NEWS RELEASES
CANADA ANNOUNCES MEASURES TO COMPLYWITH WTO RULING ON REGIONAL AIRCRAFT SUBSIDIES
November 18, 1999
CANADA ANNOUNCES MEASURES TO COMPLY
WITH WTO RULING ON REGIONAL AIRCRAFT SUBSIDIES
Pierre Pettigrew, International Trade Minister, and John Manley, Minister of Industry, today announced that the
Government of Canada has fully complied with the ruling of the World Trade Organization (WTO) concerning
support for the Canadian regional aircraft industry. In addition, two federal programs -- Technology Partnerships
Canada (TPC) and Canada Account -- have been restructured to ensure that all future transactions under both
programs are fully compliant with WTO.
Minister Pettigrew said: "Canada benefits from fair and transparent international trading rules and we will
continue to honour our WTO obligations. Now we are looking forward to equally thorough implementation of this
ruling by Brazil."
"We have met and exceeded the conditions and the deadline of the WTO," said Minister Manley. "We want to
respect not only the letter of the law, but the principle of fair trade. For that reason, we have applied these
changes not only to regional aircraft, as was required, but also to all industries affected by these programs," he
added. "We look forward to moving ahead with TPC investments in important R&D projects in partnership with
Canadian industry."
In August, the Appellate Body of the WTO confirmed an earlier ruling that found TPC's support of the Canadian
regional aircraft industry and Canada Account debt financing for the export of Canadian regional aircraft were
inconsistent with WTO rules. Steps were taken to comply with the Appellate Body findings.
Current TPC Contribution Agreements for the Canadian regional aircraft industry have been amended in order
to terminate all obligations to disburse funds effective as of today. As a result, some $16.4 million of funding
pursuant to those agreements has been cancelled.
TPC -- a Special Operating Agency of Industry Canada -- has been significantly restructured to ensure that all
future transactions will be compliant with the WTO, said Minister Manley. TPC's objectives have been adjusted;
eligible activities have been redefined; assessment criteria have been re-oriented; transparency has been
enhanced; and risk and reward sharing has been restructured. Canada Account, a program operated by Export
Development Corporation, has modified its guidelines to disallow funding that does not conform to the
requirements as clarified by the WTO. A policy guideline has been approved that ensures that all future Canada
Account transactions -- for all sectors, not only those involving the regional aircraft sector -- will be taken in
accordance with the disciplines of the OECD Arrangement on Guidelines for Officially Supported Export
Credits.
The WTO panel agreed with Canada's complaint that Brazil was providing an illegal trade subsidy through
Proex, a program that offered substantially-reduced interest rates to clients of the Brazilian aircraft
manufacturer, Embraer. In rejecting Brazil's appeal, the WTO Appellate Body confirmed that Brazil must
withdraw the Proex export subsidies within 90 days.
(Background material attached)
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For more information, please contact:
Jennifer Sloan
Press Secretary
Office of the Minister of Industry
(613) 995-9001
Bruce Deacon
Technology Partnerships Canada
(613) 941-6747
Sylvie Bussières
Office of the Minister for International Trade
(613) 992-7332
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
The news release and other documents (including TPC's new Terms and Conditions, Framework, and
Investment Application Guide) are available on the Technology Partnerships Canada website at:
http://tpc.ic.gc.ca. The news release is also available on the Department of Foreign Affairs and International
Trade's web site at: http://www.dfait-maeci.gc.ca
Backgrounder
CANADA ACCOUNT
Export Development Corporation's (EDC) purpose is to support and develop, directly or indirectly, Canada's
export trade and Canadian capacity to engage in that trade and to respond to international business
opportunities. The Corporation is accountable to Parliament through the Minister for International Trade.
Under the Canada Account program, the EDC refers transactions which it cannot support to the Minister for
International Trade, who may approve them if they are judged to be in the national interest.
Services under the Canada Account program are provided on a user-pay basis. Loans are extended on terms
that are fully repayable, on either a concessional or non-concessional basis.
Once authorized by Ministers, Canada Account transactions are offered, negotiated, executed and
administered by EDC, but the collection risk ultimately rests with the Government of Canada.
