Mediation of the regional aircraft subsidy dispute between Brazil and Canada has left both sides claiming victory. Special envoys appointed by the two governments have recommended means for resolving the dispute, but have not ruled on whether support provided to Bombardier and Embraer breaks international guidelines on subsidies.
The trade dispute was sparked by the Canadian manufacturer's complaints that Brazilian Government financing support for exports of Embraer regional jets constituted an illegal subsidy.
The Brazilian manufacturer countered with allegations that Canadian Government launch aid for development of Bombardier regional aircraft also violated international rules.
Earlier this year, the Brazilian and Canadian premiers agreed to appoint two trade envoys to examine the issue. Canada's Marc La-londe and Brazil's Dr Luiz Olavo Baptista have now presented their report, which recommends that the governments negotiate, within two months, a bilateral accord that:
subjects export financing programmes to a "common template" using Organisation for Economic Co-operation and Development (OECD) rules as the model, and: provides a dispute settlement mechanism, including annual consultations and recourse to a neutral and independent monitor who can review support programmes.Both governments and the two manufacturers have welcomed the envoys' report, each claiming it supports their position in the dispute. The Canadian Government believes the bilateral accord should resolve its concerns over Brazil's Proex export support programme, under which the Government provides "interest-rate equalisation" payments to Embraer customers.
Bombardier says that the report supports its claim that Proex is an illegal subsidy, reducing the cost of financing Embraer regional jets by 3.8%. The Brazilian manufacturer denies the allegation.
It says that support of "up to" 3.8% is provided by Proex to offset higher interest rates levied on financing for Brazilian exports, because of the country's past economic difficulties.
Embraer, in turn, believes the report calls into question the legality of Canada's export financing, alleging subsidies of 17-25% - a claim that the Canadian Government's Export Development Corporation denies.
Source: Flight International
