Termination of Canada – Commercial Aircraft Dispute Settlement (DS522)

Brazil has formally notified the WTO of its decision to withdraw the dispute Canada – Commercial Aircraft (DS522), which began in 2017. Brazil challenged the massive subsidies granted by the governments of Canada and Quebec to the launch, development and production of the C-Series aircraft by BOMBARDIER, because it considered that the amount of more than US$ 3 billion provided to that company distorted the conditions of competition in the commercial aircraft market and caused serious prejudice to the Brazilian producer EMBRAER. More information regarding these subsidies and their adverse effects can be found on the document  “DS522: Brazil’s Transition from Dispute Settlement to Subsidy Discipline Negotiations”.

Brazil remains convinced of the strength of its case. Nevertheless, it has become clear that the dispute could not effectively remedy the impacts of such large-scale subsidies on the commercial aircraft market. This market is, today, fundamentally different from when Brazil presented its panel request to the WTO. BOMBARDIER`s withdrawal from the commercial aircraft market and, in particular, its sale of the C-Series Program to the European manufacturer Airbus, followed by the relocation, by Airbus, of part of the C-Series final production to the United States, have all reduced significantly the prospects of solving the issue through the pursuit of a dispute with Canada.

After withdrawing this dispute, Brazil will focus, with renewed impetus, on launching negotiations intended to produce more effective rules regarding governmental support to the commercial aircraft sector, including support to the launch, development and production of commercial aircraft and related technologies. The successful experience with the Aircraft Sector Understanding (ASU), covering export financing within the framework of the OECD, is an example of how governments can negotiate rules to ensure that competition within the commercial aircraft sector is based on the qualities of the aircraft and not on the subsidies received by manufacturers.

Brazil favors a broad, horizontal discussion, in all pertinent fora, including the G20, the OECD and the WTO, of all subsidies, industrial and agricultural alike, with a view to reducing trade distortions, ensuring a level-playing field, increasing production efficiency and fostering sustainable development. In line with this stance, Brazil is advocating for negotiations regarding new disciplines on government subsidies for commercial aircraft as outlined in the concept paper “Achieving a Level Playing Field in the Commercial Aircraft Sector through an Agreement on New subsidy Disciplines”. Negotiating more effective rules is the best way to reestablish a level-playing field in the commercial aircraft market, a sector that generates US$ 500 billion annually and 1 million jobs worldwide.