NEWS RELEASES

July 21, 2000 (12:40 p.m. EDT) No. 181

WTO APPELLATE BODY CONFIRMS CANADIAN VIEW THAT BRAZILIAN AIRCRAFT SUBSIDY IS ILLEGAL

International Trade Minister Pierre Pettigrew and Industry Minister John Manley welcomed today's World Trade Organization (WTO) Appellate Body ruling that confirmed Brazil has not brought its Proex aircraft subsidy program into compliance with its WTO obligations, and that it continues to be an illegal trade subsidy.

"This is the fourth successive ruling against the Proex subsidy. The Government of Canada expects Brazil to honour its WTO commitments and comply with its obligations," said Mr. Pettigrew. "Canada will protect its WTO rights in the event of Brazilian non-compliance."

The Appellate Body also confirmed that Canada has brought Technology Partnerships Canada (TPC) into full compliance with its international trade obligations, and that no further changes to its structure and administration are necessary.

"We are pleased the Appellate Body has recognized that TPC is functioning in a manner fully consistent with our trade obligations. TPC continues to serve as an important program for promoting technological innovation and R&D in Canada," said Mr. Manley.

The Appellate Body ruling confirmed that Brazil has failed to remove the export subsidies for regional aircraft under Proex and that the changes that Brazil made to the program were vastly inadequate to bring it into compliance. The ruling criticized Brazil's failure to take action regarding Proex support for future aircraft deliveries under contracts signed before the November 18, 1999 implementation deadline. As a result of the ruling, Proex support must be withdrawn from more than 900 undelivered Brazilian regional aircraft. Customers of Embraer, the Brazilian regional aircraft manufacturer, could face higher aircraft prices following this decision.

In the face of continued Brazilian non-compliance and in the absence of a negotiated resolution, Canada has asked the WTO for authorization to take appropriate countermeasures against imports from Brazil. The arbitration panel examining Canada's requested quantum of retaliation is expected to issue its ruling on July 26.

Canada remains prepared to reach a mutually satisfactory negotiated resolution with Brazil on this issue.

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For further information, media representatives may contact:

André Albinati

Office of the Minister for International Trade

(613) 992-7332

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

Jennifer Sloan

Office of the Minister of Industry

(613) 995-9001

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