RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/87 
20 September 2000 
 (00-3759) 
Dispute Settlement Body 
4 August 2000  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard  
on 4 August 2000  
 
Chairman:  Mr. S. Harbinson (Hong Kong, China) 
 
 Subjects discussed
 Page  
 
1. United States – Measures treating  export restraints as subsidies.........................................1 
(a) Request for the establishmen t of a panel by Canada ..................................................................1 
2. Brazil – Export financing programme for aircraft:  Recourse by Canada to 
Article 21.5 of the DSU ........................................................................................................ .....3 
(a) Report of the Appellate Body  and Report of the Panel...............................................................3 
3. Canada – Measures affecting the export  of civilian aircraft:  Recourse by Brazil 
to Article 21.5 of the DSU..................................................................................................... ....5 
(a) Report of the Appellate Body  and Report of the Panel...............................................................5 
 
1. United States – Measures treating export restraints as subsidies 
(a) Request for the establishment of a panel by Canada (WT/DS194/2) 
1. The Chairman  drew attention to the communicati on from Canada contained in document 
WT/DS194/2. 
2. The representative of Canada  said that on 19 May 2000, his country had requested 
consultations with the United States regarding US measures that treated a restraint on exports of a 
product as a subsidy to producers of other products ma de, using or incorporating the restricted product 
if the domestic price of the restricted product was a ffected by the restraint.  Consultations, which had 
been held on this matter on 15 June  2000, had failed to settle the dis pute.  In Canada's view, the US 
measures were unjustified and were inconsistent with the WTO obligations.  Therefore, Canada was 
requesting the establishment of a panel to examine this matter. 
3. The representative of the United States  said that her country had several concerns with regard 
to Canada's initiation of this dispute.  The Unite d States believed that Canada's assertions were devoid 
of merit, and should a panel be established, it woul d find this to be the case.  However, a more 
immediate concern was the fact that in its pane l request, Canada had identified new measures that 
were only vaguely described and on which no cons ultations had been held.  In its request for 
consultations1, Canada had identified two so-called measures:  (i) certain pages from the Statement of 
Administrative Action (SAA) accompanying the Uruguay Round Agreements Act of 1994;  and 
                                                      
