Brazil files WTO com­plaint against Canada over aid to Bom­bardier

The Hamilton Spectator - - BUSINESS - ROSS MAROWITS

MON­TREAL — The fed­eral gov­ern­ment’s aid to Bom­bardier has trig­gered a new trade bat­tle with Brazil, which launched a for­mal com­plaint Wed­nes­day with the World Trade Or­ga­ni­za­tion over Cana­dian sub­si­dies to the aero­space in­dus­try.

“Cana­dian sub­si­dies ar­ti­fi­cially af­fect the in­ter­na­tional com­pet­i­tive­ness of the sec­tor, in a man­ner in­con­sis­tent with Canada’s WTO obli­ga­tions,” the Brazil­ian gov­ern­ment said in a state­ment.

Brazil said Bom­bardier re­ceived at least $2.5 bil­lion US in gov­ern­ment sup­port last year and that ad­di­tional con­tri­bu­tions may hurt the coun­try’s in­ter­ests by fur­ther dis­tort­ing the aero­space in­dus­try.

Last year, Bom­bardier re­ceived a $1-bil­lion US in­vest­ment for the CSeries pas­sen­ger jet pro­gram from the Que­bec gov­ern­ment in ex­change for a 49.5 per cent stake. The com­pany also sold a 30 per cent stake in its rail­way di­vi­sion to pen­sion fund man­ager Caîsse de dépôt for $1.5 bil­lion US.

On Tues­day evening, Ottawa an­nounced it will pro­vide $372.5 mil­lion in new loans to Bom­bardier to be paid in in­stal­ments over four years to sup­port the Global 7000 and CSeries air­craft projects. Although the loans are in­ter­est-free, the gov­ern­ment said it ex­pects to earn a re­turn, as it has done with past loans, through roy­al­ties for planes sold.

Un­der such an ar­range­ment, Bom­bardier has so far paid $741 mil­lion into Ottawa’s cof­fers on $586 mil­lion in fed­eral loans in the 1980s and ’90s, ac­cord­ing to the com­pany.

Bom­bardier is ex­pected to be­gin pay­ing roy­al­ties to the fed­eral gov­ern­ment in April for sell­ing seven CSeries last year af­ter the com­pany re­ceived $350 mil­lion in loans in 2008 in sup­port of the air­craft.

Sao Paolo-based Em­braer, a fierce ri­val of Bom­bardier’s, said it sup­ports its gov­ern­ment’s com­plaint. CEO Paulo Ce­sar Silva said the sub­si­dies given to Bom­bardier have helped the de­vel­op­ment and sur­vival of the CSeries and al­lowed the Mon­treal com­pany to sell the plane at ar­ti­fi­cially low prices.

“It is es­sen­tial to re­store a level play­ing field to the com­mer­cial air­craft mar­ket and en­sure that com­pe­ti­tion is be­tween com­pa­nies, not gov­ern­ments,” he said in a sep­a­rate news re­lease.

Brazil, which had threat­ened in De­cem­ber to launch a trade com­plaint, said the move will give it ac­cess to ad­di­tional in­for­ma­tion about sup­port to Bom­bardier.

Fed­eral In­ter­na­tional Trade Min­is­ter François-Philippe Cham­pagne said Tues­day that Ottawa is pre­pared to de­fend its fi­nan­cial sup­port to Bom­bardier.

“I am very much pre­pared to fight for what we are do­ing,” he said.

Bom­bardier CEO Alain Belle­mare was sim­i­larly de­fi­ant.

“This is the best plane in its class, so peo­ple are find­ing ways to come af­ter us,” he said.

The com­pany added Wed­nes­day that all coun­tries, in­clud­ing Brazil, help their aero­space sec­tors through tax breaks, roy­al­ties and re­search and de­vel­op­ment. It pointed to Brazil’s $588 mil­lion US in as­sis­tance to Em­braer in 2014 through the Brazil­ian De­vel­op­ment Bank for the de­vel­op­ment of its Legacy 500 busi­ness jet and an­other $1.5 bil­lion US for de­vel­op­ment costs of the KC390 air­craft.

A spokesper­son for Cham­pagne said Wed­nes­day af­ter Brazil’s trade com­plaint was an­nounced that the fed­eral gov­ern­ment is con­fi­dent the loans re­spect in­ter­na­tional law.

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