Canada export credits and loan guarantees for regional aircraft

WT/DS222/R
Page

II. introduction 1

A. complaint of brazil 1

B. establishment and composition of the panel 1

C. panel proceedings 2

III. FACTUAL ASPECTS 2

IV. parties' requests for findings and recommendations 2

A. brazil 2

B. canada 3

V. ARGUMENTS OF THE PARTIES 3

VI. ARGUMENTS OF THE THIRD PARTIES 4

VII. interim review 4

B. brazil's request for interim review 4

C. canada's request for interim review 4

VIII. FINDINGS 6

A. introduction 6

B. preliminary issues 6

1. Disputes over implementation – Article 21.5 of the DSU (regarding claims 1, 2, and 3 of Brazil) 7

(a) Arguments of the parties 7

(i) Canada 7

Claim 1 7

Claim 2 7

Claim 3 7

(ii) Brazil 8

(b) Evaluation by the Panel 8

(i) Claims 1 and 3 8

(ii) Claim 2 10

2. Specificity of the Request for the Establishment of a Panel – Article 6.2 of the DSU (regarding claims 1, 2, 5, and 7 of Brazil) 11

(a) Arguments of the parties 11

(i) Canada 11

Claim 1 11

Claim 2 11

Claim 5 11

Claim 7 12

(ii) Brazil 12

(b) Evaluation by the Panel 13

(i) Claim 1 13

(ii) Claim 2 15

(iii) Claim 5 15

(iv) Claim 7 16

C. programmes "as such" 16

1. Mandatory/discretionary distinction 16

2. Export Development Corporation "as such" 20

(a) Export Development Corporation as an export credit agency 21

(i) Brazil 21

(ii) Canada 21

(iii) Findings 21

(b) EDC Canada Account 24

(i) Brazil 24

(ii) Canada 25

(iii) Findings 25

(c) EDC Corporate Account 27

(i) Brazil 27

(ii) Canada 27

(iii) Findings 28

3. Investissement Québec "as such" 30

(i) Brazil 30

(ii) Canada 30

(iii) Findings 31

D. edc / IQ "as applied" 32

E. information gathering by the panel 33

F. canada account support for the air wisconsin transaction 34

1. Is the Canada Account financing to Air Wisconsin an export subsidy? 35

(a) Financial contribution 35

(b) Benefit 35

(c) Export contingency 37

(d) Conclusion 38

2. Does the Canada Account financing to Air Wisconsin fall within the item (k) safe haven? 38

(a) Arguments of the parties 38

(b) Evaluation by the Panel 39

(c) Conclusion 45

3. Conclusion 45

G. other edc transactions 46

1. Brazil’s general "benefit" arguments 47

(a) Indications of market financing allegedly relied on by Canada in the Brazil – Aircraft – 21.5 proceedings 47

(b) EDC credit ratings 49

(c) Brazil’s constructed "market" benchmark 53

(i) Use of data for all EETCs 53

(ii) Use of weighted averages 53

(iii) Conclusion 54

(d) Bombardier customers' commercial financing 54

(e) Conclusion 55

2. Brazil’s transaction-specific "benefit" arguments 55

(a) ASA – March 1997 56

(i) Repayment term 56

(ii) [] 58

(iii) Market benchmarks proposed by Canada 59

[] 59

[] 60

General industrial index 61

Conclusion 63

(b) ASA – August 1998 63

(c) ACA – February 1996 64

(d) ACA – March 1999 64

(e) Comair – July 1996 65

Minimum Lending Yield ("MLY") 66

[] 66

Market indicators submitted by Canada 66

(f) Comair – December 1996 and March 1997 67

(g) Comair – August 1997 67

(h) Comair – March 1998 68

(i) Comair – February 1999 69

(j) Kendell – August 1999 70

(k) Air Nostrum 71

3. Is the EDC's Corporate Account financing to Comair "contingent … upon export performance"? 72

4. Is the EDC's Canada Account financing to Air Nostrum "contingent … upon export performance"? 72

5. Conclusion 73

H. IQ equity guarantees 73

1. Are IQ equity guarantees "financial contributions" 74

2. Do the IQ equity guarantees confer a "benefit"? 74

(a) Arguments of the parties 74

(b) Evaluation by the Panel 75

(i) Do IQ equity guarantees necessarily confer a "benefit" because equity guarantees are not available in the market? 76

(ii) Do IQ equity guarantees otherwise confer a "benefit"? 77

(iii) Burden of proof 78

(iv) Application of the "benefit" standard to specific IQ transactions 78

No fees charged 78

Below-market fees 80

3. Are IQ equity guarantees "contingent … upon export performance"? 81

(a) Arguments of the parties 81

(b) Evaluation by the Panel 82

4. Conclusion 88

I. IQ loan guarantees 89

(a) Arguments of the parties 89

(b) Evaluation by the Panel 89

(c) Conclusion 91

IX. CONCLUSIONS AND RECOMMENDATION 92