World Trade Organization
Société de Dévéloppement Industriel du Québec (“SDI”)
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Société de Dévéloppement Industriel du Québec (“SDI”)SubsidyArguments of BrazilAccording to Brazil, the Société de Dévéloppement Industriel du Québec (“SDI”) provides prohibited export subsidies, in the form of loans and guarantees, to the civil aircraft industry. Brazil states that SDI has recently been “’regrouped‘” for administrative purposes into a new corporation, known as Investissement-Québec (“IQ”).421 Brazil indicates that IQ maintains the resources, including the staff, of SDI.422 Brazil states that IQ administers the Industrial Development Fund and the Private Investment and Job Creation Promotion Fund (“FAIRE”),423 which provides various forms of “’financial assistance‘” and “’government support‘” to certain focus industries, foremost among which is the aerospace industry.424 Brazil draws particular attention to what Brazil terms FAIRE’s pledge to extend “’refundable or non-refundable contributions,‘” loan guarantees, and the “’assumption of interest charges‘” for eligible projects.425 Brazil argues that SDI funding is extended on a conditionally-repayable basis, meaning that repayment will only occur if the underlying project achieves the degree of success outlined by Brazil. Brazil asserts that because the recipient has no down-side risk – i.e., if the project is unsuccessful, SDI funds need not be repaid -- a clear benefit is conferred, within the meaning of Article 1.1 of the SCM Agreement. Brazil draws attention to the finding in the most recent WTO Trade Policy Review of Canada that IQ “provides export guarantees for projects considered too risky by private financial institutions,” and that IQ assistance “is available for export development or expansion, or purchases of foreign companies, or for contract finance.” For Brazil, by offering guarantees for projects which are, in the words of the Trade Policy Review “considered too risky by private financial institutions,” IQ makes a potential direct transfer of funds and confers the obvious benefit, within the meaning of Article 1.1 of the SCM Agreement, of providing resources which would otherwise simply not be available. In light of this, Brazil states, SDI funding need not be extended on a conditionally repayable basis to constitute a subsidy. Brazil also states that although the joint DIPP/SDI contribution for the development of Bombardier’s 50-seat regional jet is not subject to the Panel’s jurisdiction (paras. 4.74-4.78), it still considers the “’conditionally-repayable‘” terms attached to it to be persuasive as evidence that funding on such terms is as a general matter available and extended to the Canadian regional aircraft industry. Brazil maintains that it has demonstrated that funds are being and have been provided to this industry, and that they are being and have been provided under conditions constituting a subsidy within the meaning of Article 1.1 of the SCM Agreement. Brazil believes that, having come forward with this evidence, Canada should be asked by the Panel to produce the evidence placed at the disposal of the WTO Secretariat in the process of conducting the Trade Policy Review. Arguments of Canada426In response to a Panel request for an explanation of, and the internal assessment documents and loan/share agreements under, Garantie Québec “ad hoc programmes” and “the financing of major projects”, in particular the three “financing of major project” activities totalling $7.1 million under the Aerospace Industry Development Fund, and five FAIRE activities, during the 1997- 1998 period Canada states that Canada notes that it has not put in a defence regarding whether these contributions are subsidies within the meaning of Article 1 of the SCM Agreement. Canada notes that Brazil agrees with Canada regarding the relevance of the principle of judicial economy to the issues to be determined in this case. Accordingly, Canada states, to the extent that any documents are produced by Canada in response to this question of the Panel, they are provided to further support Canada’s submissions that the contributions at issue are not “contingent on export performance” within the meaning of Article 3 of the SCM Agreement. Canada also states that Brazil has made no specific allegation about contributions made under the SDI, nor adduced any evidence in support of its vague and unspecific allegations concerning “benefits” under the SDI. Canada further states that Brazil has made no allegations and has adduced no evidence in respect of the Aerospace Industry Development Fund. Canada does not consider it appropriate to adduce evidence in response to allegations not made and a case that has not been established. Finally, Canada states, most of the information requested by the Panel is sensitive business confidential information, and Canada’s desire to present to the Panel such information as may help it arrive at a decision must be balanced against the commercial interests and legal rights of private parties not Party to this dispute. Accordingly, Canada indicates, with the express permission of the Government of Québec, it has provided as business confidential information the contribution agreements with les Industries Aerospatiales Mecair Inc., Héroux Inc., and Finition de Métal National N.M.F. (Canada) Ltée. relating to the three projects under the Aerospace Industry Development Fund, with the clauses relating to repayment terms blocked. Canada states that each agreement details the terms of the project, the contribution, and reimbursement.427 Canada also notes that the “ad hoc programmes” listed under the SDI relating to the civil aircraft sector are, in fact, activities under the Subsidiary Agreement that are administered (for Québec) through SDI, and that as a result, these programmes have already been accounted for. In addition, Canada states, the five FAIRE activities in the 1997-98 period were not in the civil aircraft sector: one project was in the wood products sector, one in the heavy vehicles (trucks) sector, one in the tourist industry sector, and two in the computer sector. Accordingly, Canada states, these FAIRE activities do not fall within the jurisdiction of the Panel. Comments of BrazilRegarding Canada’s citation to Brazil’s belief in judicial economy, Brazil recalls its reference to judicial economy in its letter to the Panel dated 13 December 1998 (see para. 6.281). Brazil also argues that although Canada has provided the contribution agreements for the three Aerospace Industry Development Fund projects identified by the Panel, it has redacted the sections regarding repayment terms, as well as certain of the “conditions préalables.” Brazil submits that these sections likely provide insight into whether the contributions are “in fact tied to actual or anticipated exportation or export earnings.” Brazil argues that as a result of Canada’s strategic decision to withhold this information, the Panel should adopt adverse inferences, presuming that the information suggests that the contributions are in fact tied to actual or anticipated export (paras. 