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<p><font size="+1"></font><font size="+1"><strong>December 23, 2002 <em>(2:00 p.m. EST)</em> No. 179</strong></font><font size="+1"></font></p>
<p align="CENTER"><font size="+1"><strong>WTO ISSUES REPORT IN AIRCRAFT DISPUTE</strong></font></p>
<p>International Trade Minister Pierre Pettigrew and Industry Minister Allan Rock today received a WTO arbitration panel
report in the Canada-Brazil aircraft dispute. The award marks an end to all current proceedings at the WTO surrounding the
aircraft financing dispute between Canada and Brazil, enabling the two countries to concentrate on negotiating an end to
this dispute. </p>
<p>The arbitration panel determined that Brazil should be authorized to impose $385 million in countermeasures against
Canada. Brazil had originally requested $5.2 billion in countermeasures. The award stems from our financing of an Air
Wisconsin purchase on terms that matched a below-market Brazilian offer to the airline. This award will not affect the
financing of the Air Wisconsin, Air Nostrum and Comair purchases. The award could allow Brazil to raise tariffs on
Canadian exports to Brazil but it is not expected that Brazil will impose the countermeasures, given the reciprocal damage
this could cause to bilateral trade.</p>
<p>In August 2000, a similar WTO arbitration panel determined that Canada should be authorized to apply up to $2.1 billion in
countermeasures against Brazil for its failure to withdraw its illegal Proex subsidies on Embraer aircraft. </p>
<p>"The ruling is what we expected," said Minister Pettigrew. "Negotiations to find a mutually satisfactory solution have
progressed substantively. I believe that both countries will benefit greatly when we will have put this dispute behind us.
Let's move forward and invest our energies into rebuilding our economic relationship."</p>
<p>Negotiators met five times this year, most recently in Brasilia on December 16 and 17. During the Brasilia meetings,
negotiators agreed to emphasize dialogue and negotiations in an effort to find a resolution to this dispute and strengthen the
bilateral relationship between the two countries. Negotiators are expected to meet again in March 2003.</p>
<p>For more information, please visit the following Web site: </p>
<p><a href="https://bac-lac.wayback.archive-it.org/web/20070221093725/http://www.dfait-maeci.gc.ca/tna-nac/Aircraft-e.asp">http://www.dfait-maeci.gc.ca/tna-nac/Aircraft-e.asp</a></p>
<p align="CENTER">- 30 -</p>
<p>For further information, media representatives may contact:</p>
<p>Sébastien Théberge</p>
<p>Director of Communications</p>
<p>Office of the Minister for International Trade</p>
<p>(613) 992-7332</p>
<p>Media Relations Office</p>
<p>Department of Foreign Affairs and International Trade</p>
<p>(613) 995-1874</p>
<p>Larry Shaw</p>
<p>Industry Canada</p>
<p>(613) 998-4242</p>
<p>Media Relations</p>
<p>Industry Canada</p>
<p>(613) 943-2502</p>
<p>This document is also available on the Department of Foreign Affairs and International Trade's Internet site:
<a href="https://bac-lac.wayback.archive-it.org/web/20070221093725/http://www.dfait-maeci.gc.ca/">http://www.dfait-maeci.gc.ca</a></p>
<p align="CENTER"><font size="+1"><strong>Backgrounder</strong></font></p>
<p align="CENTER"><font size="+1"><strong>CHRONOLOGY OF THE DISPUTE</strong></font></p>
<multicol cols="2" width="315" gutter="46">
<p>June 18, 1996</p>
<p>Canada requests establishment of a WTO panel to rule on
the legality of Proex.</p>
<p>July 10, 1998</p>
<p>Canada requests second WTO panel to examine Proex. </p>
<p>March 12, 1999</p>
<p>WTO panel declares the Proex subsidy for regional
aircraft a prohibited export subsidy.</p>
<p>August 2, 1999</p>
<p>WTO Appellate Body confirms the panel's
recommendations that Brazil withdraw Proex export
subsidies, and that Canada too withdraw export subsidies
under Technology Partnerships Canada and Canada
Account for regional aircraft.</p>
<p>May 9, 2000</p>
<p>WTO compliance panel confirms that Brazil has not
complied with the WTO rulings on Proex. </p>
<p>July 21, 2000</p>
<p>WTO Appellate Body confirms that Brazil has not
brought Proex into compliance with its WTO obligations
and that Proex export subsidies continue to be illegal.
Technology Partnerships Canada, however, is now found
to be consistent with WTO rules.</p>
<p>August 28, 2000</p>
<p>WTO arbitration panel rules that Canada can apply
$2.1 billion in countermeasures against Brazil. It confirms
that the Proex program has done significant damage to the
Canadian aircraft industry.</p>
<p>December 12, 2000</p>
<p>Canada formally requests and is granted authority from
the WTO to impose $2.1 billion in economic
countermeasures against Brazil for its continued use of
Proex. </p>
<p>January 10, 2001</p>
<p>Canada matches Brazilian financing terms to Air
Wisconsin Airlines to secure a regional jet contract.</p>
<p>February 16, 2001</p>
<p>Canada challenges compliance of the revised Proex.</p>
<p>March 12, 2001</p>
<p>Brazil challenges Canada's Air Wisconsin transaction, as
well as other aircraft transactions.</p>
<p>July 9, 2001</p>
<p>Canada matches Brazilian financing terms to Northwest
Airlines to secure a regional jet contract.</p>
<p>July 26, 2001</p>
<p>Canada wins fifth WTO ruling on Proex. WTO lays out
specific conditions to which Proex must adhere to be
compliant.</p>
<p>January 28, 2002</p>
<p>WTO finds that Canada Account financing of the Air
Wisconsin and Air Nostrum transactions, as well as
Corporate Account financing of three Comair
transactions, were inconsistent with WTO rules. WTO
also finds that EDC's Canada and Corporate Accounts, as
well as Investissement Québec are compliant, as such. </p>
<p>June 24, 2002</p>
<p>Brazil requests that the WTO grant Brazil authorization to
take appropriate countermeasures against Canada.</p>
<p>December 23, 2002</p>
<p>WTO grants Brazil the authority to impose $385 million
in economic countermeasures against Canada.</multicol>
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