LOOKING AHEAD
David Olive examines reality setting in for Bombardier, the Trump administration and Saskatchewan Premier Brad Wall,
Investors and dumping Trump Two lessons from last week’s stockmarket dive resulting from all the talk of a Donald Trump impeachment:
1. Given the erratic nature of the Trump presidency, investors can expect repeated market dives in months to come. They might as well brace now for the failure on Capitol Hill of Trump’s “reverse-Robin Hood” Obamacare replacement scheme, meant to finance his plan for massive tax relief for the rich (also likely DOA). Trump’s trade policy is incoherent: Last week, Trump signed a 10-point free trade pact with China after months of threatening that country with a trade war; and he launched a renegotiation of the North American Free Trade Agreement (NAFTA) after coming close to killing NAFTA outright on April 29.
2. “God forbid if Trump gets impeached,” John Sullivan, CEO of Toronto real estate giant Cadillac Fairview, told Bloomberg News last week. “The political uncertainty that results from that wouldn’t be a good thing.”
Actually, a return to the relative tranquility of the “no-drama-Obama” era would be best achieved with Mike Pence in the West Wing. The former Indiana governor, in contrast to Trump, has prior experience running a government. Pence would read his morning Presidential Daily Briefing, which Trump unapologetically ignores, and would not impulsively share secrets with visiting Russians in the Oval Office. Away out for Bombardier? Ottawa is compelled to defend Bombardier Inc. against the U.S. trade dispute Boeing Co. has launched against the Montreal aerospace company’s CSeries commuter jets, which Boeing claims Bombardier has been under-pricing to gain a foothold in the U.S. market.
All aircraft makers deep-discount their early orders on new planes. But it helps Boeing’s case that Brazil’s Embraer SA, Bombardier’s chief rival in commuter and private jets, has lodged a similar complaint with the World Trade Organization.
You have to wonder about Boeing’s long-term thinking here, though. In U.S. hearings last week, Boeing claimed it stands to lose $330 million (U.S.) per year by being squeezed out of an international market Boeing says Bombardier is determined to capture at least half of. That’s a flattering outcome to imagine for Bombardier.
More to the point, that forfeited revenue amounts to just 0.4 per cent of Boeing’s 2016 total sales of $94 billion (U.S.).
It also, as Ottawa threatened last week, puts in doubt Boeing’s $2billion contract to sell 18 Super Hornet fighters to Canada, already a relatively recent buyer of CH-47 Chinooks and C-17 Globemasters from Boeing.
An alluring solution is a consortium of Boeing, Quebec and China as co-owners of the C-Series program. Quebec already owns 49 per cent of the CSeries project. An equity stake for Boeing would enable it to crack the vast Chinese market at minimal cost.
An equity stake for state-owned Commercial Aircraft Corp. of China Ltd. (Comac) — already a rumoured investor in the C-Series — would give it access to CSeries technology that’s about a decade advanced over the Chinese aviation sector.
The heft of the triumvirate, with Comac and Boeing’s strong balance sheets and R&D and sales-book prowess would provide both companies a wider international client base. And Boeing would get a “stepup” CSeries aircraft for feeder lines operated by clients of its largest aircraft — an advantage for Boeing over archrival Airbus SE. The fall of the Brad Wall It’s been several months since PM Justin Trudeau first threatened to impose a carbon-tax regime on any province that didn’t come up with one of its own.
So far, only Brad Wall, the Sas- katchewan premier, has balked, threatening last week to launch a constitutional battle to protect his province from federal intrusion. Wall indulged in some gratuitous belligerence, calling Ottawa’s technical paper on nationwide carbon pricing released last week a “ransom note.”
But Wall is in a corner, so to speak. Provinces representing more than 80 per cent of Canada’s population already have carbon-pricing plans that meet federal guidelines.
Only Saskatchewan is refusing to consider pricing carbon, by far the most effective method of reducing CO2 emissions, according to the world consensus of climate-change scientists.
Wall’s game is either to call Ottawa’s bluff — a non-starter given the resolve of Environment Minister Catherine McKenna and her boss — or to defend his right-wing credentials with the rank-and-file of his Saskatchewan Party.
Otherwise, Wall’s stance is hard to figure.
The carbon levies collected by Ottawa will be returned to the provinces from which they came.
But in hostile provinces (so far, only Saskatchewan), Ottawa is considering direct rebates to households and businesses, rather than sending the funds to the treasury of a balky province. Those rebate cheques won’t bear Brad Wall’s signature.
Meanwhile, farmers, an important constituency for a Saskatchewan premier, are exempt from carbon taxes on farm operations. The Wall will collapse. John Robarts, Ontario premier in the 1960s, held out against Medicare, also citing federal intrusion in a provincial jurisdiction (health care).
But Ontarians broke with their popular premier on the issue. And Canada’s largest province fell in line with a defining Canadian virtue that had its origin in . . . Saskatchewan.