1 WT/DS194/1. WT/DSB/M/87 
Page 2  
 
 (ii) certain pages from the preamble to the Fi nal Rule of the US Department of Commerce 
promulgating new countervailing duty regulations.  Canada had not identified any provision of the US 
countervailing duty statute as a measure nor the US practice under that statute. 
4. In a letter dated 19 May 2000, the United States had agreed to enter into consultations but had 
expressly informed Canada of the US view, namely, that Canada had failed to identify a "measure" as 
required by Article 4.4 of the DSU.  During the consultations, the United States had explained that 
neither the SAA nor the preamble had any independent effect under US law, and that neither document authorized or required any action by the US  Government.  Canada ha d not responded to this 
explanation one way or the other.  The next  communication the United States had received from 
Canada on this matter was its panel request.  Th e measures identified in the panel request were 
different from those identified in the request for consultations.  Instead of identifying the SAA and the 
preamble as the measures, Canada ha d referred in its panel request to:  (i) section 771(5) of the Tariff 
Act of 1930, as interpreted by the SAA and the pr eamble;  and (ii) an unidentified US practice 
thereunder, thereunder being a reference to section 771(5). 
5. The United States recognized that in the Brazil Aircraft case
2, the Appellate Body had found 
that the DSU did not "require a precise and exact identity between the specifi c measures that were the 
subject of consultations and the specific measures id entified in the request for the establishment of a 
panel" (paragraph 132 of the ABR).  The United St ates would not quibble with Canada's substitution 
in its panel request of section 771( 5) as interpreted by the SAA and the preamble, for the SAA and the 
preamble as identified in its request for consulta tions.  This substitution was a permissible result of 
consultations clarifying the situation.  However, the United States took great exception to Canada's 
inclusion of US practice under section 771(5) as one of the measures in question.  First, since Canada 
had not identified what the US practice consisted of, Canada's request was not in conformity with 
Article 6.2 of the DSU.  The United States did not know, on the basis of Canada's cryptic reference, 
what practice it was referring to.  The panel request simply referred to section 771(5) as interpreted by 
the SAA and the preamble.  There had been no exampl e given regarding the application of the statute 
in practice.  Second, the United States and Canada had not consulted with respect to any US practice, 
nor had this practice been identified in Canada's request for consultations.  While the DSU might not 
require "a precise and exact identity" between the measures identified in a consultation request and a 
panel request, there had to be some identity.  In this case, insofar as Canada's  vague identification of 
"US practice" as a "measure" was concerned, th ere was no identity between the two requests.  
6. For these reasons, the United States could not ag ree with the establishment of a panel at the 
present meeting.  In addition, if Canada sought the establishment of a panel at a future meeting based 
on its current request, the United States would raise its concerns before that panel.  In the US view, in 
order to be consistent with the DSU provisions, Cana da had two options.  First, if it wished to limit 
the measures identified in its panel request to section 771(5), as interpreted by the SAA and the 
preamble, it should file a new panel request.  Altern atively, if it wished to include US practice under 
section 771(5) as a measure, it could file a new requ est for consultations, in which it would identify 
that practice so that meaningful c onsultations could be held thereon. 
7. The United States also wished to  identify another problem with  the panel request.  Canada 
had stated that US measures included section 771(5)  as interpreted by the SAA and the preamble, and 
the unidentified "US practice thereunder".  The use of  the word "include" suggested that there might 
be other measures that Canada might attempt to raise before a panel, should a panel ever be 
established.  Under the established jurisprudence, such an attempt would not be permissible.  
Therefore, the United States also wished to reserve its rights with respect to this aspect of Canada's 
request.  
                                                      
2 WT/DS46.  WT/DSB/M/87 
 Page 3 
 
 
 8. The DSB took note  of the statements and agreed  to revert to this matter. 
2. Brazil – Export financing programme for aircra ft:  Recourse by Canada to Article 21.5 
of the DSU 
(a) Report of the Appellate Body (WT/DS46/AB/ RW) and Report of the Panel (WT/DS46/RW) 
9. The Chairman  recalled that, at its meeting on 9 December 1999, the DSB had decided, in 
accordance with Article 21.5 of the DSU, to refer to  the original Panel the matter raised by Canada 
concerning the measures taken by Brazil to comply with the DSB's recommendations in this case.  
The Panel Report had been circulated on 9 May 2000 in document WT/DS46/RW.  On 22 May 2000, 
Brazil had notified the DSB of its intention to appeal  certain issues of law covered in the Panel Report 
and legal interpretations developed by the Panel.  The Appellate Bo dy Report had subsequently been 
circulated on 21 July 2000 in document WT/DS46/AB /RW.  Both Reports were now before the DSB 
for adoption at the request of Canada.  
10. The representative of Canada  said that, in November  1999, Canada had sought a 
determination on the consistency of the measures ta ken by Brazil to comply with the DSB's rulings 
and recommendations in this case.  At that time, Canada had announced that the measures taken by 
Brazil were not sufficient to bring Brazil into co nformity with the SCM Agreement, and did not 
constitute a withdrawal of the prohibited export subs idies.  The Article 21.5 Panel and the Appellate 
Body which had examined Brazil's implementation, had fully supported Canada 's position.  The Panel 
and the Appellate Body had reaffirmed the previo us DSB's rulings, namely, that Brazil could not 
continue to make payments after 18 November 1999 under its subsidy progra mme (PROEX) that had 
been found to be prohibited.  The Panel and the Appellate Body had also ruled that, despite the 
modifications made for new trans actions, PROEX remained a prohibite d export subsidy.  It had been 
more than eight months since the deadline for Br azil's implementation had expired but no compliance 
had yet taken place.  Canada and Brazil had been enga ged in this dispute for over four years, and four 
reports had now been adopted by the DSB, all ruli ng in favour of Canada:  i.e. the report of the 
original panel, the report of Appellate Body, the re port of the Article 21.5 Panel and now the report of 
the Appellate Body under Article 21.5.  All four reports had found that Brazil's PROEX programme 
was a prohibited export subsidy and violated Brazi l's obligations under the SCM Agreement.  Since 
the dispute had gone on for a long time, Canada cal led on Brazil to implement immediately the  DSB's 
rulings and recommendations. 
11. The representative of Brazil  said that his country intended to bring all future PROEX 
operations in line with the DSB's recommendations .  However, Brazil would respect its legal 
commitments with regard to prior operations.  Those matters were part of broad consultations 
currently being held with Canada , and Brazil hoped that a mutually satisfactory solution would soon 
be reached.  The dispute at hand involved provisions of the SCM Agreement in an area relatively new 
to developing countries, namely, official export fina ncing.  International cooperation in the area of 
export credit insurance dated back to, at least, 1934 - the period of the Great Depression - when the 
Berne Union had been set up.  In January 1955, the Organization for European Economic 
Cooperation, the predecessor of the Organiza tion for Economic Cooperation and Development 
(OECD), had adopted rules on export credits.  Sin ce then those rules, which had been negotiated 
among developed countries, had evolved significantly.  As far as those rules were concerned, until 
recently, developing countries had been c onsidered as recipients of credits. 
12. The dispute at hand concerned a developing country  that had entered into an industry of high 
cost, high technology and with a high value-added cont ent.  For such an industry, export financing 
was critical.  However, from the point of view of developing countries, in particular non-OECD 
members, there were many systemic difficulties in th is area.  Brazil's concerns about multilateral rules 
on export credits, or lack thereof, were known.  During the preparatory process for the Third WT/DSB/M/87 
Page 4  
 
