Canada is not a banana republic
There’s a lot that separates western liberal democracies and your typical banana republic, but two of the most important distinctions are found in the rule of law—first, that laws are created through a formal process and not imperial decree, and second, that contracts are awarded by civil servants at independent state institutions and not politicians.
While a Latin American autocrat may take a piece of paper, scribble out an edict and this becomes the law of the land, in Canada, prime ministers must follow an established process: legislation must be introduced in Parliament and voted on.
The same goes for contracts. A corrupt politician in a broken-down African state may tell civil servants which of his favoured companies shall be awarded the contract for government-bought goods or services; in Canada, our elected officials are meant to follow a different path: the civil service tenders a proposal, and companies compete for the work in a politically-blind bidding process.
I grant that the process is not always clean in Canada—recall the Quebec corruption scandal of a few years back. But if politicians or bureaucrats skirt the rule of law and dodge the proper procurement process they’re likely to find themselves in a political scandal or facing a judge.
Canada is thus different, or meant to be, from Latin American machismos. Or even Donald Trump, who upon arriving into office down south, had little conception of why powers are constitutionally divided among his office, two branches of Congress, the judiciary and the states.
Which brings me to Prime Minister Justin Trudeau and his imperial decree that Boeing, the American- airplane manufacturer, might find its federal government-related business suspended until it drops its complaint with the U.S. Trade Commission against Montreal-based Bombardier, this over the latter’s C -Series program. “We won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business,” said Trudeau earlier this week. The reference was to the planned federal purchase of 18 Super Hornet fighter jets for the Canadian military.
The prime minister also remarked that Boeing was acting in its own “narrow economic interest to harm a potential competitor.” Trudeau claimed the Boeing’s challenge was “not in keeping with the kind of openness to trade that we know benefits citizens in all countries.”
Narrow economic interest, harm to a competitor and a lack of openness to trade?
Duplicity, thy names are Bombardier and the federal government.
The first traceable federal disbursement to Bombardier occurred in 1966, and over the decades since, Bombardier and related companies have received at least $4.1 billion (after adjusting for inflation) in federal and also provincial subsidies over five decades.
The most recent examples: $1.3-billion payment from the Quebec government in 2015, $54-million in federal funding for a Bombardier-led consortium in 2016, and $372.5-million in federal cash earlier this year from Ottawa.
That’s a problem all on its own, since picking and choosing companies for special treatment from taxpayers produces regular losses for taxpayers.
Another major problem is how Bombardier has regularly appeared in Federal Court to block Access to Information data from being released. That data might help the public—and competitors—know more about Bombardier’s five-decade bonanza of government-funded loans, grants, interest-free deals and other favours. Such details might reveal that the taxpayer-funded flows do in fact skirt the free trade rules to which Canada has agreed.
Yet despite Bombardier’s five-decade long rent-seeking, subsidy-procuring behaviour, and pliant federal and Quebec politicians who see no difference between their political interests and that of a corporation, Bombardier’s newest spokesperson, the prime minister, claims, Monty Python-like, that there is really nothing to see here, that Boeing’s challenge is actually sour grapes and amounts to nothing.
If that were true, neither the prime minister nor one of the federal government’s pet companies, Bombardier, should have an issue with a trade complaint being examined in full.
In all this, it’s true that Bombardier is not alone in its subsidy-seeking behaviour. By one estimate, Boeing itself has received subsidies worth $13.4 billion. But that speaks to the need for better, tougher free trade agreements that curtail government involvement worldwide—let aerospace companies fight it out for business and leave each country’s taxpayers out of it.
(And yes, it is possible. Countries have been moving away from high tariffs and duties on each others’ goods and services since the 1950s; they can also do the same on subsidies if a few key countries and leaders would make a principled, economically sensible and taxpayer-friendly stand.)
Lastly, all of this also illustrates one other problem with taxpayer grants and loans for Bombardier, not to mention every other company in every other sector that receives similar lolly. Once governments “invest” through loans or equity stakes, or otherwise become enmeshed with a company via other corporate welfare schemes, politicians are in an inherent conflict of interest. They feel the need to defend their—or more precisely taxpayers’—“investment” from competition, domestic or foreign.
Thus, instead of acting in the wider interests of all Canadians and the greater economy, we have a prime minister acting as an apologist and advocate for one company’s—to borrow from Trudeau’s attack on Boeing—”narrow economic interest”. To that end, he issues decrees and demands suspension of planned procurements as if he were the president of Venezuela and not the prime minister of Canada.
In that way, Trudeau mimics the behaviour of tin-pot potentates. In so doing, he’s treating Canada, its institutions and rule of law as inconvenient, thus following the lowly sub-standards of a banana republic.
Originally published in Maclean’s September 21, 2019
Mark Milke is the author of multiple reports on subsidies to business.