Possible trade challenge would weigh on Bombardier aid move: Trudeau

By David Ljunggren and Randall Palmer

OTTAWA (Reuters) - When the Canadian government decides whether to give aid to aircraft maker Bombardier Inc, it will take into account any possible trade challenge that might arise as a result, Prime Minister Justin Trudeau said on Thursday.

Rival Brazilian plane maker Embraer SA expressed concern on Tuesday about the Canadian province of Quebec's decision to pump $1 billion into Bombardier's struggling CSeries airplane project. Ottawa is considering whether to give federal aid as well.

"We will ensure that any decision taken is in the best interests of Canadians based on a strong economic case, but concerns about international impacts I'm sure will fold into any decision we take in a responsible manner," Trudeau said at a news conference.

Canada and Brazil fought a fierce trade dispute at the World Trade Organization (WTO) over accusations of subsidies to Bombardier and Embraer in the 1990s.

Any dispute over Canadian aid to Bombardier this time could draw in much bigger combatants, since the CSeries would compete with Boeing and Airbus planes.

"The decision on Bombardier will be taken by the minister (of innovation, Navdeep Bains) based on facts, recommendations and economic reasons. It's always tempting to take a political decision, or a decision based on symbols," Trudeau said.

Veteran trade lawyer Peter Clark, who advised Embraer in the 1990s but is not working for it now, said that while direct export subsidies violated international rules, even government investment in such a project was likely to be challenged.

"It's keeping an aircraft alive that's going to compete with Boeing and with Airbus, and I don't think they'll sit idly by," Clark said.

University of Ottawa law professor Debra Steger said a complication for the federal government is that it is responsible for all provincial action within its jurisdiction, so any federal aid could get lumped in with the Quebec move.

"The federal government would be on the hook for what Quebec did," she said, noting that sub-national aid was also an element of lengthy WTO litigation involving Boeing and Airbus.

Former Liberal member of Parliament and trade lawyer Barry Campbell, said potential federal government support could be designed "in such a way that they would be on side".

(Writing by Randall Palmer; Additional reporting by Leah Schnurr; Editing by G Crosse, Tom Brown, Grant McCool)