Brazil Withdraws WTO Subsidy Complaint Against Canada

The Brazilian government on Thursday withdrew its complaint to the World Trade Organization against Canada over government subsidies to Bombardier, a move “welcomed” by Embraer in a statement that nevertheless called the case a strong one.

The complaint, authorized by Brazil’s Council of Ministers of the Foreign Trade Chamber (Camex) in December 2016, centered on a $2.5 billion injection of provincial funds by the government in Quebec during that year alone and “significant capital” from the Canadian federal government to ensure artificially low prices for the former C Series. In all, Brazil claimed that Bombardier received more than $4 billion worth of illegal subsidies. A WTO dispute settlement panel agreed to examine programs worth $3 billion.

The panel, established in September 2017 after Brazil and Canada failed to come to terms during formal consultations launched in February of that year, continued to deliberate over Brazil’s charges that 19 alleged subsidies provided by Canada and Quebec for Bombardier’s C Series program contravened WTO rules. By last November the panel, which still hadn’t settled the matter following several delays, said it could not complete its work any earlier than this year’s third quarter due to “the scale and complexity of the dispute.” Airbus took control of the C Series program in June 2018 and subsequently renamed it the A220.

“Although Brazil has a strong case, the WTO dispute became ineffective to address the Canadian subsidies and to remedy the distortions generated in the market,” Embraer said in a statement released Thursday. “After Bombardier exited the commercial aviation segment and transferred the C Series program to Airbus, which has a second assembly line in the United States, the trade dispute against Canada at the WTO is no longer the most effective means to achieve Brazil’s and Embraer’s goal of re-establishing a level playing field in this sector.” 

Now, Brazil has called for broad negotiations over “more effective disciplines” on government support in the commercial aviation segment, based on what Embraer called the successful negotiations in 2007 that led to the Organization for Economic Cooperation and Development’s Aircraft Sector Understanding (ASU) to regulate export credits.

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