 Ministerial Conference, Brazil had expressed its c oncerns regarding the laconic and unbalanced 
language of item (k) contained in A nnex I of the SCM Agreement.  Braz il had tried to use interest rate 
support to finance exports of regional aircraft.  However, that mechanism had been challenged by 
Canada.  In order to defend itself, Brazil had invoke d the first paragraph of item (k).  However, the 
Panel had suggested that Brazil should invoke the s econd paragraph of item (k ) which refered to the 
interest rate provisions of the OECD Arrangeme nt.  The Appellate Body had condemned this 
interpretation, but had left open some questions as to how the first paragraph of item (k) could be 
applied. 
13. Brazil had found several problems with the requi rements of the second paragraph of item (k) 
and its reference to the interest ra te provisions of the OECD Arrangem ent.  First, developing countries 
had not participated in the negotiations of those provisions.  Nevertheless, one panel had intended to 
limit export financing activities of developing c ountries to the parameters contained in those 
provisions.   
14. Second, developing countries were not fam iliar with the provisions of the OECD 
Arrangement. In addition, the OECD Secretaria t was not responsive to inquiries from non-OECD 
participants.  Most questions raised by Brazil had no t been answered due to the confidential nature of 
the OECD deliberations.  This was surprising, give n that many major participants of the OECD had 
an interest in greater transparency in the WTO.   
15. Third, a mere reference in item (k) to the inte rest rate provisions of the OECD Arrangement 
was not enough to clarify to non-OECD participants  what should be done to comply with the SCM 
Agreement.  The Article 21.5 Panel that had exam ined the Canada Account Program had tried to 
define the OECD interest rate provisions.  Howeve r, that effort had raised more questions than 
answers.  The fact was that no one knew what tho se provisions were.  For example, the "matching" 
provision of the OECD Arrangement allowed an OE CD participant to matc h unduly generous credit 
terms offered by another country - whether or not an OECD participant - as long as special and 
confidential intra-OECD notification procedures were observed.  At least one Member believed that 
"matching" was part of the interest rate provisions  of the OECD Arrangement.  He underlined that the 
Panel had disagreed on this point.  However, if "matching" was an OECD interest rate provision, then 
OECD participants could provide OECD minus credit terms to its exporters a nd still be in compliance 
with the WTO disciplines.  However,  transparency would only be ensured for OECD participants.  He 
asked whether a developing country practising "mat ching", with no OECD notification requirements, 
would be deemed to be in compliance with the WTO Agreement.  He believed that he knew how 
some other Members would answer this question. 
16. Fourth, the OECD rules were not suited to the needs and specificities of developing countries 
or to any non-OECD participant.  For example, it was not clear what was the appropriate Commercial 
Interest Reference Rate (CIRR) for supplier cred its denominated in local currencies.  Many export 
credit agencies in developing countries used London Interbank Rates (LIBOR) as a reference for both 
fixed and floating rate transactions.  He questioned whether that practice was inconsistent with the 
SCM Agreement as LIBOR was not an OECD benchmark.  These questions had not been answered by the Panel.  Another question was what versi on of OECD interest rate provisions should be 
observed:  i.e. that which was in force at the tim e when the Marrakesh Agreement had been signed or 
that currently in force.  In the 1992 version of the OECD Arrangement interest rate support was not 
defined in the text "in light of differences betw een long-established national systems of export credit 
… in operation in the participating countries".  In  the latest version of the OECD Arrangement, 
interest rate support was mentioned in the text.  However, non-OECD particip ants did not know how 
this mechanism worked or what were the national prac tices in this regard.  It was not clear what the 
next version of the OECD Arrangement would o ffer for non-OECD participants.  Brazil, as a non-
OECD participant, continued its efforts to define  multilateral rules in this area.  Brazil had never 
raised this matter during the proceedings as its defense was not based on the second paragraph of  WT/DSB/M/87 
 Page 5 
 
