WTO panel rules against Canada in preliminary ruling in C Series dispute

A Bombardier Global 7000 aircraft mock up is shown in Toronto on Tuesday, November 3, 2015. (Nathan Denette/The Canadian Press)

MONTREAL -- A World Trade Organization panel is moving ahead with its review of Brazil's complaint that Bombardier Inc.'s C Series is receiving unfair subsidies after it threw out a key Canadian argument.

The panel ruled against Canada's objection that it look at four programs, including Ottawa's supercluster plan, that were not included in its original complaint.

Brazilian aerospace rival Embraer S.A. launched the trade dispute last year alleging Bombardier and its suppliers have received more than $3.7 billion (US$3 billion) in subsidies, which it claims have hurt its aviation business.

It argues the government subsidies have allowed Bombardier to sell the C Series at artificially low prices that distort the global market and harm competitors.

Canada had argued that Brazil's request to include the additional programs broadened the scope of the dispute beyond the original request for consultations.

However, the WTO ruled that they were within the terms of reference of the panel.

The WTO also rejected an argument by Canada that Brazil didn't identify specific measures in regard to its concerns about several other programs.

Joseph Pickerill, spokesman for International Trade Minister Francois-Philippe Champagne, said Canada was disappointed the panel did not uphold its claim.

"This is just a preliminary stage in the broader WTO dispute and Canada will continue to participate fully in the WTO proceedings," Pickerill said in a statement.

Bombardier said the preliminary ruling clarifies the scope of the proceedings.

"The investments and contribution programs mentioned in Brazil's petition are in full compliance with all WTO and international trade rules," company spokesman Simon Letendre said in a statement.

Bombardier's aerospace rival has eaten away at its leadership in regional jets and is developing an updated offering to partially compete with the C Series.

The WTO established a dispute settlement panel in September, a month after consultations with Canada failed to resolve Brazil's complaint that government subsidies for the C Series are inconsistent with Canada's WTO obligations.