Brazil secures WTO backing in dispute with Canada's Bombardier

By Tom Miles and Bruno Federowski

GENEVA/BRASILIA (Reuters) - Brazil has secured World Trade Organization backing to press its claims against Canada in a dispute over what it says are unfair subsidies for Bombardier Inc's (BBDb.TO) CSeries jets, a preliminary WTO ruling published on Tuesday showed.

The case plays into a decades-long dispute between Bombardier and its main rival, Brazil's Embraer SA (Sao Paolo:EMBR3.SA - News), which gained higher profile after European heavyweight Airbus SE (Paris:AIR.PA - News) agreed to take a majority stake in the Canadian plane program.

"What happened today was very important for Brazil; it was a small victory," Celso Pereira, a Brazilian diplomat at the WTO, told Reuters in a phone interview. "Now the game will really begin. We've overcome an important barrier."

Brazil launched the WTO dispute last year, saying the CSeries had received $3 billion in federal, provincial and local subsidies.

Canada objected, saying Brazil had unfairly broadened the case by including four claims that went beyond its original complaint. Brazil said their inclusion did not change the essence of the dispute.

In their preliminary ruling on the case, the three-person WTO dispute panel threw out Canada's argument.

"The panel agrees with Brazil that the four measures at issue fit within the scope and essence of the dispute as described by Brazil, so that the scope of the dispute is not expanded by Brazil's panel request," the preliminary ruling said.

Canada had also argued that Brazil had failed to identify specific payments from Canadian research and technology councils.

But the panel rejected that argument too.

"We conclude that Canada's and Quebec's provision of funding, technology transfer, in-kind goods and services, and other support ... is identified with sufficient particularity in Brazil's panel request and therefore falls within the panel's terms of reference," the panel said.

The panel will now assess arguments from both Brazil and Canada over the alleged subsidies. Pereira said he expects a final decision sometime next year.

Bombardier said in a statement that it supports Canada in the trade case which it stressed is "at a preliminary stage." It said the CSeries investments and contribution programs mentioned in Brazil’s petition "are in full compliance with all WTO and international trade rules."

In January, a United States trade agency rejected a request by planemaker Boeing Co (NYSE:BA - News) to impose heavy duties on the CSeries sales to American carriers. Europe's Airbus is expected to close a deal for a 50.01 percent stake of the CSeries this year.

(Reporting by Tom Miles in Geneva and Bruno Federowski in Brasilia; Editing by Edmund Blair, Rosalba O'Brien and Lisa Shumaker)