 
 item (k).  Nevertheless, this was an important ma tter for Brazil as well as for developing countries and 
non-OECD participants.  Outside the WTO, the ru les on export financing we re being developed to 
suit the needs and interests of OECD participants.  At the same time the needs and interests of non-
OECD participants were being disregarded.  Tho se uncertainties and inequities in the area of export 
financing should not be ignored because they were too difficult or sensitive issues to be dealt with. 
17. The representative of the European Communities  said that the EC had initiated a trade barrier 
regulation (TBR) investigation on PROEX at the requ est of the European aircraft producers.  This 
procedure had been suspended in order to monitor Brazil's implementation of the DSB's 
recommendations.  The Appellate B ody had confirmed that Brazil had failed to implement the DSB's 
recommendations by continuing to make paymen ts under the condemned PROEX scheme and by 
failing to amend PROEX in a manner consistent with  the WTO rules.  The EC therefore expected 
Brazil to immediately stop issuing NTN-I bonds for the sale of the outstanding aircraft for which letters of commitment had been given, and to st op providing new export subsidies under the amended 
PROEX scheme.  Failure to do so would oblige the EC to take further steps to protect its rights. 
18. The DSB took note
 of the statements and adopted  the Appellate Body Report contained in 
WT/DS46/AB/RW and the Panel Report contained in  WT/DS46/RW, as modified by the Appellate 
Body Report. 
3. Canada – Measures affecting the export of  civilian aircraft:  Recourse by Brazil to 
Article 21.5 of the DSU 
(a) Report of the Appellate Body (WT/DS70/AB/ RW) and Report of the Panel (WT/DS70/RW) 
19. The Chairman  recalled that at its meeting on 9 December 1999 the DSB had decided, in 
accordance with Article 21.5 of the DSU, to refer to  the original Panel the matter raised by Brazil 
concerning the measures taken by Canada to comply with the DSB's recommendations in this case.  
The Panel Report had been circulated on 9 May 2000 in document WT/DS70/RW.  On 22 May 2000, 
Canada had notified the DSB of its intention to a ppeal certain issues of law covered in the Panel 
Report and legal interpretations developed by the Panel.  The Appellate Body Report had been 
subsequently circulated on 21 July 2000 in doc ument WT/DS70/AB/RW.  Both Reports were now 
before the DSB for adoption at the request of Canada. 
20. The representative of Canada  said that his country was pleased with the conclusions of the 
Appellate Body confirming that as a result of th e revisions to the Technology Partnerships Canada 
Programme, Canada had fully implemented the DSB's rulings and recommendations.  Canada 
welcomed the adoption of the Appellate Body Report .  He noted that the Article 21.5 Panel had also 
made some findings with respect to the Canada Ac count Programme that had not been appealed.  The 
Panel had called on Canada to adopt  a more detailed description of th e rules to be followed in its 
future assistance under that Programme.  In reaching th is decision the Panel had interpreted, for the 
first time, the exception in the second paragraph of ite m (k) of Annex I of the SCM Agreement.  This 
exception related to the provision of export credits consistent with the OECD Arrangement.  Canada 
appreciated the guidance and clarification provided by  the Panel on item (k).  However, it had some 
concerns that the Panel had gone be yond its mandate in the details of  its prescriptions for compliance. 
21. The Panel had determined that  Canada's guideline lacked sufficient detail to satisfy the 
Panel's interpretation of item (k).  The Panel had gone  on to list the elements that had to be contained 
in the guideline in order for it to be acceptable a nd had made suggestions as to how the guideline 
should be worded.  Canada was of the view that, in  dictating the precise elements and wording to be 
contained in the Canadian guideline, the Panel had exceeded its role.  The role of the Panel was to 
interpret the SCM provisions, but it was for Member s to implement their obligations in the manner 
that was most appropriate given their domestic legal system. WT/DSB/M/87 
Page 6  
 
