WTO to investigate Brazil’s complaint against Bombardier
Latest challenge seen to add uncertainty to C Series after week of setbacks
The World Trade Organization has approved the Brazilian government’s request to investigate Canada’s alleged use of more than $3 billion in subsidies for Bombardier Inc., just days after the company was hit with a massive 220- per-cent duty.
The Brazilian government initially launched the formal dispute process in February, hours after the Canadian government announced it would be giving Bombardier $372.5 million in repayable loans. Brazil said in its request that Canada’s financial support, through loans, grants, equity infusions, tax credits and other contributions, has helped Bombardier develop, launch and preserve the C Series program.
Earlier this week, the U.S. Department of Commerce slapped Bombardier with a massive 220-per-cent preliminary duty in the investigation launched by the Boeing Co. over its use of countervailing subsidies.
Brazilian aircraft manufacturer Embraer SA released a statement Friday saying it supports the establishment of the WTO panel.
“We believe that the decision of the Commerce Department reinforces the Brazilian Government’s claim in the panel opened today at the WTO,” Embraer’s chief executive Paulo Cesar Silva said in a statement.
Joseph Pickerill, a spokesperson for Minister of International Trade Francois-Philippe Champagne, said Canada will defend the interests of Bombardier and the Canadian aerospace industry.
“All aircraft-producing countries provide some form of support to their aircraft industry,” Pickerill said. “Brazil is no exception, and Canada will be examining closely Brazilian Government support.”
Bombardier spokesperson Simon Letendre added in an emailed statement the company is “confident that the investments and contribution programs mentioned in Brazil’s petition are in full compliance with all WTO and international trade rules.”
While the establishment of the panel was expected, Matthew Kronby, the Government of Canada’s lead counsel during the last trade battle with Brazil and now a partner at Bennett Jones LLP, said it adds uncertainty for the C Series program.
“I think that’s exactly what Boeing and Brazil are trying to achieve here,” he said.
The WTO will now select three members for the dispute-settlement panel, which will then issue a report determining whether the Canadian government violated international trade rules. Kronby said the panel report may not be released until 2019, largely due to the scope of the Brazilian government’s complaint.
Lawrence Herman, international trade counsel at Herman and Associates, said Bombardier and its C Series program will face challenges due to the “two-front assault.”
“It shows the commercial viability and attractiveness of the C Series as others are trying to prevent its entry in a major way into the global aviation market,” Herman said.
“But that doesn’t get you over the immediate problem, which is the fact that these kind of disputes do destabilize the market.”
Canada and Brazil have a long history of trade disputes over government support to the aerospace sector, including a sevenyear battle in the late 1990s and early 2000s.
While Bombardier faced several blows in the past few days, it ended the week with some positive news. The company announced Friday it had finalized an agreement with India’s SpiceJet Limited for the purchase of up to 50 Q400 turboprop aircraft, a deal that could be worth up to US$1.7 billion, based on list prices. The deal marks the largest single order for the turboprop aircraft. In June, an analyst said the purchase was important to ensure the viability of the turboprop program.
The Bombardier stock was trading 3.2 per cent up to $2.28 on the Toronto Stock Exchange on Friday, and is up 2.2 per cent in a week that has rocked the aerospace company with a series of bad news.