duties on the C Series to level the playing field.

Commerce's preliminary ruling on countervailing duties triggered a sharp rebuke from lawmakers on both sides of the Atlantic. Prime Minister Justin Trudeau accused Boeing of trying to put Canadians out of work and threatened to cancel a major military contract to buy 18 Boeing Super Hornet fighters. Quebec Premier Philippe Couillard said that from now on "not one bolt, not one part, not one plane" made by Boeing should be purchased in Canada until the dispute is resolved fairly. In Britain, where the C Series wings are built, Defence Minister Michael Fallon also also vowed to retaliate, though like Canada, British officials are using political back channels with the United States to try to get the lawsuit dropped.

The fight over dumping allegations has been equally acrimonious. Boeing alleges Bombardier used $2.5-billion (U.S.) in state subsidies to adopt a strategy of slashing prices on the C Series and make inroads with major U.S. airlines, even if it meant selling far below cost. Boeing says that Bombardier offered Delta the C Series for $19.6-million per plane, significantly below the $33.2-million it costs to build it.

"These duties are the consequence of a conscious decision by Bombardier to violate trade law and dump their C Series aricraft to secure a sale," Boeing said in an e-mailed statement Friday. "This dumping in our home market was not a situation Boeing could ignore, and we're now simply asking for laws already on the books to be enforced."

Bombardier denies the allegations and says Boeing's numbers are wrong. The company had steeled itself for a big anti-dumping duty, saying that the legal process Commerce is following in its investigation of the case makes "no sense."

"Boeing's complaint and the Commerce Department's response constitute an abuse of process that will penalize not only Bombardier but also American workers and travellers and the American airline companies that will be forced to accept higher prices or inferior products," said Canadian Chamber of Commerce President Perrin Beatty.

The heart of the dumping question is whether Bombardier made C Series sales into the United States at less than fair value. Bombardier's position is that it has built no C Series aircraft yet to sell into the United States and made no C Series sales yet into the country (it doesn't book Delta's purchase agreement as a sale until the planes are delivered). Therefore, it says there were no sales and so the whole basis of the investigation is false and should be terminated.

Bombardier says the industry reality is that aircraft programs take billions of dollars in upfront investment and decades to generate a return. It argues that it's impossible to tally a firm production cost on the C Series until it has built enough of them to push past an early learning curve. And it argues that the plane's final price for Delta hasn't been set either because it will depend on seat configuration and other factors. Commerce has not been receptive to those arguments, according to people familiar with the case.

A battle has been growing over whether Bombardier has been co-operating with the Commerce probe and disclosing enough documents, with Boeing saying its rival has failed in that respect and Bombardier insisting the requests for information have been unreasonable. That led to Boeing demanding last month that an anti-dumping duty of 143 per cent be implemented – up from its earlier request of 80 per cent.

Commerce's two rulings are preliminary and it still has to issue final decisions. Observers note that the department finds in favour of U.S. complainants in a vast majority of cases and that its decisions are frequently at odds with U.S. obligations under World Trade Organization regulations.

The real test will come next year when Boeing will have to prove before the International Trade Commission (ITC) that it suffered injury at the hands of the C Series. Only then would the duties be finalized. Legal experts have said it will be difficult for Boeing to make that case given it does not make a plane comparable to the C Series and did not participate in the Delta sales competition. However, U.S. law remains stacked in favour of those making the complaint. For example, in the event ITC commissioners are split on a decision, the ruling is awarded to the complainant. And Boeing has risen to significant influence inside the Trump White House, according to CNN.

"Whatever the outcome, Bombardier, the Canadian government and the government of Quebec are likely to appeal any negative rulings to the highest levels of international trade," said Dan Fong, an analyst with Veritas Investment Research. "In the meantime, C Series sales momentum in the U.S. will be significantly curtailed, which may also put pricing pressure on Bombardier's international sales efforts."

