Brazil Challenges Canada At WTO Over Bombardier Loans
- Author: Joey Payne Feb 09, 2017,
Feb 09, 2017, 0:38
Brazil says Canadian federal, provincial and local subsidies "artificially affect the global competitiveness of the sector" in a way that is inconsistent with Canada's WTO obligations.
Brazil has launched a formal complaint to the World Trade Organization over Canadian subsidies to the aerospace sector, hours after the federal government announced $372.5 million in interest-free loans to Bombardier.
Canada and Brazil have had a long-running dispute over government backing of Bombardier and Embraer, with both sides filing complaints against the other.
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"I am very much prepared to fight for what we are doing", he said.
Brazil said Bombardier received at least US$2.5 billion in government support past year and that additional contributions may hurt the country's interests by further distorting the aerospace industry.
The loan to Bombardier is far less than the USA $1 million the firm asked for in late 2015. The company also sold a 30 per cent holding in its railway division for $1.5 billion to Quebec-based pension fund manager Caisse de dépôt.
"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.
Aviation industry observers said it's hard to conclude that public aid allowed Bombardier to pursue aggressive pricing in contract bidding.
Brazilian aircraft manufacturer Embraer SA said Wednesday that it supports the move.
Through its strategic aerospace and defence initiative (SADI), the government will provide the portion of the loan earmarked for Bombardier's Global 7000 jet programme, while the remainder will be funded through the government's existing contribution agreements with Bombardier.
Canada's Trade Minister says the loans comply with WTO rules and the government will defend itself against litigation. In addition, the development costs of the KC390 were fully funded by the Brazilian government to the tune of $1.5 billion.
The foreign ministry in Brazil said it had requested consultations with Canada at the WTO "over subsidies given by the Canadian government at a federal, provincial and local level to the aerospace industry". The request for consultations is the first stage of this proceeding and will allow access to additional information regarding the support given to Bombardier.