Brazil makes good on WTO threat
Takes Canadian goverment to task over Bombardier loans
TORONTO — The Brazilian government has launched a formal complaint against Canada at the World Trade Organization, citing the government’s support of Bombardier Inc.
The complaint, which Brazil has been threatening for months, was officially opened Wednesday, hours after the Canadian government announced that it will give Bombardier $372.5 million in repayable loans over four years.
Brazil submitted a request for consultations with Canada under the WTO’s dispute settlement system, the first step in the official complaint process. The complaint relates to subsidies granted to the aircraft industry by all three levels of government, and singles out Bombardier’s CSeries program.
“In Brazil’s understanding, Canadian subsidies artificially affect the international competitiveness of the sector, in a manner incompatible with Canada’s obligations to the WTO,” Brazil’s Ministry of Foreign Affairs said in a statement. “In 2016 only, Bombardier received at least $2.5 billion US in government support. New contributions have been announced, which may further deepen distortions in the aircraft sector, to the detriment of Brazilian interests.”
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 Caisse de depot for $1.5 billion US.
Canada and Brazil have a long history of trade disputes over government support to the aerospace sector.
Brazilian aircraft manufacturer Embraer SA said Wednesday that it supports the move.
“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 CSeries program, but have also allowed Bombardier to offer its aircraft at artificially low prices,” Embraer CEO Paulo Cesar Silva said in a statement. “It is essential to restore a level playing field to the commercial aircraft market and ensure that competition is between companies, not governments.”
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.
Bombardier said it is “not concerned at all” about the WTO complaint.
“These are repayable program contributions coming from existing programs, and we are very confident that they are fully compliant with Canada’s international trade obligations,” Bombardier spokesman Simon Letendre said in an email.
The $372.5 million in repayable loans, announced Tuesday night, will go towards research and development of Bombardier’s new Global 7000 business jet and the ongoing development of the CSeries. It is significantly less than the $1 billion US originally requested by Bombardier.
Canadian International Trade Minister Francois-Philippe Champagne said Ottawa is prepared to defend financial support like the one awarded Tuesday.
“I am very much prepared to fight for what we are doing,” he said Tuesday, adding that all countries, including Brazil, help their aerospace sectors.