Brazil's failure to scrap subsidies paid to Embraer, ruled illegal by the World Trade Organisation (WTO), could clear the way for Canada, home of Bombardier, to impose trade sanctions on the Latin Americans.

The WTO's final ruling in the case says Brazil has not complied with an order to remove $3.7 billion in "ProEx" subsidies to buyers of Embraer's regional jets, which compete with Bombardier CRJs.

Ottawa is now expected to ask the Geneva-based organisation for permission to hit Brazil with multi-billion dollar trade penalties.

The WTO panel's findings "conclude that Brazil has failed to implement the dispute settlement body's August 1999 recommendation that it withdraw the export subsidies for regional aircraft under ProEx within 90 days".

Both nations still hope to avoid an all-out trade war.

Source: Flight International