The Globe and Mail. OCTOBER 6, 2017. OPINION. Taxpayer is the loser in battle of Bombardier-Boeing
ERIC REGULY, EUROPEAN BUREAU CHIEF

ROME - Boeing, Airbus and Bombardier – the top three aerospace companies – are failures. They cannot survive on their own, never have, never will. Taxpayers are always on the hook, often lavishly so, and they can't ever win. Capitalism at its finest, they are not.

When the companies' fortunes fly, it is the shareholders who cash in, even though the companies' success was in good part propelled by the taxpayer-funded loans, loan guarantees, grants, tax credits, export assistance and assorted subsidies that are showered on the "national champion." When the companies struggle because of botched management decisions or dud products, it is the taxpayers who absorb the losses.

Taxpayers have to because these companies, like the largest banks, are too big to fail. It is impossible to imagine that Boeing, Airbus or Bombardier would ever be allowed to burn on the tarmac, no matter what sins each commits. They have too many employees, too many government contracts and too many suppliers, none of which can be sacrificed in the name of creative destruction or protecting the taxpayer. Their government sponsors have created monsters that have to be subsidized no matter what – because their rivals are also subsidized – and which have to be defended from competition no matter what.

The warped, government-sponsored aerospace industry is going through a particularly ugly phase which is seeing mighty Boeing, the maker of everything from the Boeing 787 Dreamliner passenger jet to the F/A-18 Hornet fighter-bomber, gang up on much smaller Bombardier, which became Canada's favourite tech son after BlackBerry conceded defeat to Apple's iPhone.

Boeing accused Bombardier of selling its new C Series jet to Delta Air Lines at an "absurdly low" price, in effect dumping the plane into the U.S. market, where the Canadian company was desperate for a high-profile order for the slow-selling plane. On Friday, as expected, the U.S. Commerce Department hit Bombardier's C Series (and other foreign makers of aircraft in the 100- to 150-seat range) with preliminary anti-dumping duties of 80 per cent. The penalty comes on top of a separate countervailing duty of nearly 220 per cent imposed by the department last week.

The duties were requested by Boeing and if they are upheld, the C Series, a clever and efficient machine by all accounts, will be wiped out of the American market.

It all began a decade ago, when Bombardier formally launched the C Series, after several false starts. The single-aisle aircraft would be an entirely new product aimed at the gap between the regional jet (pioneered by Bombardier) and the workhorse Boeing 737 and archrival Airbus A320.

Bombardier's mistake was not in the design or the engineering of the new plane; it was underestimating the ruthless competitive response of Boeing and Airbus. The industry's two heavyweights did not so much fear the first version of the C Series, the CS100, which seats 120 passengers in the standard, single-class version, but the inevitable stretched versions that would compete directly with the 737 and A320. Bombardier's bigger CS300 seats 140 in the standard, single class version and a theoretical CS500 would come with 160-plus seats, eating into the 737-A320 duopoly. Boeing had nightmare visions of companies like Ryanair, Europe's biggest airline, which flies only 737s, switching to big versions of the C Series.

In response to the C Series, Boeing launched the 737 Max and Airbus launched the A320neo, both of them more efficient versions of the old models. Prices came down and both companies put enormous pressure on their customers to shun Bombardier's "nice little airplane," as Airbus's chief salesman, John Leahy, dismissively called it.

Boeing and Airbus wanted to kill the C Series, in reality. In an interview last year with The Globe and Mail, Tom Williams, Airbus's chief operating officer, said "I always take the view that you should be paranoid and that your enemies are out to get you and you should always be ready to react. So I think we did the right thing ... I think it is more difficult for Bombardier to sell the C Series against the 737 Max and the 320neo."

The anti-Bombardier campaign has had considerable success. The C Series went more than $2-billion (U.S.) over budget. Sales have been slow. Bombardier's share price collapsed. Enter the taxpayer, of course. Last year, Bombardier bagged a $372.5-million (Canadian) "repayable contribution" from the Canadian government. Earlier, the Quebec government invested $1.3-billion into the C Series in exchange for 49.5 per cent of the project. Author and subsidy tracker Mark Milke has calculated that Bombardier, including its de Havilland subsidiary, has probably received $4.1-billion in federal and Quebec aid over the past 50 years, a figure that has excluded the funds injected into Bombardier's Northern Ireland plant by the British government.

