The Council of Ministers of the Foreign Trade Chamber (CAMEX) authorized the opening of a dispute settlement procedure against Canada at the WTO on state subsidies granted to the aeronautical industry, specifically to Bombardier.

CAMEX claims that in 2016 alone, the Government of Quebec injected $2.5 billion into Bombardier. In the assessment of Brazil, the support granted by the Canadian government to Bombardier has affected the competitive conditions in the market in a way that is incompatible with the commitments made by Canada in the WTO.

The dispute settlement proceedings involve subsidies of over $4 billion provided by Canada to Bombardier, Embraer’s competitor in the commercial aircraft sector.

The Brazilian Government’s understanding, shared by Embraer, is that the Canadian Government’s subsidies to Bombardier not only enabled the company to survive, but also allowed Bombardier to offer its aircraft to customers at artificially low prices, distorting the commercial aircraft market and violating Canada’s WTO obligations.

After multiple attempts to resolve the issue at the 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,” said Paulo Cesar Silva, Embraer President & CEO. “Canada’s subsidies have caused significant market distortions and are not in compliance with international trade rules.”

Bombardier has acknowledged the fact that the company was walking on a tight rope by the end of 2015, plagued by the delays of the C Series program and having to cope with the failure of the Learjet 85 project. After receiving the $2.5 billion commitment from the state of Quebec, the company managed to strike two major orders of C Series planes from Delta and Air Canada.

On the 30th of November, France declared that the US must adhere to a World Trade Organization ruling announced several days earlier about the tax breaks the US had provided to Boeing, according to Reuters.

At the moment, Bombardier is discussing a further $1 billion investment from Canada’s federal government. If reached, the deal would lead to a joint venture between Bombardier, the state of Quebec and the government.

The new dispute might be reminiscent of the trade war started by Canada over Brazil’s subsidies to Embraer several decades ago. Back then, after a number of counter-claims concerning state subsidies given to Bombardier and Embraer, the WTO ruled out that both manufacturers had been provided unjust subsidies.