Long-Running Dispute on Rules-Stretching Comes to
Determination, It Seems
Both airliner-makers are tightly in synch with their
governments. World's #4 'liner-maker Embraer has long relied on
government help from its friends in Brasilia. #3 builder,
Bombardier, tired of losing contracts due to those cozy
relationships, got its friends in Ottawa to go to bat for them.
The most-recent flare-up between the two landed both parties in
the World Trade Organization's "court."
Bombardier narrowly aced out Embraer, in a deal with United
Airlines' affiliate Air Wisconsin ("Bombardier Lands C$2.4 billion
Air Wisconsin CRJ Order," 04-17-01, ANN). Brazil complained that
Canada was stretching the rules even more than Brazil had been.
Canada said it had to, to keep up with the rules-stretching that
Embraer had used, to secure previous contracts ("Chretien Going to
War With Brazil?" 05-29-01, ANN). In other words, both parties were
trying to funnel taxpayer monies, in the form of subsidies (price,
financing, or both), to private airlines. The airlines loved it;
the taxpayers thought it was about "jobs," and didn't see the
costs; and politicians salivated over the chance to spend OPM --
Other Peoples' Money -- on behalf of vocal, visible, reputable
concerns.
The seesaw battle over this deal has been swinging this way and
that for quite some time ("WTO Allows Revised Sovereignty to
Canada, Hits Brazil Over Jets," 08-25-00; "WTO to Side With
Embraer: Toronto Globe and Mail, 06-22-01; "Bombardier and Embraer
Get WTO Ruling that Brazil Likes," 07-12-01; "Bombardier Likes WTO
Again," 07-27-01, ANN); only this time, Canada may have spent too
much, even for the WTO to not notice.
On Monday, the WTO finally ruled that, in the Air Wisconsin
case, the sweetheart loan made by Canada to Air Wis, to the tune of
some $1.1 billion (US), was out of line. There may be further
screaming, as Canada has also offered to help finance Bombardier
customers, Delta Airlines' Comair and Spanish carrier Air
Nostrum.
"The WTO did find that the (government) financing of the Air
Wisconsin transaction did not comply with WTO rules," the Canadian
government said in a statement. Bombardier used a little more ink:
"It is with regret that Bombardier notes that on the subject of
matching, the WTO panel's decision differs with the arguments of
Canada, the European Union and the United States, which all
emphasized the importance of matching, as defined by the OECD
rules, as the only efficient means, in many instances, to counter
non-market practices such as Brazil's subsidized financing."
Eleven of the 75 jets have already been delivered; Bombardier
doesn't expect any changes in this particular Air Wis deal.
Canada has a month in which to appeal. Canadian and Brazilian
officials are to meet February 8, to start what may soon be known
as the "RJ Peace Process." That effort will probably just run afoul
of the anti-trust laws...
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