Brazil Drops WTO Aero Trade Charges Against Canada

The Brazilian government today decided to withdraw its ongoing World Trade Organization (WTO) dispute with Canada over aircraft subsidies, and said it will launch negotiations on more effective disciplines to regulate government support in the Commercial Aviation segment.

At the WTO, Brazil challenged more than $3 billion in illegal subsidies that the Governments of Canada and Quebec provided to Bombardier for the launch, development and production of the C-Series program.

“These subsidies distorted the conditions of competition in the global market for commercial aircraft, causing serious prejudice to Embraer, in clear violation of WTO rules,” Embraer said in a statement today.

Brazil first complained to the WTO about the help the C-series jet received in 2017. Embraer had claimed the jet got $3 billion in Canadian aid to compete with Embraer’s E2, in order for the former to gain control over the regional jet market.

“Canada's subsidies have allowed Bombardier (and now Airbus) to offer its aircraft at artificially low prices. These subsidies, which have been fundamental in the development and survival of the C-Series program, are an unsustainable practice that distorts the entire global market, harming competitors at the expense of Canadian taxpayers. Embraer considers that this proceeding will help to restore a level playing field and ensure that competition in the commercial aircraft market is between companies, not governments,” said Paulo Cesar de Souza e Silva, the company’s former President & CEO.

In a statement today, Brazil’s Ministry of Foreign Affairs said: “Nevertheless, it has become clear that the dispute could not effectively remedy the impacts of such large-scale subsidies on the commercial aircraft market. This market is, today, fundamentally different from when Brazil presented its panel request to the WTO. BOMBARDIER`s withdrawal from the commercial aircraft market and, in particular, its sale of the C-Series Program to the European manufacturer Airbus, followed by the relocation, by Airbus, of part of the C-Series final production to the United States, have all reduced significantly the prospects of solving the issue through the pursuit of a dispute with Canada.”

The ministry added that after withdrawing this dispute, Brazil will focus, with renewed impetus, on launching negotiations intended to produce more effective rules regarding governmental support to the commercial aircraft sector.

It suggested the format of negotiations could be based on a successful deal brokered by aircraft producing nations at the Organization for Economic Co-operation and Development in 2007. That resulted in agreed caps on public export financing even as the same nations remained at odds over production subsidies.