CANADA – MEASURES CONCERNING TRADE IN COMMERCIAL AIRCRAFT REQUEST FOR THE ESTABLISHMENT OF A PANEL BY BRAZIL
Document: REQUEST FOR THE ESTABLISHMENT OF A PANEL
Date: 21 August 2017
Document codes: WT/DS522/6
Complainant: Brazil
Respondent: Canada
Third parties: China, EU, Japan, Russia, Singapore, U.S.
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 3.1(a), 3.2, 3.1(b), 5(c), 6.3(a), 6.3(b), 6.3(c), 6.4, 6.5  Subsidies and Countervailing Measures (SCM)

CANADA – MEASURES CONCERNING TRADE IN COMMERCIAL AIRCRAFT
REQUEST FOR THE ESTABLISHMENT OF A PANEL BY BRAZIL
The following communication, dated 18 August 2017, from the delegation of Brazil to the
Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.

On 8 February 2017, the Government of Brazil ("Brazil") requested consultations with the
Government of Canada ("Canada") pursuant to Articles 1 and 4 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes ( "DSU"); Articles 4, 7, and 30 of the Agreement
on Subsidies and Countervailing Measures ( "SCM Agreement "); and Ar ticle XXII of the General
Agreement on Tariffs and Trade 1994 ( "GATT 1994") (to the extent incorporated by Article 30 of
the SCM Agreement) in relation to measures affecting trade in commercial aircraft . Consultations
were held on 10 March 2017 with a view to reaching a mutually satisfactory solution.
Unfortunately, the consultations failed to settle the dispute.

Accordingly, Brazil respectfully requests that the Dispute Settlement Body ( "DSB") establi sh a
panel pursuant to Article 6 of the DSU; Articles 4, 7, and 30 of the SCM Agreement; and
Article XXIII:2 of the GATT 1994 (to the extent incorporated by Article 30 of the SCM Agreement).

In Brazil's view, the measures that are the subject of this pane l request are prohibited and
actionable subsidies provided to Bombardier, Inc. ( "Bombardier")1 and its suppliers as well as
legislation, regulations, other instruments, and amendments thereto providing such subsidies to
these recipients. Such measures include the following:

Quebec's Aerospace Strategy

In July 2006, the government of Quebec ("Quebec") announced the Quebec Aeronautical Industry
Development Strategy. 2 The Quebec government 's objectives of the strategy are to "maintain
Quebec's position as a world leader in the aeronautical sector by developing new products and
enhancing the sector 's competitiveness" and "{s}trengthen Quebec's largely dominant position in
the Canadian aeronautical industry. " Quebec indicated that it would work jointly with t he federal
government to foster "the development of new products, export assistance and financing of the
sales of prime contractors, equipment manufacturers and SMEs. " In May 2016, Quebec stated
that its contributions under the 2006 Strategy amounted to m ore than C$700 million. The
initiatives announced under the strategy include, but are not limited to:

 financing of R&D and product development by means of loans repayable through royalties
on sales;
 financing of developmental projects in the form of share capital by the Société générale de
financement (which was merged into Investissement Québec ("IQ") in December 2010);

1 "Bombardier," as referenced in this request, includes Bombardier, Inc.; Bombardier Aerospace;
Bombardier Transportation (Investment) UK Ltd; the C Series Aircraft Limited Partnership; and all other
subsidiaries and affiliates of Bombardier, Inc.
2 "Quebec Aeronautical Industry Development Strategy" (July 2006),
http://collections.banq.qc.ca/ark:/52327/bs58942. Brazil referred to this strategy in its request for
consultations as Quebec’s Aerospace Strategy 2006-2016. Canada provided a link to the strategy during
consultations.

 broadening the Quebec content in prime contractors' projects;
 participating in the long -term funding of the Consortium de recherche et d 'innovation en
aérospatiale au Québec ("CRIAQ");
 pursuing Quebec's financial support for the Centre technologique en aérospatiale ("CTA");
 maintaining Quebec's fiscal measures pertaining to precompetitive research;
 supporting the modernization and purchase of leading -edge equipment (amendment of
rules governing programs of the Ministère de l 'Économie, Science et Innovation Quebec
("MESI")); and
 ensuring that the federal government plays an essential support role in the Quebec
aeronautical industry by financing product development.
In 2006, Aéro Montréal (of which Bombardier and its suppliers are members) was established to
provide supply chain solutions, knowhow, and industry collaboration services to Bombardier and
other aerospace companies in Montreal. Canada's federal government, Quebec, and Communauté
métropolitaine de Montréal provided at least C$5 million in funding to Aéro Montréal to support its
initiatives and working groups, which included participation in , for example, the Greener Aircraft
Catalyst Project or SA2GE ( Systèmes aéronautiques d'avant-garde pour l'environnement) and the
MACH Initiative.

