The Ottawa Citizen
May 10, 2000

Canada seeks $700M in spat over subsidies

(Excerpt)

Canada will ask for $700 million in annual trade retaliation against Brazil today in what would be the largest punitive award ever granted by the World Trade Organization, Canada’s Trade Minister Pierre Pettigrew announced yesterday.

The retaliation request must be filed with the WTO by Friday or Canada would forfeit its right to seek retaliation in its three-year tit-for-tat battle with Brazil over subsidies each government provides to its respective aircraft manufacturers on highly popular regional jets.

Canada was found to be illegally subsidizing the sale of Bombardier’s Canadair RJ regional jets through Industry Canada’s Technology Partnerships Canada (TPC) program, as well as through the Export Development Corporation’s controversial Canada Account. Brazil was supporting the sale of Embraer aircraft through its Proex export program.

Mr. Pettigrew said the decision to move today rather than wait to see whether bilateral talks with Brazil lead to a settlement has more to do with timing requirements of the WTO than the state of negotiations.

He said he has instructed trade officials in Geneva to ask the WTO for permission to retaliate against an array of up to 160 Brazilian products, including beef, coffee, jams, plastics, charcoal, film, real and artificial furs, silk, bed linens, umbrellas, leather, steel, and even spacecraft.

Potentially more damaging to Brazil is Canada’s request that the WTO suspend the proof-of-injury requirement on all other products that currently receive Proex subsidies, including a range of products not on Canada retaliatory list.

Canada sells about $1.36 billion in goods and services to Brazil, while importing approximately $700 million. Under WTO rules, Brazil is not permitted to retaliate against Canada, though reports have hinted that they will look to impose their own punitive measures should Canada act. That would touch off a trade war that could test the enforcement capacity of the WTO.

“Look, it’s a very big victory for Canada,” Mr. Pettigrew told reporters following question period yesterday. He said the WTO was extremely clear in its rulings on why Proex constitutes illegal trade subsidies and, after three years, it is time for Canada to take action to make sure Brazil complies with global trade rules.

“We have been talking to Brazil for years and years. Sometimes you are more optimistic than others. Canada still wants a negotiated settlement, but when we see that Brazil does not seem to be playing the game fairly on such an important issue, well you have to act.

“We have only a few days to act (to seek permission to retaliate). If we don’t use this, we lose this.”