Feb. 8, 2017: Brazil, on behalf of Embraer, filed a complaint with the World Trade Organization over Canadian government investment in Bombardier’s CSeries.
“Brazil notified the WTO Secretariat that it had requested WTO dispute consultations with Canada regarding alleged subsidies provided to Canadian aircraft manufacturer Bombardier,” the WTO announced today. Coincidentally, today it was also revealed the federal government will provide C$372m in loans to Bombardier. Most will go toward the Global 7000 corporate jet program but some will go to the CSeries, which competes with Embraer’s EJets.
“The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel,” the WTO said.
The province of Quebec previously provided US$1bn in an equity investment into the CSeries program. A quasi-government pension plan fund also invested more than US$1bn for a 30% share of BBD’s train business. Bombardier asked the Feds for US$1bn.
Embraer was quick to complain that this created a de facto government company that created unfair competition to Embraer. The Brazilian company complained that Bombardier was able to undercut Embraer as a result in a competition to sell airplanes to Delta Air Lines.
The federal money is interest-free, according to a news report. Interest-free, or below-market, loans were found to be illegal in the US vs European Union trade dispute over Airbus subsidies.
“We are very confident that all forms of support provided to Bombardier, including the repayable program contributions announced by the federal government yesterday, are fully compliant with Canada’s international trade obligations and we are prepared to defend our position alongside the Canadian government as Minister Champagne stated yesterday,” a BBD spokesman wrote LNC today.