In May 2016, Quebec announced government contributions of C$510 million under Quebec's
Aerospace Strategy 20 16-2026.3 Under the 2016 Strategy, Quebec will, among other things,
bolster industry growth through support for major investment projects, assist SMEs through
boosting exports, and promote innovation through stimulating the development of new products
(e.g., Greener Aircraft Catalyst Project).

Brazil considers that the above -referenced measures and initiatives provide subsidies directly or
indirectly to Bombardier and its suppliers or are used by Canada to adopt and/or implement the
measures identified below.

"Launch Aid" and Related Financing

 Canada's provision (through Industry Canada ("IC"), a Government of Canada department
(Ministry) now called Innovation, Science and Econom ic Development Canada) of
C$350 million of financing to Bombardier for commercial aircraft design and development
(hereinafter "launch aid"4). Canada and Bombardier initially agreed on the launch aid in
May 2005. Brazil understands that the Terms and Conditions were signed in 2008, and
the contribution agreements were signed in March 2009. The C$350 million in funding
had been disbursed to Bombardier as of the end of December 2013.
 Quebec's provision (through IQ, Quebec 's economic de velopment corporation) of
C$117 million of launch aid to Bombardier. The launch aid was announced in May 2005.
Quebec agreed to provide the launch aid in July 2008, and C$117 million was disbursed in
2009.5
 Canada's provision (through Innovation, Science and Economic Development Canada) of
C$120 million in additional royalty -based financing for Bombardier 's C -Series aircraft.
Canada announced the additional contribution on 7 February 2017. The funds are being
provided under existing contribution agreements with Bombardier.6
Subsidies Managed by the Industrial Technologies Office
The Industrial Technologies Office ( "ITO") is a Special Operating Agency of Innovation, Science
and Economic Development Canada. ITO manages repayable and non -repayable financing
provided under:

3 "Québec Aerospace Strategy Summary," at 2 (May 2016), https://www.mrif.gouv.qc.ca/pdf
/actualites/13326_Sommaire_SQA_En_LR_Final.pdf.
4 The term "launch aid" in this request includes: "royalty-based financing", "repayable contributions",
"launch investment", "repayable investment", "contribution financière remboursable par redevances", and
other terms that have been used to describe the financing provided to Bombardier and its suppliers. The terms
of such financing may include no interest or interest at non-commercial rates, and a repayment obligation that
is tied to future sales.
5 See Decret 666-2009 (10 June 2009), Gazette Officielle du Québec, No. 27, at 3123 (8 July 2009).
6 This contribution is a portion of C$372.5 million in repayable contributions that Canada announced on
7 February 2017 to support Bombardier and that Brazil referenced in its request for consultations.

 Technology Partnerships Canada ( "TPC"), which was launched in March 1996 to support
technological development in the aerospace sector. As of November 2016, Canada
disbursed more than C$1.5 billion to Bombardier and its C-Series suppliers.
 Strategic Aerospace and Defence Initiative ( "SADI"), which was launched in April 2007.
During 2008 -2014, Canada agreed to contributions totaling more than C$1 billion for
Bombardier's C -Series suppliers. On 7 February 2017, Canada announced additional
contributions of C$252.5 million under SADI to Bom bardier purportedly for the
development of the Global 7000 business aircraft. Bombardier and Canada reached an
agreement regarding this additional funding on 24 March 2017.7
 Technology Demonstration Program ( "TDP"), which was launched in September 2013 to
provide non -repayable contributions to support large scale projects. In October 2016,
Canada announced a contribution of up to C$54 million to a consortium led by Bombardier
to develop state-of-the-art electric systems and advanced aerodynamic systems.
Other Research and Development Subsidies
 Quebec's provision of over C$110 million to Bombardier, its C -Series suppliers, and other
aerospace companies through SA2GE (i.e., the Greener Aircraft Catalyst Project).
Quebec's MESI initially introduced SA2GE in 2010 under the Quebec Research and
Innovation Strategy and launched the second phase in 2016 under the Quebec Aerospace
Strategy.
 Canada's and Quebec 's provision of funding to CRIAQ (of which Bombardier and its
suppliers are members) to finance aerospace research projects conducted by Bombardier,
its C-Series suppliers, and other aerospace companies. Since CRIAQ was established in
2002, it has funded numerous aerospace research projects. Bombardier has participated
in at least twenty-five of these projects.
 Canada's and Quebec 's provision of funding to the Consortium for Aerospace Research
and Innovation in Canada ("CARIC") (of which Bombardier and its suppliers are members)
to launch research and development projects and provide other support to Bombardier, its
C-Series suppliers, and other Canadian aerospace companies. In August 2014, CARIC
and IC signed an agreement for C$30 million in funding over five years.
 Canada's provision of funding to the Green Aviation Research & Development Network
("GARDN") to increase the competitiveness of Bombardier and other companies in
Canada's aerospace industry and reduce the environme ntal footprint of Canadian aircraft,
engines, and avionics systems. In January 2009, the Government of Canada established
GARDN as a Business -Led Network of Centres of Excel lence. GARDN is receiving
C$25 million for 2009-2018, and nearly C$18 million has been disbursed as of fiscal year
2015. Bombardier has received funding through at least twelve GARDN research projects,
and its C-Series suppliers have also received funding through GARDN research projects.
 Canada's provision of support through the Canada Economic Development for Quebec
Regions ( "CEDQ") (including its Quebec Economic Development Program). Since its
creation in 2005, CEDQ has provided at least C$20 million in contributions to Bombardier's
C-Series suppliers to improve productivity and production, acquire equipment, and expand
operations.
 Canada's and Quebec 's provision of funding, technology transfer, in -kind goods and
services, and other support through the CTA, 8 the National Research Council ( "NRC"),9
and the Natural Sciences and Engineering Research Council of Canada ("NSERC").10

