The first priority for any government spending must be to invest in the people of its own country.
We all pay taxes and pay our government fees on the basis that the revenue earned by all levels of government – money that comes from us – will be used to benefit our communities in a variety of ways.
This could be health care, education, programs to ensure everyone has access to opportunity, to fight inequity, and more.
It also includes the efforts of our government to boost the economy, creating economic opportunity and good jobs.
One particularly big spending item that has been on the government agenda for some time now is the contract to replace the aging CF-18 fighter jets used by our military. This is a contract worth an estimated $15 billion to $19 billion – a welcome injection into the economy.
The federal government had been on track to buy 18 Super Hornets from U.S. aerospace company Boeing, to fill a capability gap while the procurement process proceeds.
Boeing then pushed the United States government to impose massive tariffs on Bombardier over federal and Quebec government support for the C-Series jet. The U.S. government responded by imposing duties of almost 300 per cent on sales of the C-Series in that country.
The move prompted Prime Minister Justin Trudeau to say his government wouldn’t do business with a company that is trying to sue Canada.
On Tuesday, the Liberal government made good on its warning, with Public Works and Procurement Minister Carla Qualtrough telling a news conference that “bidders responsible for harming Canada’s economic interests will be at a distinct disadvantage” when it comes to getting the new contract.
The statement was widely seen as a warning to Boeing to drop its case against Bombardier if it hopes to win future government contracts.
Canada has a long and proud history in the aerospace sector, including the contributions of Boeing. We have developed some incredibly innovative technologies over the decades, and facilities in this country are a vital part of an integrated North American industry. Technology and parts go back and forth across the border as aircraft and space craft are developed and built.
Defense aircraft is one of the largest procurements a government can make. Many North American and global aerospace firms invest in Canada.
Thanks to regional offsets, in which governments require the companies from which they procure aerospace products to spend an equal amount in Canada and spread out across provinces, the aerospace sector spans the country. While much of the industry is concentrated in Ontario and Quebec, there are also sizable plants in Atlantic Canada, Winnipeg and British Columbia.
Without regional offsets – that is, without governments willing to use its spending powers to ensure good jobs and economic opportunity for all its citizens – much of that regional diversity would be at risk.
Modern trade deals, however, put regional offsets and other important industrial policy techniques at risk. The off-again, on-again Trans-Pacific Partnership, for instance, would consider regional offsets to be a barrier to free trade. The TPP would, however, allow some countries in the deal, countries considered to be developing or emerging such as Malaysia and Vietnam, to use regional offsets.
The move by the federal government in Tuesday does not go as far as calling for regional offsets in any bid for the big fighter jet contract, but it does signal that any company wanting the contract must consider ways that it can help foster investment in this country. That's a good start.
It is not too late for Boeing to take part in the program to replace the CF-18 and play an even stronger role in Canada’s aerospace industry. It has shown a willingness to abide by regional offset programs in the past, and with a review of its current trade actions, could easily boost its role in our defense procurement.
Boeing has been an important part of the aerospace sector in Canada for many years. Its facility in Winnipeg alone employs 1,300 workers, Unifor members, who also contribute to the community and the economy.
The company is a vital part of the economy and a good example of how integrated the industry is, with many of the parts it makes in Winnipeg being sent back to the U.S. for the Boeing 787 Dreamliner and the new 737 MAX.
With Tuesday’s announcement, the federal government is now signaling clearly it wants to continue a mutually beneficial relationship with the company. We should all welcome that.