February 1, 2001 (1:00 p.m. EST) No. 13

BRAZIL BLOCKS CANADA'S REQUEST FOR A

WTO RULING ON BRAZILIAN AIRCRAFT SUBSIDY

International Trade Minister Pierre Pettigrew and Industry Minister Brian Tobin announced today that Brazil has blocked Canada's request for the World Trade Organization (WTO) to examine the latest version of PROEX, a Brazilian export program.

"Brazil's efforts to block our request for clarification on their most recent revisions to PROEX confirm our view that PROEX is still illegal, and Brazil knows they would lose another WTO panel," said Minister Pettigrew.

"Canada will not be deterred. We will continue to press for Brazil to make PROEX compliant," added Minister Tobin.

At a WTO meeting this morning, Canada requested that a WTO compliance panel determine whether Brazil has fully implemented WTO rulings that ordered it to withdraw its illegal PROEX export subsidy on regional aircraft. Brazil used procedural objections to block Canada's request for clarity on this issue. As a result, Canada's request has not yet been granted.

Brazil claims that it has modified PROEX to comply with four WTO rulings that declared it to be a prohibited export subsidy that should be withdrawn. The PROEX program offers below-market financing to clients of the Brazilian aircraft manufacturer Embraer.

Canada will request a special WTO meeting to take place within the next 10 days, at which time a compliance panel will be established automatically.

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Background information is attached.

For further information, media representatives may contact:

Sylvie Bussières

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

CHRONOLOGY OF PROEX DISPUTE IN THE WTO

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 to be a prohibited export subsidy.

August 2, 1999

WTO Appellate Body confirms that Brazil must withdraw PROEX export subsidies.

December 9, 1999

Canada requests establishment of a WTO panel to rule on the compliance of Brazil's revisions to PROEX.

May 9, 2000

WTO Compliance Panel confirms that Brazil has not complied with the WTO rulings on PROEX.

July 21, 2000

WTO Appellate Body confirms that Brazil has not brought PROEX into compliance with its WTO obligations, and that PROEX 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. 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.

February 1, 2001

Brazil blocks Canada's request for the WTO to examine the latest version of PROEX.