4.146-4.151). Export contingencyArguments of BrazilFor Brazil, SDI loans and guarantees (as well as those of Investissement-Québec) confer direct benefits on Québec businesses for the express purpose of assisting those businesses with “’[l]a conquète de marchés à l’exportation,‘”428 and to support transactions “’à l’étranger.‘”429 Brazil asserts that under SDI, the Government of Québec sponsors export programmes “’designed to promote the export of Québec-produced goods and services.‘”430 According to Brazil, SDI was formed with the objective “’to promote economic development in Québec, particularly by encouraging the development of businesses, the growth of exports, research and the development of new techniques.‘”431 Brazil states that SDI provides Québec businesses with “’guarantee[s] of payment or repayment of a financial obligation‘” and “’loan[s] at the current market rate‘”432 for the purpose of assisting those businesses with “’[l]a conquète de marchés à l’exportation,‘”433 and to assist with “’tout projet d’exportation‘” or “’de démarrage à l’exportation.‘”434 According to Brazil, SDI does not fund only exports to other of the Canadian Provinces, but specifically supports transactions “’à l’étranger.‘”435 Brazil asserts that every CRJ sale benefiting from the Can$43 million SDI loan for the development of the 50-seat CRJ has been for export,436 and that accordingly, SDI funding to the civilian aircraft industry constitutes an export subsidy in law or in fact prohibited by Article 3 of the SCM Agreement. Brazil does not contest that some SDI/IQ funds may well have gone to other industries with sales in domestic markets. Brazil states that its claim that SDI/IQ assistance constitutes a prohibited export subsidy under Article 3 of the SCM Agreement is unrelated to these incidences of SDI/IQ funding. For Brazil, when SDI/IQ assistance goes to the Canadian regional aircraft industry, it goes to an industry that is totally export oriented, precisely because it is an export industry and the Government of Québec anticipates that it will remain so. For Brazil, the ordinary meaning of Article 3.1(a) of the SCM Agreement prohibits such assistance. Arguments of CanadaCanada maintains that the SDI is not contingent upon export performance. Canada observes that Brazil admits that the programme is available for goods destined for domestic as well as export market. According to Canada, the SDI was established by the Loi sur la société de développement industriel du Québec437 (the SDI Act). In June 1996, the Garantie Québec programme replaced most operations under the SDI. Canada states that this programme is designed to guarantee loans, lines of credit or other forms of financing offered through a financial institution, and indicates that the programme supports projects dealing with start-up, expansion or modernisation, in the manufacturing or tourist sectors and in certain service industries; research, development or design, as well as marketing and financing of tax credits for scientific research or experimental development; marketing, acquisition of a company in another country, and financing of a line of credit; and business mergers, regrouping of common activities and take-over of one firm by another in the manufacturing and tourist sectors, and in certain service industries. Canada states that according to Article 2 of the SDI Act, the objective of the SDI is to ‘«favoriser le développement économique du Québec, notamment en encouragent le développement des entreprises, la croissance des exportations et les activitiés de recherche et d’innovation.»’ Canada notes that Brazil acknowledges that ‘«exportation»’ in this context means exports outside Québec, including the other provinces of Canada. Therefore, for Canada, SDI has as a general objective the enhancement of Québec’s competitiveness and, as a desirable but not necessary result, an increase in Québec’s exports. Canada maintains that export performance is not a criterion of success for either the programme as a whole or its activities;438 and that export performance is manifestly not a condition for receiving contributions. Canada maintains that the SDI comprises four sets of eligibility criteria, one of which is for ‘export development’, which includes credit insurance, financing for foreign direct investment by Québec companies, and inventory financing. Canada argues that 458 activities were authorised in 1997-1998, of which 53 per cent involved loans or loan guarantees of less than Can$200,000. One out of 39 financing activities and 96 out of 419 guarantees authorised was for exportation.439 According to Canada, the activities covered a wide range of industrial, transportation, resources and agricultural sectors (278 authorisations) and services (180 authorisations),440 but none were related to the civil aircraft sector. Canada submits that in individual projects there are no rewards if exports take place and no penalties if they do not. More important, in Canada’s view, is that SDI is not in law or in fact contingent upon export performance. According to Canada, the sole basis for Brazil’s allegation that SDI is inconsistent with SCM Agreement Article 3 appears to be that one of the objectives of the programme is “the growth of exports,” although Brazil admits that Québec counts sales to Canada’s other provinces as export sales. (para. 6.333) Accordingly, in Canada’s view, there is no prima facie case for Canada to answer. Canada also objects, for the reasons identified in its arguments concerning TPC (paras. 6.197- 6.199) to what it views as the inappropriate use by Brazil of Canada’s trade policy review. Canada asks the panel to ignore Brazil’s arguments about SDI that are based on that document. Directory: english -> tratop e -> dispu e dispu e -> Annex g list of exhibits submitted by the parties dispu e -> World Trade Organization dispu e -> Annex a submissions of Brazil Download 1.34 Mb. Share with your friends:
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