NEWS RELEASES

July 9, 2001 (12:30 p.m. EDT) No. 100

CANADA REACTS TO BRAZIL'S ILLEGAL TRADE PRACTICES

International Trade Minister Pierre Pettigrew and Industry Minister Brian Tobin confirmed today that the Government of Canada will match the financing terms that Brazil is offering Northwest Airlines. This action enables Canada's Bombardier to supply Northwest Airlines with up to 150 aircraft on terms that are competitive with those offered by Brazil's aircraft manufacturer, Embraer.

"The WTO has ruled four times that Brazil's Proex subsidy to Embraer is illegal. We will not allow Canadian jobs to be lost to Brazil in this way," said Mr. Pettigrew. "Embraer has a substantial unfair advantage because Brazil keeps violating WTO rules through its Proex financing scheme. Our message is very simple: we are serious about protecting Canadian jobs."

If all options are exercised, the deal could sustain 1500 person-years of employment in Canada. The value of the loan for the firm order of 75 aircraft would be up to US$1.2 billion. The loan will be at the Organization for Economic Co-operation and Development reference rate and for a period of 15 years. Financing for the other 75 options would be on similar terms.

"Canada's response to Brazil's illegal subsidies is focussed and measured," said Minister Tobin. "Across the country, the Canadian aerospace industry employs over 90 000 workers and this government's message is clear: we are committed to protecting those jobs against illegal practices."

The WTO has confirmed that the Proex export subsidy violated WTO rules and that it has done significant damage to Canada's aircraft industry. Canada was granted authority by the WTO to apply up to $344 million per year in countermeasures against Brazil. The Government of Canada has yet to decide on the application of retaliatory measures. Canada remains prepared to reach a mutually satisfactory negotiated resolution with Brazil on this issue.

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Backgrounders are attached.

For further information, media representatives may contact:

Sébastien Théberge

Office of the Minister for International Trade

(613) 992-7332

Heidi Bonnell

Office of the Minister of Industry

(613) 995-9001

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

This document is also available on the Department of Foreign Affairs and International Trade's Internet site: http://www.dfait-maeci.gc.ca

Backgrounder

CANADA'S AEROSPACE INDUSTRY

Canada is among only a handful of nations with an advanced, diversified aerospace industry. Canada's range of design and manufacturing expertise is comparable to that of many larger economies, including the United States, Great Britain, France, Germany and Japan.

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, satellites, flight simulators and many other products. Canada is also recognized for the availability of repair and overhaul services.

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-tech, value-added products. The sector spent about $730 million in 1999 on research and development. Investment in plants and equipment reached $900 million in 1999.

Products

• Canada's aerospace industry is a world leader in several key sectors, including: regional aircraft, business jets, commercial helicopters, gas turbine engines, landing gear systems, aircraft environmental control systems, flight simulators, satellite communications sub-systems and space-based robotics.

Employment

• In 1999, total employment in the aerospace sector rose to 84 000 and is expected to reach 95 000 by 2001.

• Jobs in the aerospace industry are spread throughout the country, with particular concentration in Quebec and Ontario. In 1999, Quebec accounted for the largest share with 48 percent in all aerospace jobs, followed by Ontario (33 percent), Western Canada (15 percent), and the Atlantic provinces (4 percent).

Sales and Exports

• Canada's more than 500 aerospace companies reached a record level of $17.7 billion in sales in 1999, a 20 percent increase over 1998. Sales are expected to rise to $23.6 billion by 2001.

• In 1999, export sales rose 29 percent from 1998 levels to $13.3 billion, and are projected to rise to $19.4 billion by 2001. Export sales traditionally account for approximately 70 percent of total sales.

Backgrounder

BOMBARDIER'S ACTIVITIES AND SUPPLIERS ACROSS CANADA

• Bombardier employs 28 000 people across the country and is expected to continue expanding.

• Bombardier, a highly diversified industrial company, is a leading manufacturer of business jets, regional aircraft, rail transportation equipment and motorized recreational products.

• Bombardier has 19 plants and key operational facilities in seven Canadian provinces. Bombardier's economic contribution is often very strategic for several small communities that benefit directly from Bombardier's successes, i.e., Thunder Bay, Moose Jaw, Portage la Prairie, La Pocatière, Valcourt, etc.

• Bombardier also works with more than 5000 suppliers across Canada which are providing components for its aircraft and rail cars, as well as for its recreational products like the snowmobile, the personal watercraft etc.

• Bombardier also provides opportunities for many Canadian companies to improve and expand their business. For example, CAE has developed a series of simulators to support Bombardier's new product development. This experience will enable CAE to attract additional contracts from around the world.

• Furthermore, Bombardier gives Canadians in science, engineering, business, management, marketing/advertising and many others the opportunity to work for a leading world class company from their home country base.

• Bombardier is a Canadian success that benefits the country as a whole with economic spin-offs.

Canadian Suppliers to Bombardier Aerospace

• In British Columbia, Avcorp supplies Bombardier with airplane structures and Viking Air provides parts and components for Bombardier's planes.

• In Alberta, Bombardier partners with ATCO Frontec, based in Edmonton, and with Field Aviation in Calgary.

• In Saskatchewan, Bombardier operates the Nato Flying Training facility in Moose Jaw.

• In Manitoba, Bristol supplies Bombardier with various small airplane components. Bombardier also operates the Canadian Aviation Training Centre at the former Canadian Armed Forces base in Portage la Prairie.

• In Ontario, Bombardier suppliers include BF Goodrich Aerospace (landing gears), Honeywell (electrical systems) and Magellan/Fleet Aerospace (structural components). In the Toronto area, deHavilland (acquired by Bombardier in 1992) has diversified its product line and has grown from around 3500 employees to over 5000.

• In Quebec, Dowty (landing gears), Héroux Inc. (landing gears) and National Metal Finishing (wings components) provide material to Bombardier.

• In the Atlantic provinces, Composites Atlantique and IMP supply aircraft components to Bombardier.

Canadian Suppliers to Bombardier Transportation

• In British Columbia, Quester Tangent supplies Bombardier with electronic equipment and Wismer Rawlings Electric Ltd. provides motors.

• In Quebec, Acier Inoxydable Atlas (stainless steel), ADS Groupe Composites Inc. (fibreglass), Milufab Inc. (door panels), Pocatec Ltd (communications and information signs), Railtech Ltd (laminated panels) and Vapor Canada Inc. (door operators) are Bombardier suppliers.

• In Ontario, Bach-Simpson Corporation (event recorders), CMRM (roll forms) and WABCO (brake components) are also suppliers.

Backgrounder

CANADIAN WINS AT WTO OVER PROEX