7 This contribution is a portion of C$372.5 million in repayable contributions that Canada announced on
7 February 2017 to support Bombardier and that Brazil referenced in its request for consultations.
8 "Quebec Aeronautical Industry Development Strategy," at 21, 32, and 36 (July 2006),
http://collections.banq.qc.ca/ark:/52327/bs58942.
9 "Quebec Aeronautical Industry Development Strategy," at 15 and 21 (July 2006),
http://collections.banq.qc.ca/ark:/52327/bs58942.
10 Canada’s and Quebec’s support to Bombardier and its C-Series suppliers through these entities
included participation in SA2GE programs, CEDQ programs (including establishment of the Aerospace
Manufacturing Technology Centre ("AMTC")), and other collaborative projects (for example, in the areas of
composite materials and robotics systems for aircraft assembly). "Assembly of First Flight Test Vehicle for
Bombardier CSeries Aircraft Underway" (15 October 2012), http://www.marketwired.com/press-
release/assembly-of-first-flight-test-vehicle-for-bombardier-cseries-aircraft-underway-tsx-bbd.a-1713407.htm;

 Canada's provision of non -repayable contributions of up to C$950 million for
"superclusters" in the advanced manufacturing, digital technology, clean resources,
infrastructure, transportation, and other industries through the Innovation Superclusters
Initiative.11
 Quebec's provision to Bombardier of a tax credit under the Tax Credit for Private
Partnership Pre -Competitive Research, which provides a tax credit to encourage
corporations in the private sector to form partnerships with two or more corporations to
carry out pre-competitive research in Quebec12.
Equity Infusions
 Quebec's provision (throug h IQ) of US$1 billion to Bombardier for cash flow purposes of
the C-Series program in exchange for a 49.5 percent share in a newly -created entity to
which Bombardier will transfer the assets, liabilities, and obligations of its C -Series
program. In Octobe r 2015, IQ and Bombardier entered into a memorandum of
understanding for the US$1 billion equity infusion. In June 2016, Bombardier closed the
investment with IQ and transferred the C -Series assets to a new entity. IQ paid the first
installment of US$500 million to Bombardier in June 2016 and the second installment of
US$500 million to Bombardier in September 2016.
 Quebec's provision (through Caisse de Dépôt et Placement du Québec ("CDPQ"), an entity
owned and controlled by the government of Quebec) of US $1.5 billion for general
corporate purposes of Bombardier in exchange for a convertible share investment in
Bombardier Transportation's newly-created holding company, Bombardier Transportation
(Investment) UK Ltd. The agreement between CDPQ and Bombardier was announced in
November 2015. In February 2016, the sale was closed, and Bombardier received gross
proceeds of US$1.5 billion from CDPQ.
Provincial and Local Subsidies Relating to Bombardier's C-Series Production Facilities
 Quebec's agreement with Bombardier to construct, own, lease, finance, operate, and/or
provide other support for Bombardier 's new C -Series production facility at Mirabel,
Quebec. Quebec offered to pay for Bombardier 's new C -Series final assembly plant in
January 2005 and announced an "agreement" on the selection of a site in Mirabel, Quebec
in May 2005. Bombardier again selected Mirabel, Quebec as the C -Series final assembly
site in July 2008.
 The municipality of Mirabel 's (Quebec) tax incentives, exemptions, and other support,
including exemption of property taxes for Bombardier 's C-Series production facility during
its first ten years of operations. These measures include, but are not limited to,
Règlement No. 1633 (28 April 2008) and Règlement No. 1915 (28 November 2012). In
November 2008, Mirabel approved a ten -year tax credit for companies in the aircraft
manufacturing industry that are established at the airport, including Bombardier and its
C-Series facility.
 Provision of support by Aéroports de Montréal ("ADM") to Bom bardier and C -Series
suppliers in relation to the selection, construction, lease, and/or operation of the Mirabel
site of Bombardier 's C-Series final assembly plant and suppliers ' component plants and
investments in infrastructure for aerospace companies l ocated at the airport. ADM is the

