Canadian Manufacturing

Brazil to launch trade action against Canada over Bombardier support

Brazil, home to rival plane maker Embraer, alleges that financial support for Bombardier has affected market conditions in a way that is incompatible with WTO rules



Bombardier received a US$1-billion investment in its CSeries jet from the Quebec government in exchange for a 49.5-per-cent stake in the program this year. PHOTO: Bombardier

MONTREAL—Brazil vowed on Dec. 19 to launch a trade challenge against Canada before the World Trade Organization over financial support for Bombardier, a move the Montreal-based company said was without merit.

“We are very confident that all investments associated with Bombardier are fully compliant with all WTO rules and regulations,” Olivier Marcil, vice-president of external relations, said in an email.

Bombardier responded after Brazil’s Foreign Ministry issued a statement saying it will proceed with a WTO challenge, alleging that financial support for the aerospace giant has affected competitive market conditions in a way that is incompatible with Canada’s commitments to the WTO.

Brazil is complaining about US$2.5 billion in investments in Bombardier this year to help it survive.

Bombardier received a US$1-billion investment in the CSeries passenger jet from the Quebec government in exchange for a 49.5-per-cent stake in the plane. Late last year, the company sold a 30 per cent stake in its railway division to pension fund manager the Caisse de depot for US$1.5 billion.

Ottawa is also looking to invest US$1 billion, which Brazil alleges is designed to “ensure the viability of the new CSeries aircraft and its placing on the market at artificially reduced prices.”

Prime Minister Justin Trudeau said he hopes to reach a deal with Bombardier before next year’s federal budget, adding that all countries, including Brazil, help their aerospace industries.

“There are rules around what we can do and what we can’t do, and we are making sure we comply by the rules,” he said.

Embraer, Bombardier’s Brazilian-based rival, said it welcomes the decision to launch a WTO challenge against Canada.

“The formal dispute settlement process at the WTO is the only means to ensure a level playing field in the market,” CEO Paulo Cesar Silva said in a news release.

“Canada’s subsidies have caused significant market distortions and are not in compliance with international trade rules.”

The Caisse said its investment was made independent of the Quebec government, based on commercial principles.

The CSeries entered commercial service this year after years of delays and cost overruns.

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