Canada is following through on its threat to abandon plans to purchase 18 Boeing Super Hornet fighter jets.
Government and industry sources said the Australia deal will be announced as early as next week, with the Royal Canadian Air Force needing 28 to 30 used F/A-18 fighter jets to meet its global commitments.
The Liberals had planned to buy 18 Super Hornets, at an estimated cost of $6 billion, until Boeing launched a trade dispute against Canadian rival Bombardier.
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In late September, Defence Minister Harjit Sajjan acknowledged that Canada was focused on purchasing surplus Australian F-18s for interim aircraft. They would supplement Canada's existing CF-18 fleet until a new aircraft could be acquired.
The final ruling in the case is expected next year, but the relationship between Boeing and Canada has nosedived since. "It would be a deeply unfortunate outcome", he said.
Australian military officials had been in the Canadian capitol of Ottawa in late November for talks, two of the sources said.
Investors Business Daily notes that the move appears to be motivated by a 300 percent tariff Washington slapped on sales of Canadian Bombardier Series C jets.
In response, the Commerce Department in September imposed a almost 220-percent preliminary tariff on the C-series, but a final decision is not until 2018.
Bombardier denies any wrongdoing and says Boeing can not prove it was harmed by the Canadian company's actions because it did not offer Delta any planes of its own.
In buying older Australian Super Hornets, Canada would be buying a cheaper aircraft, not need to retrain its pilots, nor spend money on a new supply chain, one source said.
Canadian Prime Minister Justin Trudeau has said the country "won't do business with a company that's busy trying to sue us and put our aerospace workers out of business". "Unfortunately, I think they're taking advantage of a [political] context that's favourable to them". It has been the standard line in Ottawa for months that Boeing, having failed to act as a trusted or valued partner, has effectively been shut out of any new federal contracts.
The trade dispute comes at a time when the United States and Canada are deadlocked in negotiations over the North American Free Trade Agreement (NAFTA) which, according to US President Donald Trump has not done enough to protect US jobs.