On March 12, 1999, a World Trade Organization Panel ruled that Canada Account financing for regional aircraft
constitutes a prohibited export subsidy. This happened because Canada could not defend itself against Brazil's
allegations without breaching commercial confidentiality. A new policy has been approved to make explicit that
Canada Account will comply with Canada's obligations under the WTO.
Backgrounder
TECHNOLOGY PARTNERSHIPS CANADA
• Technology Partnerships Canada (TPC) is a technology investment fund established in 1996 to contribute to
the achievement of Canada's objectives of increasing economic growth, creating jobs, and supporting
sustainable development. TPC supports and advances government initiatives by investing strategically in
research, development and innovation in order to encourage private sector investment, and so maintain and
grow the technology base and technological capabilities of Canadian industry. TPC also encourages the
development of small and medium-sized enterprises (SMEs) in all regions of Canada.
• TPC supports R&D and innovation in:
- Environmental technologies
- Enabling technologies (advanced manufacturing and processing technologies, advanced materials processes
and applications, applications of biotechnology and applications of selected information technologies)
- Aerospace and Defence
TPC AND THE WTO
• On August 2, 1999, the Appellate Body of the World Trade Organization confirmed an earlier ruling that
found the way TPC was administered in support of five projects relating to the regional aircraft industry was
inconsistent with WTO rules.
• Under the ruling, Canada was obliged to make adjustments to the administration of TPC's support for the
Canadian regional aircraft industry. All necessary adjustments have been made.
• TPC's current Contribution Agreements for the Canadian regional aircraft industry have been amended in
order to terminate all obligations to disburse funds effective November 18, 1999. As a result, some $16.4 million
of funding pursuant to those agreements has been cancelled.
• In addition, TPC has cancelled the conditional approval, given prior to the issuance of the Appellate Body
ruling, for two other regional aircraft projects.
TPC IS RESTRUCTURED
• The Government of Canada has significantly restructured TPC. As of November 18, the new Terms and
Conditions, a new Framework governing how the Agency operates and a new Investment Application Guide
have been released.
• All applicants with outstanding files as of today ( 86 in total) have been informed in writing that TPC is closing
their files. Companies are free to submit new proposals under the restructured fund and a new Investment
Application Guide has been issued for that purpose.
• Five key elements of TPC have been restructured:
(1) TPC objectives have been adjusted to focus on promoting technological innovation and enhancing the
technological capability of Canadian industry, rather than commercialization. Consistent with the WTO, actual
or anticipated export performance is neither an objective nor a consideration of TPC.
(2) Eligible activities have been redefined based on the WTO definitions for industrial research and
pre-competitive development. Industrial research will encourage more early stage and collaborative R&D;
pre-competitive development will promote investment in generic horizontal technologies, in support of
companies' overall R&D program rather than product specific technologies.
(3) Assessment criteria have been re-oriented to focus on the contribution a project makes to improving the
technological competitiveness of a firm rather than the commercial viability of a specific product.
(4) Transparency has been enhanced: All TPC investments will be announced in order to provide an
opportunity for public scrutiny. In addition, TPC's administration has been modified to enable TPC to release
more information in order to defend its investment decision, while still respecting the need for commercial
confidentiality. All TPC contracts will explicitly document the government's rationale for the investment and all
related conditions.
(5) Risk and Reward Sharing has been restructured: TPC will continue to share with its private sector partners
in both the risks and rewards of projects, with the rewards to government consisting of both financial returns
and economic benefits to Canada. Repayments will no longer be primarily based on royalties tied to product
sales but will take different forms depending on the project (e.g. royalties on total company or division sales,
warrants, fixed repayments conditional on technological milestones, etc.).
THE WAY AHEAD
• Technological innovation and R&D are key elements in achieving the objectives of economic growth and job
creation.
• The government has reaffirmed its strong commitment, most recently through the Speech from the Throne, to
working in partnership with industry to strengthen our technological capabilities and position Canada and
Canadians for success in today's knowledge-based economy.
• TPC has proven to be an effective and efficient tool for leveraging vital, strategic investments in technological
R&D and innovation.
• Canada, as a trading nation, benefits from a set of fair and transparent international trading rules. The
government will continue to support technological innovation and R&D through TPC, consistent with its WTO
obligations.
The news release and other documents (including TPC's new Terms and Conditions, Administrative
Framework, and Investment Application Guide) are available on the Technology Partnerships Canada website
at: http://tpc.ic.gc.ca
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