"The National Research Council of Canada and Bombardier Aerospace Sign R&D Cooperation Agreement,"
defense-aerospace.com (5 December 2011), http://www.defense-aerospace.com/article-
view/release/130954/bombardier-canada-nrc-sign-r&d-agreement.html. Additional information on these
measures is available in the Response of the Government of Canada to the Department’s May 19, 2017
Questionnaire in 100- to 150-Seat Large Civil Aircraft from Canada before the U.S. Department of Commerce
International Trade Administration (Inv. No.: C-122-860), GOC Volume VIII – Other Assistance, July 25, 2017
(Public Version).
11 "Innovation Superclusters Program Guide," Innovation, Science and Economic Development Canada
(2017), https://www.ic.gc.ca/eic/site/093.nsf/vwapj/Sprclstr-Prgrm-Gd-EN.pdf/$file/Sprclstr-Prgrm-Gd-
EN.pdf; Aéro Montréal Press Release, "Federal Budget 2017 - Aéro Montréal welcomes measures targeting
innovation, the supply chain and skills development for our Québec SMEs" (23 March 2017),
http://www.newswire.ca/news-releases/federal-budget-2017---aero-montreal-welcomes-measures-targeting-
innovation-the-supply-chain-and-skills-development-for-our-quebec-smes-616968324.html.
12 Response of the Government of Quebec to the Department’s May 19, 2017 Initial Questionnaire in
Countervailing Duty Investigation of 100- to 150-Seat Large Civil Aircraft from Canada before the U.S.
Department of Commerce International Trade Administration (Inv. No.: C-122-860), Other Subsidies, July 24,
2017, GOQ-128 (Public Version).

local airport authority that operates the Mirabel airport and surrounding area under a
long-term lease from Transport Canada, which closely regulates and continuously reviews
ADM's activities.
 Other assistance disclosed b y the Government of Quebec and Bombardier, including the
PR@M Industry Program administered by the City of Montreal and governed by the Ville
de Montreal By-Law RCG 07-029, Hydro-Quebec Energy Efficiency Programs, and the Tax
Credit for Investment Relating to Manufacturing and Processing Equipment13.
Other Quebec Provincial Subsidies
 Quebec's provision (through state -owned and controlled CDPQ ) of a line of credit for
US$195 million to Bombardier (as part of a revolving credit facility in which other
institutions participated). CDPQ 's US$195 million line of credit was announced in
September 2009. Bombardier has extended the maturity date of t he credit facility
multiple times, most recently to June 2019.
 Quebec's provision of C$4 million to Bombardier – including C$2 million for the C -Series
program – through Emploi-Québec. The support was announced in November 2013.
 Quebec's provision of loan guarantees, financial assistance, and other support to
Bombardier and its C -Series suppliers through the Strategic Support for Investment
Program (known as "PASI") and other programs ( Projet de Soutien de Progrès
Économique ("PSPE"), Programme d 'Attraction et de Retention des Investissements en
Recherche ("PARIR"), and Programme d 'Aide aux Employés ("PAE")) that were
subsequently consolidated under ESSOR.14
Brazil's request also covers any amendments, revisions, implementing measures, or related
measures to the measures identified above.
Brazil understands that the above measures are inconsistent with the obligations of Canada under
the following provisions:

1. Articles 3.1(a) and 3.2 of the SCM Agreement;
2. Articles 3.1(b) and 3.2 of the SCM Agreement; and
3. Articles 5(c), 6.3(a), 6.3(b), 6.3(c), 6.4, and 6.5 of the SCM Agreement.

