Paul Lewis / Washington DC
US/German manufacturer tells Bombardier and Embraer to follow world trade rules
Fairchild Dornier is warning that it will seek political backing in the USA and Germany for subsidy support if its regional jet rivals Bombardier and Embraer do not adhere to World Trade Organisation (WTO) rules governing aircraft financing. This follows the latest WTO ruling that the revised Brazilian ProEx 3 scheme is in principle legal, but only as long as it is properly employed.
The US-owned German-based manufacturer is threatening to become embroiled in the long-running row over regional jet subsidies, which until now has largely been confined to a two-sided dispute between Bombardier and Embraer. The latter claims that the latest WTO ruling upholding ProEx 3 gives it a clear victory over Canada, which had been arguing that ProEx 3 still breached international financing agreements.
"WTO does not say anything about behaviour, only principles," says Chuck Pieper, Fairchild Dornier chairman. "It says you should live up to the principles of these incentives, but if that does not happen, the question is where are we going to be?"
WTO rules set financing rates at the commercial interest reference rate, plus 1%, with loans capped at 85% of a contract's value and extending no more than 10 years. Brazil has twice had to revise its ProEx interest equalisation programme to bring it in line with international rules, after the WTO found in favour of Canada.
Critics claim that some recent regional jet financing deals have involved no downpayment and been extended to 16 years. Canada in response recently stepped in with low-interest financing to help secure Bombardier orders from Air Wisconsin and Northwest Airlines. Brazil then lodged its complaint against Canada with the WTO.
Fairchild Dornier's threat to seek US law-maker support follows a hearing before the House of Representatives' Committee on Transportation and Infrastructure aviation subcommittee on the US aerospace industry's competitiveness. Among complaints was the level of European funding for Airbus aircraft developments.
Testimony by US Undersecretary of Commerce for International Trade Grant Aldonas included allegations that Europe has linked landing rights with Airbus sales and has stalled on certification of rival Boeing aircraft. Aldonas also claims "reports implicate rivals in bribery of foreign public officials".
Source: Flight International
