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<title>THE GOVERNMENTS OF CANADA AND BRAZIL WELCOMEREPORT OF SPECIAL ENVOYS ON REGIONAL AIRCRAFT</title>
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<p><font size="+2"></font><font face="Univers" size="+2"></font><font face="Univers" size="+2">May 7, 1998 No. 111</font></p>
<p align="CENTER"><font face="Univers" size="+2">THE GOVERNMENTS OF CANADA AND BRAZIL WELCOME</font></p>
<p align="CENTER"><font face="Univers" size="+2">REPORT OF SPECIAL ENVOYS ON REGIONAL AIRCRAFT</font></p>
<p><font face="Courier">The Government of Canada today announced that the Special Envoys appointed by
Prime Minister Jean Chrétien and Brazilian President Fernando Henrique Cardoso
have submitted their report on means for resolving the dispute between Canada and
Brazil regarding support for exports of regional aircraft. </font></p>
<p><font face="Courier">"President Cardoso and I welcome this report. The Special Envoys have provided us
with a good framework and sound basic principles for resolving our differences
concerning government support for regional aircraft sales," said the Prime
Minister.</font></p>
<p><font face="Courier">The Canadian Special Envoy is the Honourable Marc Lalonde, currently a partner
with Stikeman, Elliott in Montreal. The Brazilian Special Envoy is Dr. Luiz Olavo
Baptista of the University of São Paulo. </font></p>
<p><font face="Courier">"Our officials will negotiate, over the next two months, a bilateral agreement
based on the recommendations of the Envoys," added the Prime Minister. "This
bilateral agreement will be consistent with our existing international trade
obligations and will ensure that our aerospace companies compete on a level
playing field." The dates for the initiation of these negotiations will be
established through diplomatic channels. </font></p>
<p><font face="Courier">- 30 -</font></p>
<p><font face="Courier">A backgrounder is attached.</font></p>
<p><font face="Courier">For further information, media representatives may contact:</font></p>
<p><font face="Courier">Media Relations Office</font></p>
<p><font face="Courier">Department of Foreign Affairs and International Trade</font></p>
<p><font face="Courier">(613) 995-1874</font></p>
<p><font face="Courier">This document is also available on the Department of Foreign Affairs and
International Trade Internet site: http://www.dfait-maeci.gc.ca</font></p>
<p><font face="Courier"> </font><font face="Univers" size="+1"> Backgrounder</font></p>
<p><font face="Univers" size="+1">REPORT OF SPECIAL ENVOYS ON REGIONAL AIRCRAFT</font></p>
<p><font face="Courier">During the Team Canada visit to Brazil in January of this year, the Prime
Minister agreed with Brazilian President Fernando Henrique Cardoso to appoint
Special Envoys to recommend ways to resolve the dispute between Canada and Brazil
over trade in regional aircraft.</font></p>
<p><font face="Courier">On January 29, Prime Minister Chrétien announced the appointment of the
Honourable Marc Lalonde as the Canadian Special Envoy. At the same time,
President Cardoso designated Dr. Luiz Olavo Baptista. Mr. Lalonde is a former
Cabinet Minister and an Officer of the Order of Canada. Since 1984, he has
practised corporate and commercial law as a partner with Stikeman, Elliott in
Montreal. Dr. Baptista is a professor of international law at the University of
São Paulo and a corporate lawyer.</font></p>
<p><font face="Courier">The two Envoys worked together over the past three months, meeting in Canada and
in Brazil with officials of the Canadian and Brazilian Governments and with
officers of Bombardier and Embraer, and have now submitted their joint
recommendations.</font></p>
<p><font face="Courier"><strong>Key Recommendations:</strong></font></p>
<p><font face="Courier">The Envoys recommend that the two governments negotiate, within two months, a
bilateral accord that:</font></p>
<p><font face="Courier"> is consistent with the World Trade Organization (WTO) Agreement;</font></p>
<p><font face="Courier"> subjects export financing programs to a "common template," using the
Organization for Economic Co-operation and Development (OECD) Consensus as a
model;</font></p>
<p><font face="Courier"> contains a dispute settlement mechanism, including annual consultations and
recourse to a neutral and independent Monitor who can review support programs and
provide an opinion on their consistency with the bilateral agreement;</font></p>
<p><font face="Courier"> provides for consultations with respect to domestic programs to determine their
WTO consistency.</font></p>
<p><font face="Courier"><strong>Benefits of an Accord for Canada</strong></font></p>
<p><font face="Courier">When implemented, the bilateral accord should resolve Canada's longstanding
concerns regarding the Brazilian export subsidy PROEX and its effect on the
market for regional aircraft. The PROEX program reduces the cost of financing for
purchasers of Embraer regional jets by 3.8 percent through what are called
"interest equalization" payments. </font></p>
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