NEWS RELEASES
CANADA WINS WTO PANEL WITH BRAZIL
March 12, 1999 (3:00 p.m. EST) No. 56
CANADA WINS WTO PANEL WITH BRAZIL
International Trade Minister Sergio Marchi and Industry Minister John Manley announced today that Canada scored an important victory at the
World Trade Organization (WTO) in a long-standing trade dispute with Brazil.
The WTO has ruled in Canada's favour on eight of ten points, and has declared that PROEX, a Brazilian export program, is a prohibited export
subsidy that must be withdrawn without delay.
The WTO ruled that Brazil did not meet conditions that grant developing nations more time than developed nations to remove prohibited export
subsidies such as PROEX. The harmful effects of PROEX have been most evident in the aerospace sector. Under the program, foreign
purchasers of Brazilian exports benefit from payments that reduce financing costs to levels that undercut the market.
"Through more than two years of consultations with Brazil, Canada tried to solve this dispute through negotiations," said Mr. Marchi. "Today's
WTO ruling confirms Canada's assertion that PROEX is an illegal export subsidy that must be withdrawn immediately. This ruling will remove a
serious distortion from the regional aircraft market that threatened jobs in Canada's vitally important aerospace sector."
A separate panel found all but two Canadian measures to be consistent with WTO rules. These are: Canada Account debt financing for regional
aircraft since 1995, and Technology Partnerships Canada (TPC) assistance to the regional aircraft industry.
"Canada Account debt financing for regional aircraft has only involved two transactions since 1995, and we continue to believe that all Canada
Account financing has complied with WTO requirements," said Minister Marchi. "If this ruling stands, however, it will not have a significant effect
on Canada Account operations."
Concerning the ruling on TPC assistance to the aerospace sector, Minister Manley noted that the panel report was narrow in scope and limited
to the application of TPC to regional aircraft. It was not critical of TPC's overall structure.
"No one is saying that support for research and development is prohibited under WTO rules," said Minister Manley. "The Canadian government
will continue to support research and development and to encourage innovation and excellence in Canadian industry, while respecting our
international obligations."
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Backgrounders are attached.
For further information, media representatives may contact:
Leslie Swartman
Office of the Minister for International Trade
(613) 992-7332
Jennifer Sloan
Office of the Minister of Industry
(613) 995-9001
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
Backgrounder
WHY THESE WTO RULINGS ARE GOOD FOR CANADA
Canada today won its long-standing WTO case against Brazil's PROEX program.
It was a strong unequivocal win which will protect thousands of Canadian jobs across the country and ensure that the market for regional
aircraft is not distorted by illegal Brazilian subsidies. The WTO has ruled:
PROEX is an illegal export subsidy;
Brazil does not meet the conditions that can give developing countries until 2003 to remove offending programs. PROEX must be withdrawn
without delay;
The Export Development Corporation Corporate Account is not a subsidy;
The Canada Account, as a program, is not a subsidy;
The Defence Industry Productivity Program is not an export subsidy;
The Canada-Quebec Subsidiary Agreement is not a subsidy;
Investissement Quebec is not a subsidy;
Ontario's sale of de Havilland to Bombardier was not a subsidy;
Specific aspects of two Canadian programs -- Canada Account support for regional aircraft since 1995 and Technology Partnerships Canada --
were found to be inconsistent with WTO rules, but only so far as they apply to the regional aircraft market, and the integrity and future of both
programs is not in question.
The Government of Canada remains committed to ensuring that leading-edge research and development is supported in Canada.
Backgrounder
The Stakes: Canada's Aerospace Industry
The Canadian aerospace sector comprises more than 400 companies and employs approximately 60 000 people across Canada; it exceeded
$15 billion in sales in 1998.
The Canadian aerospace industry influences the output and performance of many other sectors of the Canadian economy. Leading aerospace
firms work with numerous suppliers and sub-contractors across Canada in the production of complete aircraft, engines, structural components,
repair and overhaul, satellites, flight simulators and many other products.
Aerospace is a vitally important incubator of advanced technologies, bringing together a critical mass of Canadian firms that are helping to build
a future economy based on high-technology, value-added products. The sector spends about $880 million a year on research and development.
Canada is among only a handful of nations with an advanced, diversified aerospace sector. The range of design and manufacturing expertise
in Canada is comparable to that of many larger economies.
Canada has the sixth-largest share in global aerospace markets, competing with many larger economies such as the United States, France,
Germany and Japan.
Chronology of the Canada-Brazil Aerospace Dispute
June 1996: Canada first expresses concerns about the use of PROEX in the aerospace sector, and requests consultations.
July 1996: Consultations on PROEX take place in Geneva under WTO Subsidies Agreement.
October 1996: Canada sends letter asking the WTO to establish a dispute settlement panel.
October 1996: Brazilian Foreign Minister Lampreia visits Canada, meets Minister for International Trade.
October 1996: Canada withdraws request for WTO panel pending further negotiations.
November 1996: Consultations on PROEX took place with Brazil in Geneva.
November 1996: Consultations on PROEX took place with Brazil in Brasilia.
December 1996 to May 1997: Exchange of draft proposals for a bilateral agreement.
March 1997: Brazil requests WTO consultations on programs that support Canadian industry.
April 1997: Consultations in Geneva on Canadian programs.
November 1997: Further discussions between the Canadian and Brazilian governments.
January 16, 1998: Prime Minister Chrétien visits Brazil on Team Canada, speaks to President Cardoso about PROEX. They agree to appoint
special envoys.
January 29, 1998: Canada and Brazil appoint special envoys.
May 7, 1998: Envoys deliver recommendations to Prime Minister Chrétien and President Cardoso.
June 8-9, 1998: Consultations in Brasilia.
June 25-26, 1998: Consultations in Washington, D.C.
July 10, 1998: Canada informs WTO of intention to request dispute settlement panel.
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October 22, 1998: WTO panels on PROEX and on Canadian measures are struck.
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February 17, 1999: WTO delivers interim reports on both panels to parties involved (Canada and Brazil).
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March 12, 1999: WTO delivers final reports on PROEX and Canadian measures to parties involved.
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End of March 1999: WTO to publish panel reports. Deadline for appeals is 30 days later.
FLOW CHART OF A TYPICAL WTO TRADE DISPUTE(Time periods for disputes involving exports subsidies is halved)
Request for Consultations
If responding party does not reply within 10 days, or if it does
not enter into consultations within 30 days, or at period
mutually agreed, the complaining party can request the
establishment of a panel (other WTO Members with substantial
trade interest have 10 days to join the consultations).
Consultations
60 days
Complaining State May Request Panel
The complaining State may request a panel at any
time after 60 days from the date the request is received by the
other State, provided consultations have not resolved
the issue.
Dispute Settlement Body (DSB) Establishes Panel
(usually within 10-30 days)
Panel's Terms of Reference
Composition of the Panel
(within 20 days of the establishment of the panel)
Panel Examination
Unless otherwise agreed, this should not exceed 6 months from composition of the panel.
For cases on prohibited subsidies, it should not exceed 3 months
(includes circulation of interim report within 13 to 22 weeks).
Final Panel Report Circulated to Members and DSB
(report circulated to disputing parties a few weeks in advance)
DSB Adopts Panel Report
(not before 20 days of
circulation)
Appeal to Appellate Body
(within 60 days of panel
report)
Appellate Review
(60 or 90 days)
DSB Adopts Appellate Report
(within 30 days of report)
DSB Monitors Implementation of Adopted
Panel/Appellate Body Recommendations
Within 30 days of adoption, the responding party must inform the
DSB of its intentions regarding the implementation of the
recommendations.
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