There is little doubt that the federal and provincial assistance has allowed Bombardier to cut the prices on C Series, but Boeing's complaint against Bombardier is laughable. Boeing is one of the most heavily subsidized companies on the planet. A 2015 report by Good Jobs First, an independent government-accountability research group in Washington, estimated that Boeing had soaked up $64-billion (U.S.) federal loans, loan guarantees and other assistance between 2000 and 2014. State and local subsidies larded another $13-billion onto Boeing's tally.

Backed by the nationalistic administration of President Donald Trump, Boeing stands a good chance of eradicating the C Series from the American market. Import duties will make the plane absurdly expensive.

But the protectionist move, while highly damaging, will not prove fatal for Bombardier. The company's failure is unthinkable. Taxpayers will come to the rescue once again, whether or not they want to. Everywhere, governments have created aerospace industries that lobby for a "level playing field" – no unfair subsidies, in other words – but in reality one can't imagine making planes without torrents of unfair subsidies. Sadly for the taxpayer, this dubious business model will never change.

BOMBARDIER. REUTERS. OCTOBER 6, 2017. U.S. backs 300 percent in duties on Bombardier after Boeing complaint
Alwyn Scott

WASHINGTON (Reuters) - The U.S. Commerce Department on Friday moved to impose trade duties of nearly 300 percent on sales of Bombardier Inc CSeries jets in the United States, prompted by Boeing Co’s complaint that the Canadian company received illegal subsidies and dumped the planes at “absurdly low” prices.

The Commerce Department proposed a 79.82 percent antidumping duty after a preliminary finding that the jets were sold below cost to Delta Air Lines Inc in 2016, adding to the 219.63 percent duty for subsidies announced last week.

The new proposed penalty, which would not take effect unless affirmed by the U.S. International Trade Commission early next year, is nevertheless expected to heighten trade tensions between the United States, Canada and Britain, where wings for the Bombardier jetliner are made.

The total duty was well above the 80 percent Boeing sought in its complaint.

After the first duty was announced on Sept. 26, Canada and Britain threatened to avoid buying Boeing military equipment, saying duties on the CSeries would reduce U.S. sales and put thousands of Bombardier jobs in their countries at risk.

The duty would apply to the cost of CSeries planes imported to the United States, effectively keeping it out of the market.

Bombardier shares were last down 0.5 percent to C$2.18.

Boeing, the world’s largest plane maker, hailed the decision.

“These duties are the consequence of a conscious decision by Bombardier to violate trade law and dump their CSeries aircraft to secure a sale,” Chicago-based Boeing said in a statement.

Canada’s government said it was in “complete disagreement” with the decision and would keep raising concerns with the United States and Boeing.

Bombardier did not immediately respond to requests for comment.

Echoing remarks from its statement last week, Delta noted the decision was preliminary and said it was confident regulators “will conclude that no U.S. manufacturer is at risk” from Bombardier’s plane.

Boeing has said the dispute is about “maintaining a level playing field and ensuring that aerospace companies abide by trade agreements” and is not an attack on Canada or Britain.

U.S. Commerce Secretary Wilbur Ross said the decision would help protect U.S. jobs, in line with President Donald Trump’s “America First” policy.

“We will ... do everything in our power to stand up for American companies and their workers,” Ross said in a statement.

More than half of the purchased content of each CSeries aircraft comes from U.S. suppliers, Bombardier has said. The plane supports an estimated 22,700 jobs and Bombardier’s aerospace division spent $2.14 billion in the United States last year, according to the company and documents seen by Reuters.

