NEWS RELEASES
CANADA WINS FIFTH WTO RULING IN AIRCRAFT DISPUTE
July 26, 2001 (10:55 a.m. EDT) No. 112
CANADA WINS FIFTH WTO RULING IN AIRCRAFT DISPUTE
International Trade Minister Pierre Pettigrew and Industry Minister Brian Tobin today welcomed
the World Trade Organization (WTO) report that lays out the conditions to which Brazil's export
financing program Proex must adhere to be WTO compliant.
"The WTO has given Brazil clear conditions that it must follow," said Mr. Pettigrew. "The ruling
confirms the position that Canada has taken since the beginning of the dispute. I hope that this
fifth ruling will finally convince Brazil to comply with its WTO obligations."
"The WTO ruling confirms the Government of Canada was within its right to take action in
protecting Canadian jobs across the country," said Minister Tobin. "All Canadians benefit from
the aerospace sector, which has proven to be an important contributor to our country's advances
in high technology and innovation."
The panel ruled that to conform to WTO obligations, Proex must meet the following conditions:
It either must not benefit Embraer's customers or it must conform to the OECD Arrangement on
Guidelines for Officially Supported Export Credits. To conform to the OECD Arrangement,
Proex financing support would have to be at a rate no lower than the Commercial Interest
Reference Rate (CIRR); its duration could not exceed 10 years; the financing could not exceed 85
percent of the value of the transaction; and the interest rate has to include a special fee.
Last December, 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 dispute.
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Backgrounders are attached.
For further information, media representatives may contact:
Mora Johnson
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
WTO RULES FOR EXPORT FINANCING
|
Current Proex Program |
OECD Rules |
| Interest rate |
CIRR* rate |
No lower than CIRR* rate |
| Duration of loan |
unlimited |
10 years maximum |
| Percentage of the value of the
transaction |
up to 100% of the value |
No more than 85% of the
value |
| Special fee |
no fee |
20 basis-point fee |
* CIRR refers to the Organization for Economic Co-operation and Development (OECD)'s
Commercial Interest Reference Rate (CIRR). The OECD sets guidelines on the minimum fixed
interest rate that can be provided by exporter governments offering official support. CIRR is set
on a monthly basis.
Backgrounder
CHRONOLOGY OF THE DISPUTE
June 18, 1996
Canada requests establishment of WTO
Panel to rule on legality of Proex.
July 10, 1998
Canada requests second WTO Panel to
examine Proex.
March 12, 1999
WTO Panel declares Proex subsidy for
regional aircraft a prohibited export subsidy.
August 2, 1999
WTO Appellate Body confirms Brazil must
withdraw Proex export subsidies.
May 9, 2000
WTO Compliance Panel confirms Brazil has
not complied with the WTO rulings over
Proex.
July 21, 2000
WTO Appellate Body confirms Brazil has
not brought Proex into compliance with its
WTO obligations, and continues to be an
illegal trade subsidy.
August 28, 2000
WTO arbitration panel rules Canada can
apply $344 million per year in
countermeasures against Brazil. It confirms
Proex program has done significant damage
to the Canadian aircraft industry.
December 12, 2000
Canada formally requests and is granted
authority from WTO's dispute settlement
body to impose economic countermeasures
against Brazil for its continued use of Proex.
January 10, 2001
The Government of Canada matches
Brazilian financing terms to Air Wisconsin
to secure a contract for 75 jets.
February 16, 2001
Canada challenges compliance of revised
Proex.
March 12, 2001
Brazil challenges Canada's Air Wisconsin
transaction.
July 9, 2001
Canada matches Brazilian financing terms to
Northwest Airlines to secure a contract for
up to 150 jets.
July 26,2001
Canada wins fifth WTO ruling on Proex.
By early fall 2001
WTO ruling on Air Wisconsin transaction.
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