Regionals Update: Embraer draws Germany into subsidy squabbles

 - July 11, 2008, 6:35 AM

Heartened by a recent WTO ruling against Canada for its support of Bombardier CRJ sales, Brazil’s Embraer has now turned its attention to its European competition, accusing the German government of illegally subsidizing the development of Fairchild Dornier’s 728 and 928 programs. Fairchild Dornier recently secured an additional $850 million to support the development of extended-range variants of its 70- to 110-seat jet programs, some $340 million of which would come from guaranteed loans offered by German federal and Bavarian state banks. Embraer has asked the Brazilian government to urge the WTO to investigate the matter.

The WTO in late January ruled that Ottawa broke international trade rules when it provided $1.1 billion in low interest loans to Air Wisconsin for its acquisition of 75 Bombardier CRJs. It also found that funding provided by Canada’s Export Development Corp., to Air Nostrum in 1998 and Comair in 1996, 1997 and 1999 ran counter to international trade rules. Of course, Canadian officials said the loans merely matched similar benefits offered by Brazil on behalf of Embraer. The latest ruling sparked a new round of talks between the two governments, beginning last month in New York.