Canadian investments in Bombardier are in compliance with all trade rules

Earlier this month, the Canadian government announced new R&D support for Bombardier. This repayable support will help strengthen Canada’s position as a world leader in the commercial aerospace industry; an industry that employs more than 210,000 Canadians and contributes tremendous benefits to the Canadian economy. At Bombardier, we are proud to have the government as a partner in supporting Canadian jobs, Canadian research and development, and Canada’s global leadership in aerospace.

In crafting this support, Bombardier and the government shared a number of priorities. The investment had to be fair to the people of Canada by providing a return on taxpayers’ money. It had to be focused on innovation in key areas, such as improving fuel efficiency and reducing aircraft emissions. And, it had to honour Canada’s obligations as a member of the World Trade Organization.

Earlier this week, the CEO of Embraer SA, our Brazil-based competitor, published a column in these pages alleging that Canada had provided Bombardier with “illegal subsidies” that somehow “violate” WTO rules. This is not true. And because the allegations were so inaccurate and misleading, we needed to respond to set the record straight.

Because the development of a new aircraft requires billions of dollars of investment over many years, all countries with major aerospace industries provide government support for their domestic aerospace companies. This is true for Embraer and Brazil.

As clearly noted in Embraer’s public filings with the Securities and Exchange Commission, the company has received a variety of tax benefits and government grants from Brazil, including tax benefits for research and development and a special payroll-tax exemption.

On top of that, Embraer also greatly benefits by its ability to transfer technology from Brazilian government funded military programs to its commercial programs. It has been widely reported that Embraer’s new E2 family of aircraft benefited directly and substantially from the company’s development of the KC-390 tanker, which was fully funded by the Brazilian government in the amount of at least $1.5-billion.

Readers would be right to question why these facts, and others, were omitted from the CEO’s column. For example, Brazil’s tax incentives are currently the subject of a WTO challenge by the European Union and Japan, and we anticipate they will be found to be illegal export subsidies.

Canada, on the other hand, has chosen to provide its support to Bombardier in a manner that respects international rules. For example, when Quebec made an equity investment in Bombardier’s C Series program, it was done on terms consistent with those required by private investors. We did this to ensure that the investment was both fair to the people of Quebec and compliant with international law.

At Bombardier, we welcome fair and open competition. We believe competition serves a very important role in pushing the industry to innovate; to design and build aircraft that are more efficient, more reliable and more environmentally friendly. And, that is exactly what Bombardier did with the C Series, which is simply the best aircraft in its class. So, we understand Embraer’s attempts to spread misinformation to avoid a discussion based on the merits of our aircraft.

Despite efforts from our competitor to cast doubt, we know without question that Canada’s and Quebec’s investments have been done the right way, in compliance with all international trade rules and our own high Canadian standards.

Originaly published in the Globe and Mail, Friday, Feb. 17, 2017

 

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