VICTORIA, British Columbia – In a major policy shift, Canada will now determine the winning firms for its defense equipment projects not only based on the benefits a company can provide but also the “harm” individual corporations have on the Canadian economy.
The change, announced Tuesday with the launch of a (CAN) $19 billion project (U.S. $14 billion) to buy 88 next generation fighter jets, is clearly aimed at Boeing, which earlier this year filed a trade complaint against Canada’s largest aerospace firm, Bombardier.
But the criteria will apply to all future defense procurements, Canadian government officials said Tuesday.
“This new policy clearly demonstrates that we are standing up for Canadian interests,” said Navdeep Bains, the minister of innovation, science and economic development.
“If there’s an impact on Canadian jobs you will be at a distinct disadvantage,” he said of firms who want to bid on military equipment projects.
In April, Boeing asked the U.S. Commerce Department to investigate Bombardier, claiming that Canadian government subsidies for that Quebec-based firm allow it to sell its C-Series passenger aircraft in the U.S. at cut-rate prices. As a result, the Trump administration brought in a tariff of almost 300 percent against Bombardier aircraft sold in the U.S.
In retaliation for Boeing’s actions, Canada decided against buying 18 new Super Hornet fighter jets in a deal that would have been worth $5.23 billion.
The announcement of the new procurement policy further ups the ante against Boeing, but government officials say it will send a strong message to countries as well that Canada will not idly stand by and accept unfair trade barriers.
Canada plans to spend billions of dollars in the coming years on new aerial refuelling tankers, unmanned aerial vehicles and satellites. Boeing is interested in all of those programs.
Canada’s procurement minister Carla Qualtrough said all companies are welcome to bid on the upcoming fighter jet program. Proposals will be requested in 2019 and a winner selected in 2022. Eighty-eight fighter jets will be purchased, she added.
Delivery of the first planes are expected in 2025.
But Qualtrough noted that the new policy provides for the examination of whether a bidder has been “responsible for harming Canada’s economic interests.”
Although she didn’t name Boeing specifically, the minister pointed out that such an evaluation would be based on a company’s actions at the time bids are examined. That would give Boeing a chance to drop its trade complaint against Bombardier, government officials say.
Boeing said Tuesday it will examine what is being called the “Boeing clause.”
“We will review the future fighter capability project requirements for 88 jets and make a decision at the appropriate time,” company spokesman Scott Day said.
He noted that Boeing is the largest non-Canadian aerospace manufacturer in Canada and has around 2,000 employees in the country.
Canadian Prime Minister Justin Trudeau has accused Boeing to trying to eliminate tens of thousands of aerospace jobs at Bombardier through its efforts. “As a government they should not expect us to buy planes off them if they are attacking our industry,” he said on Sept. 17.
Defence Minister Harjit Sajjan and Bains said Tuesday that Canada will only deal with a “trusted partner” on the new fighter jets. Sajjan had previously said Boeing is no longer considered a trusted partner by Canada.
Boeing officials have insisted that its trade actions against Bombardier’s civilian aircraft should not be tied to defense procurements.
Instead of buying 18 Super Hornets as a stop-gap measure until the new fighters arrive, the Canadian government announced Tuesday it would purchase used F-18s from Australia.
David Pugliese is the Canada correspondent for Defense News.