For many years, Canada and Brazil have been in a trade dispute centred
on each country’s alleged support of aerospace manufacturers. Canada’s
Bombardier and Brazil’s Embraer both receive considerable financial
assistance from their respective governments.
Caetano Barreira/EPA/Shutterstock
A long-simmering dispute between Canada and Brazil illustrates how
strategic trade policy is often difficult to distinguish from pure protection.
The world’s two major producers of regional jets are Bombardier, based
in Montreal, and Embraer SA, based in Brazil. For several years, each
company has accused its competitor’s government of using illegal
subsidies to help the domestic company sell jets in world markets. Brazil’s
Pro-Ex program provides Embraer’s customers with low-interest loans
with which to purchase Embraer’s jets. Export Development Canada
(EDC) provides similar loans to Bombardier’s customers.
There have been several complaints brought to the World Trade
Organization (WTO) by both the Canadian and Brazilian governments. In
various rulings the WTO determined that both governments were using
illegal subsidy programs to support their aerospace firms. Both countries,
however, naturally view their respective programs as necessary responses
to the other country’s subsidization. Many economists believe that an
agreement to eliminate both programs would be fair to both parties,
while saving Brazilian and Canadian taxpayers a considerable amount of
money. As of 2018, however, governments in both countries continue to
support their respective aerospace firms and both sets of taxpayers
continue to foot the bill.