By Rebecca Rayko,
AWN Editor

Less than a week after the implementation of WTO rulings regarding government subsidies on regional jets, Canada and Brazil once again began the war of words.

The WTO ruling that abolished the use of Canada's TPC and Brazil's ProEx subsidies affects all aircraft deliveries after November 18, but Bombardier is less than convinced that its rival Embraer is in compliance with the ruling.

"We would expect Brazil to give more information on how it plans to comply with the WTO ruling," said Yves Allaire, executive vice president of Bombardier, in a teleconference last week.

The Canadian manufacturer is requesting the formation of a compliance panel that would force Brazil to give more information verifying that is not using ProEx to help Embraer sell airplanes.

"This means that aircraft cannot receive ProEx subsidies and concerned parties can verify these measures have been taken," said Allaire. "Brazil should deny Embraer access to financing at below market rate - this is the crux of the matter."

Canada's Bombardier is now threatening retaliation in the form of $6.7 billion in damages it says it lost in sales to Embraer with its use of the ProEx subsidy. This figure is based on the 885 firm orders and options Bombardier says Embraer now has in backlog, and Allaire claims that Bombardier would have gained half of that business were it not for ProEx.

Allaire further said that the Canadian aerospace industry overall lost 22,000 person/hours and up to 10,000 jobs due to the lost business to Brazil.

The information Canada is seeking specifically is how Embraer plans to implement the WTO decision on the backlog of aircraft yet to be delivered. If Canada is assured that ProEx will not apply to the 885 Embraer regional jets in backlog, it will consider dropping their retaliation efforts.

Embraer responded with strong words of its own. Chief executive Mauricio Botelho said the company will not change the terms of existing sales contracts for its regional jets - meaning it plans to deliver the aircraft with financing terms determined by the ProEx rates.

"ProEx is a contract signed by the Brazilian government with the international community," Botelho said. Not complying would hurt both Embraer and Brazil, which is struggling to overcome the effects of a fragile economy.

Botelho said that about 700 Embraer jets remain to be delivered using ProEx financing. He also expressed doubt that Canada has completely abolished the use of TPC and that the changes Canada has made are merely cosmetic.

Bombardier has requested a panel be formed within 10 days. A report summarizing a review of the evidence would be expected in February.