Additional reporting by David Ljunggren in Ottawa, Tim Ahmann in Washington and Allison Lampert in Montreal; Editing by Meredith Mazzilli

BLOOMBERG. 6 October 2017. Bombardier Hit With New U.S. Jet Duties After Boeing Complaint
By Andrew Mayeda and Frederic Tomesco

• Commerce imposes anti-dumping levies in latest C Series blow
• Trade dispute has roiled relations with allies in Canada, U.K.

The U.S. slapped duties on Bombardier Inc.’s showcase commercial jet for the second time in as many weeks, upholding Boeing Co.’s case that its Canadian competitor sold planes at less than fair value.

The Commerce Department imposed a preliminary import duty of 80 percent on Bombardier C Series aircraft based on its finding, according to an emailed statement Friday. The agency ruled last week that the Montreal-based planemaker, which invested more than $6 billion to develop the all-new C Series, benefited from unfair subsidies.

The second round of import duties marks the latest blow for Bombardier, which received financial support from Quebec and Canada after its biggest jet came in two years late and about $2 billion over budget. The ruling is also bound to stoke tensions between the U.S. and two key allies, Canada and the U.K., which expressed disappointment with last week’s ruling.



Both charges -- last week’s 220 percent countervailing duties and Friday’s anti-dumping restrictions -- could be reversed by the U.S. International Trade Commission if the tribunal concludes that Boeing wasn’t injured by Bombardier’s jet program, a decision expected to be made next year. The Commerce department also still needs to issue a final ruling in both cases.

Bombardier fell less than 1 percent to C$2.18 at 2:00 p.m. in Toronto. The shares are about 4 percent lower than their level before the initial Commerce Department ruling last week.


Canadian Prime Minister Justin Trudeau, who called last week’s decision disappointing and vowed to fight for Canadian jobs, has warned that his government won’t buy Boeing military jets unless it drops the case. The controversy also could hang over his trip to Washington next week, where he is scheduled to discuss trade with President Donald Trump just as negotiators hold the fourth round of talks to amend the North American Free Trade Agreement.

‘Bitterly Disappointed’

British Prime Minister Theresa May said she was “bitterly disappointed” by last week’s decision, considering Bombardier employs more than 4,000 people in Northern Ireland. U.K. Trade Secretary Liam Fox and Irish Foreign Minister Simon Coveney have discussed the matter with U.S. Commerce Secretary Wilbur Ross this week.

The U.S. will begin collecting preliminary duties to offset the difference between the sales price and fair value, the Commerce Department said in its latest decision. The ruling applies to exports of 100- to 150-seat Canadian aircraft.

Boeing accuses Bombardier of selling its biggest jet in the U.S. at less than fair value, while benefiting from unfair government subsidies. The C Series wouldn’t exist without the assistance of the Canadian and Quebec governments, according to the U.S. planemaker.

“This determination confirms that, as Boeing alleged in its petition, Bombardier dumped its aircraft into the U.S. market at absurdly low prices,” the U.S. planemaker said in an emailed statement.

Delta Air Lines Inc. placed an order for at least 75 of the C Series planes last year, a deal with a list value of more than $5 billion, and deliveries are expected to begin next year. Neither Delta nor Bombardier immediately responded to requests for comment.

Bombardier has called Boeing’s complaint “unprecedented in its overreach.” The Canadian manufacturer argues that Boeing doesn’t make planes that compete with the aircraft -- an assertion that Delta backed up in its testimony before the International Trade Commission.

WTO Case

In a separate case, the World Trade Organization last week approved Brazil’s request to investigate Canada’s alleged use of more than $3 billion in government subsidies to produce Bombardier aircraft.

The South American nation began WTO consultations in February, saying Canada ran afoul of trade rules because its policies unfairly bolstered the domestic aerospace industry to the detriment of Embraer SA, an airplane producer based in Sao Jose dos Campos, Brazil.

Bombardier said it was “confident that the investments and contribution programs mentioned in Brazil’s petition are in full compliance with all WTO and international trade rules.”

— With assistance by Tony Robinson

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LGCJ.: