Graham Warwick/WASHINGTON DC

Canadian and Brazilian negotiators have begun talks to hammer out a settlement in the long-running dispute over subsidies for Embraer regional jet sales, following the World Trade Organisation (WTO) decision to allow Canada to impose trade sanctions on Brazil.

Brazilian reports say Canada will be allowed to impose $1.3 billion in sanctions. The Canadian Government had requested authority for sanctions of up to $3.4 billion, its estimate of the value of Proex subsidies for Embraer regional jet orders and options.

In July, the WTO ruled Brazil had failed to bring Proex in line with international regulations and continued to provide illegal subsidies. Approval for trade sanctions will increase pressure on Brazil to negotiate a settlement.

The Brazilian Government continues to state it will not remove the subsidies from aircraft yet to be delivered, but will instead offer Canada compensation.

Bombardier has welcomed the WTO action but does not expect a direct financial benefit from settlement of the dispute. Within the bilateral negotiations "there is discussion of possible compensation to avoid sanctions," says executive vice-president Yvan Allaire, "but there is no direct relationship with Bombardier earnings."

The company is still pushing for removal of Proex subsidies from undelivered Embraer aircraft and wants to assure a "level playing field" for future orders, says president Bob Brown.

Bombardier, meanwhile, confirms that talks continue with American Airlines on the fate of its CRJ700 order, threatened by a proposed pilots' contract restricting subsidiary Amerian Eagle's regional jet fleet to 50 seats or fewer (Flight International 1-7 August).

Brown also acknowledges the proposed BRJ-X is on the back burner following the launch of the 90-seat CRJ900. "We are focusing our strategy on the CRJ," he says. "We continue to believe there is a niche in the 100-seat market, but all effort is going into the -900."

Source: Flight International