Brazil Launches WTO Challenge over Aid for Bombardier

 - February 8, 2017, 10:07 AM
Brazil claims the Bombardier C Series has benefited from more than $4 billion worth of illegal government subsidies. (Photo: Bombardier)

Brazil on Wednesday formally requested consultations with the Canadian government at the World Trade Organization (WTO) in Geneva over public financial support for Bombardier’s C Series program. The move follows an announcement by the federal government in Ottawa that it would grant Bombardier C$372.5 million ($283 million) in interest-free loans for both the C Series and the Global 7000 business jet. Although the loan totals less than the C$1 billion Bombardier original sought, CEO Alain Bellemare expressed satisfaction with the amount due to what he characterized as an improving financial situation at the company. 

For its part, Embraer applauded the Brazilian government's move, for which it has lobbied since the provincial government of Quebec granted Bombardier its own C$1 billion in loans last year.

The subsidies that the Canadian company has already obtained and continues receiving from the Canadian government have not only been fundamental in the development and survival of the C Series program, but have also allowed Bombardier to offer its aircraft at artificially low prices,” said Embraer CEO Paulo Cesar Silva. “It is essential to restore a level playing field to the commercial aircraft market and ensure that competition is between companies, not governments.”

In December Brazil’s Council of Ministers of the Foreign Trade Chamber (Camex) confirmed it authorized the opening of a dispute settlement procedure against Canada. At the time the Brazilian authorities cited a US$2.5 billion injection of provincial funds by the government in Quebec during 2016 alone and “indications” that the Canadian federal government planned soon to contribute significant capital to ensure artificially low prices for the C Series narrowbody. All told, Brazil claims that Bombardier has received more than $4 billion worth of illegal subsidies from Canada.

Brazil claims that Bombardier received more than $2.5 billion in illegal government support last year alone. The request for consultations marks the first stage of the dispute settlement procedure and allows Brazil access to additional information on the support given to Bombardier.

July 2017
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Comments

Both Brazil and Canada have a long history of Government support for their aircraft industries, so Brazil does not have "clean hands" in this complaint. I was directly involved in a U.S. Gov't. countervailing duty suit against Brazil in the early 1980s for their government subsidized customer aircraft financing and the U.S. proposed a 28% duty to level the playing field; however, politics got involved and the duty was not enacted. One can review the case and U.S. Federal Register for more details. Both countries should play by the rules they have agreed to or be penalized for breaking those rules.

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