Published: Thu, February 09, 2017
Economy | By Melissa Porter

Canada rejects Brazil's WTO challenge over Bombardier aircraft

The Canadian government on Tuesday announced C$372.5 million ($283 million) in repayable loans for two of Bombardier Inc's BBDb.TO jet programs, promising to defend the deal against a potential trade challenge by Brazil.

The federal money will support the company's Global 7000 and CSeries programs.

While the state aid is far less than the $1 billion originally sought by the Canadian plane and train producer, Chief Executive Alain Bellemare called it "the right level of support".

But Joseph Pickerill, a spokesman for Canada's minister of worldwide trade, said that "Canadian support measures to the aerospace industry, including to Bombardier, were developed in full knowledge of WTO rules and are consistent with these obligations".

Brazil on Wednesday will request the WTO start consultations on a dispute involving the two companies around Quebec's funding, Brazil's Foreign Ministry said.

"In Brazil's understanding, Canadian subsidies artificially affect the global 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.

It follows a $1 billion investment from the government of Quebec in the C Series program, announced in October 2015. The company also sold a 30 per cent stake in its railway division to pension fund manager Caisse de depot for US$1.5 billion.

"I am very much prepared to fight for what we are doing", he said.

They also note that Brazil has provided significant long-term aid to its aerospace sector, with the country's defense department being the largest contributor to Embraer revenue and with the government holding a vote that allows it to veto the company's strategic moves.

"Bombardier plays a vital role, both as an anchor employer and an innovation leader", said Innovation, Science and Economic Development Minister Navdeep Bains during a news conference inside a Bombardier hangar in Dorval, Que.

The latest WTO standoff follows almost a decade of sparring between Brazil and Canada over state financing for Embraer and Bombardier's exports in the 1990s.

"This is the best plane in its class, so people are finding ways to come after us", Bellemare said.

Embraer is the world's biggest aircraft builder after Boeing and Airbus.

The WTO found government loans used by European Union member states to support Airbus airplane developments constituted unfair subsidies, prompting the threat of USA sanctions.

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