12 December 2000

WTO Grants Canada Right to Impose Sanctions against Brazil over Aircraft Subsidy Dispute

Canada today formally requested and was granted authority from the World Trade Organization's (WTO) dispute settlement body to impose economic countermeasures against Brazil for the continued use of its illegal Proex aircraft subsidy program.

"We have been very clear about how Brazil must reform Proex to meet WTO requirements," said the Minister. "In the absence of necessary changes to Proex, we are ready to exercise our WTO rights and protect Canadian companies from illegal trade practices abroad."

The last negotiating session between Canada and Brazil took place on November 28 and 29 in Rio de Janeiro. The main stumbling block during these meetings was Brazil's newly amended Proex subsidy program, which is not compliant with Brazil's WTO obligations. If Brazil were to make necessary
reforms to Proex, the two countries would likely be able to agree on compensation measures for past Proex violations and a monitoring mechanism for any future aircraft subsidy programs.

A WTO arbitration panel ruled in August that Canada can apply up to $344 million per year in countermeasures against Brazil, confirming the Proex subsidy program has done significant damage to the Canadian aircraft industry. The award was the largest in WTO history. Four previous WTO panels had also ruled that the Proex subsidy violated Brazil's WTO obligations and must be withdrawn.

Canada has yet to decide on specific retaliatory measures to be imposed against Brazil. No future talks with Brazil have been scheduled.