Canada – Export Credits and Loan Guarantees for Regional Aircraft (WT/DS222): Decision by the Arbitrator under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement

Summary

INTRODUCTION

Initial Proceedings

On 19 February 2002, the Dispute Settlement Body (DSB) adopted the report of the Panel in this dispute. The DSB recommended, in particular, that Canada withdraw the subsidies found to be incompatible with its obligations under Article 3.1(a) of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) within 90 days. The 90-day period expired on 20 May 2002.

On 24 May 2002, Brazil stated that Canada had not followed the recommendation of the DSB within the time-period specified by the Panel and, pursuant to Article 4.10 of the SCM Agreement and Article 22.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), Brazil requested the DSB to authorize it to take appropriate countermeasures in the amount of US$3.36 billion.

In its communication, Brazil specified, inter alia, that it intended to implement this authorization to take appropriate countermeasures in the form of some or all of the following:

(a) suspension of the application of the obligation under paragraph 6(a) of Article VI of GATT 1994 to determine that the effect of subsidization under EDC Canada Account and EDC Corporate Account programmes is to cause or threaten material injury to an established domestic industry, or is to retard materially the establishment of a domestic industry;

(b) suspension of the application of obligations under the Agreement on Import Licensing Procedures relative to licensing requirements on imports from Canada; and

(c) suspension of tariff concessions and related obligations under the GATT 1994 concerning a list of products to be drawn from the list attached to its request.

Request for Arbitration and Selection of the Arbitrator

On 21 June, Canada submitted a communication to the DSB objecting to the recourse by Brazil to Article 22.2 of the DSU and Article 4.10 of the SCM Agreement. Canada stated that the countermeasures proposed by Brazil were not appropriate.