Brazil’s decision to challenge Canada at the WTO welcomed by Embraer

In May this year, the Brazilian government was mulling over the possibility of filing a complaint with the World Trade Organization (WTO) relating to unfair Canadian government subsidies provided to the struggling Canadian company, Bombardier. On Monday of this week it was announced that CAMEX, the Council of Ministers of Brazilian Foreign Trade Chamber and the highest government institution responsible for the country’s overseas trade policies, is to initiate settlement proceedings against Canada at the WTO.
Embraer, a Brazilian plane manufacturing company and direct competitor of Bombardier, had originally expressed concerns that finance provided by the Canadian government had influenced the price of Bombardier C-series aircraft. According to their complaint, as Bombardier had managed to obtain US$1 billion for its C-Series program from the Quebec government and a request had been made for the federal government of Canada to match the investment, Embraer felt this allowed the plane manufacturing arm of Bombardier to sell jets at below production cost. The two principal deals highlighted were Air Canada’s order of 45 CS100 jets and Delta Air Lines’ US$5.6 billion commitment for up to 125 C-series aircraft.
Paulo Cesar Silva, Embraer’s President & CEO, is quoted as saying at the time: “Following the receipt of governmental support, Bombardier has been acting very aggressively – to the point of offering planes at price below their production cost,” adding that the “Canadian taxpayer is providing money to Bombardier to have Bombardier offering aircraft in the market at below cost.”
In response, the spokeswoman of the Bombardier Commercial Aircraft Unit, Marianella de la Barrera, confirmed that Bombardier’s deal with Delta was in full compliance with WTO rules, also saying that: “Delta chose C-series because of better technology.”
This is not the first time there has been friction between the two major plane manufacturers as, back in the late 1990s and early 2000s, Brazil and Canada had previously engaged in controversy over governmental subsidies to the domestic plane-makers, with the WTO ruling in 2002 that both countries had broken trade rules.
After several attempts to resolve this most-recent issue at a diplomatic level, Embraer believes that “the formal dispute settlement process at the WTO is the only means to ensure a level playing field in the market,” with Silva adding that: “Canadian subsidies have caused significant market distortions and are not in compliance with international trade rules.”