The above measures that are the subject of this request appear to be specific subsidies. They are
financial contributions ( e.g., grants, loans, equity infusions, tax credits, government provision of
goods or services, etc.) by a government or public body (or through the entrustment or direction
of a private body) that confer a benefit to Bombardier within the meaning of Article 1. 1(a) and (b)
of the SCM Agreement. Furthermore, these subsidies are specific to Bombardier or the aerospace
industry within the meaning of Article 2 of the SCM Agreement.

In Brazil's view, each and every measure listed above is a subsidy contingent, in law or in fact,
whether solely or as one of several other conditions, upon export performance in violation of
Articles 3.1(a) and 3.2 of the SCM Agreement and is contingent, in law or in fact, whether solely or
as one of several other conditions, upon the use of domestic over imported goods in violation of
Articles 3.1(b) and 3.2 of the SCM Agreement.

Brazil is also concerned that Canada is causing, through the use of the above -referenced
measures, adverse effects to the interests of Brazil in the form of serious prejudice or threat of
serious prejudice within the meaning of Article 5(c) of the SCM Agreement. In particular:

13 Response of the Government of Quebec to the Department’s May 19, 2017 Initial Questionnaire in
Countervailing Duty Investigation of 100- to 150-Seat Large Civil Aircraft from Canada before the U.S.
Department of Commerce International Trade Administration (Inv. No.: C-122-860), Other Subsidies, July 24,
2017, GOQ-99, GOQ-110, GOQ-129 (Public Version). See also Response of Bombardier Inc. and C Series
Aircraft Limited Partnership to the Remainder of Section III of the Countervailing Duty Questionnaire in
Countervailing Duty Investigation of 100- to 150-Seat Large Civil Aircraft from Canada, Inv. No.: C-122-860),
Other Subsidies, July 25, 2017, 128, 129, and 144 (Public Version).
14 "Contrats et engagements financiers," MESI, https://www.economie.gouv.qc.ca/ministere/le-
ministere/acces-information/contrats-et-engagements-financiers.

 The effect of the subsidies is to displace or impede or threat en to displace or impede the
imports of a like product of Brazil into Canada within the meaning of Articles 6.3(a) and
6.4 of the SCM Agreement.

 The effect of the subsidies is to displace or impede or threaten to displace or impede the
exports of a like p roduct of Brazil from third country markets within the meaning of
Articles 6.3(b) and 6.4 of the SCM Agreement.

 The effect of the subsidies is significant lost sales or threat of lost sales by the like product
of Brazil to the subsidized product in the same market within the meaning of Article 6.3(c)
of the SCM Agreement.

 The effect of the subsidies is significant price suppression or price depression or threat of
significant price suppression or price depression in the same market within the meaning of
Article 6.3(c) of the SCM Agreement.

 The effect of the subsidies is significant price undercutting or threat of significant price
undercutting by the subsidized product as compared to the price of the like product of
Brazil in the same market within the me aning of Art icles 6.3(c) and 6.5 of the
SCM Agreement.

Brazil is further concerned that the measures that are the subject of this request have caused and
continue to cause nullification or impairment of benefits accruing directly or indirectly to Brazil
under the GATT 1994 within the meaning of Article XXIII:1.

Brazil requests that a Panel be established with standard terms of reference, in accordance with
Articles 4.4 and 7.4 of the SCM Agreement and Article 7 of the DSU.

Brazil asks that this request for the establishment of a Panel be placed on the agenda for the next
meeting of the DSB, which is scheduled to take place on 31 August 2017.

Brazil further requests that, upon establishment of a panel for this matter, the DSB initiate the
procedures provided for in Annex V of the SCM Agreement pursuant to paragraph 2 of that Annex,
and designate a representative to serve the function of facilitating the information -gathering
process pursuant to paragraph 4 of that Annex. Brazil also intends to put forwar d suggestions as
to the information that should be sought under this procedure once the panel is established.

In order to obtain sufficiently representative data to resolve this dispute while at the same time
avoiding unnecessary burdens on other WTO Memb ers, Brazil intends to address questions under
the Annex V procedure to Canada and to the following third -country Members: China, European
Union, Germany, Ireland, India, Indonesia, Japan, Kingdom of Bahrain, Kingdom of Saudi Arabia,
Latvia, The Netherland s, Norway, Republic of Korea, Russian Federation, Sweden, Switzerland,
Tanzania, United Arab Emirates, United Kingdom, and United States.

The entity within the Government of Brazil that is responsible for administering the Annex V
process is the Ministry of Foreign Affairs, and Brazil requests that all communications under the
Annex V process be directed to the Brazilian Mission to the WTO in Geneva.