Jul 15, 2016 5:29PM EDT – At issue is government financial support of Quebec plane maker, but Ottawa maintains Canada complies with trade rules | published: Jul 15, 2016 5:29PM EDT
Prime Minister Justin Trudeau shrugged off a threat by Brazil to file a challenge at the World Trade Organization over a government bailout of Bombardier Inc., and his trade minister said she’s confident Canada won’t be found to be breaking the rules.
The Quebec government finalized a $1-billion (U.S.) investment in Bombardier in June, and the Montreal-based aircraft maker is still looking for commensurate help from the Liberal government in Ottawa.
Brazil’s Foreign Relations Minister, Jose Serra, said Thursday he’s considering taking a complaint to the WTO, which functions as a referee of fair trade between member countries. Were Brazil to succeed in convincing WTO officials that Canada is breaking trade rules in assisting Bombardier, Brasilia could be granted the right to retaliate against Canadian imports.
The threat made by Mr. Serra raises the possibility of a resumption of a nasty trade war between Canada and Brazil over state aircraft subsidies that poisoned relations in the late 1990s and early 2000s. Brazil is very protective of its homegrown aircraft maker, Embraer.
Mr. Trudeau didn’t appear fazed by this on Friday.
“The fact of the matter is there is no country in the world that doesn’t heavily subsidize its aerospace sector,” he told reporters just before heading to the Calgary Stampede grounds.
He said Ottawa has not made a decision about Bombardier’s request for assistance.
“We believe that aerospace is a sector in which good jobs and strong communities and innovation flow from investments. And that’s why we are making sure that we’re engaged robustly and responsibly with Bombardier about potential investments by the federal government in Bombardier,” Mr. Trudeau said.
“We believe investing in aerospace is right for Canada and is right for the world. And I can understand that our competitors are rightly worried about how great the C Series plane is.”
International Trade Minister Chrystia Freeland said she is confident Canada could withstand a WTO challenge of the taxpayer bailout extended to Bombardier, noting she believes Canada is complying with international trade commitments that prohibit subsidies to aircraft makers.
Under WTO rules, a subsidy is a financial contribution by a government or public body that confers a benefit. A cash grant, for instance, is a clear case of beneficial government assistance. But member states have disagreed in the past over whether a loan or equity investment constitutes an illegal subsidy. Past rulings have said the issue of whether a benefit is conferred can be determined by examining what the recipient could have obtained from the markets.
The question Canada will have to answer is whether Bombardier could have obtained a $1-billion investment from the private markets on favourable terms.
“Our government ensures carefully that Canada abides by its international trade obligations,” Ms. Freeland said in a conference call with journalists on Friday from London, where she met with representatives of the British cabinet led by new Conservative Prime Minister Theresa May.
“We are incredibly proud of our aerospace sector,” the minister said, calling Bombardier – which had originally struggled to find buyers for its C Series jet – “obviously an export leader” in the world market for airplanes.
“This is an industry that creates high-skilled jobs in Canada and enjoys the full and strong support of our government,” Ms. Freeland said.
Separately, she said the May government has reaffirmed it will help with the European Union approval of the Canada-EU trade deal, despite the fact that London is also preparing to leave the political-economic union as a result of last month’s Brexit vote. Britain itself may end up leaving the Comprehensive Economic and Trade Agreement when it quits the EU.
Ms. Freeland said she met with Liam Fox, Britain’s new Secretary of State for International Trade, “and when I asked him if I could count on his and Britain’s continued support for CETA, he told me Britain would not just be supporting CETA, Britain would be pushing for CETA at the EU table.”
Britain has been Canada’s third-largest export market in recent years.
The federal government has been very firm in insisting that CETA – or at least about 90 per cent of it – can take effect in 2017, despite Brexit and the need to have all 28 member member parliaments ratify the agreement.
Former Conservative trade minister Ed Fast, who negotiated the Canada-EU deal, has voiced concerns that Ms. Freeland is being “hopelessly optimistic about the timelines about getting this agreement ratified” in the wake of the Brexit referendum.
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