 22. In addition, the Panel's decision made it impossibl e for Canada to have been in compliance.  
He explained that the Panel had ruled that Canada 's guideline lacked sufficient detail to satisfy its 
interpretation of item (k).  Yet, as previously expl ained, item (k) was interpreted for the first time by 
this very Panel.  It was only logical that Ca nada could not have complied with an as-yet-unknown 
interpretation.  Despite those concerns, Canada wa s prepared to adopt the Report of the Panel and 
would implement its recommendations. 
23. The representative of Brazil
 said that a considerable period of time had elapsed since 
consultations on this matter had been held for the first time.  Since then, the Canada Account and the 
TPC Programmes had been found to be inconsiste nt with the SCM Agreement.  Brazil had also 
learned more about the financing activities of th e Export Development Cor poration (EDC).  Brazil 
had serious reservations about the credit terms exte nded by that agency, but confidentiality barriers 
had hampered its efforts to have EDC transactions  examined by the original panel.  Only under 
Article 21.5 procedures was it recognized that th e EDC financing was provided with repayment 
periods and interest rates that did not conform to  the OECD Arrangement.  As that recognition had 
come too late in the process, the original panel's d ecision in this regard was unfortunate.  This matter 
was now being evaluated by Brazil.  The Article 21.5 Panel had agreed with Brazil's position that 
Canada had not withdrawn the subs idies provided by the Canada Acc ount Programme which, thus far, 
remained inconsistent with the SCM Agreement.   Brazil hoped that its ongoing consultations with 
Canada would settle this issue. 
24. The TPC Programme had originally been found to be a de facto export subsidy.  Under 
Article 21.5 procedures, Brazil had pointed out that any changes made to the legal framework of the 
Programme should ensure that prohibited export subs idies would no longer be granted.  Despite its 
arguments, the standards adopted by the Article 21.5 Panel, which had been endorsed by the 
Appellate Body, had set a very low threshold for the implementation of the DSB's recommendations.  
In fact, under the standards set out in the Article 21.5 Panel Report, a Member could set a de facto 
export subsidy by making a few changes to the le gal framework of the Programme - which was not 
found to be in violation of the WTO disciplin es - and by not taking improper action during the 
Article 21.5 procedures.  However, following the adoption of panel reports under Article 21.5 
proceedings, the subsidizing Member would be free to  resume the practice found to be in violation of 
multilateral disciplines and the complaining party would be left with one option, namely, to start a new dispute settlement procedure.  This was an  unreasonable and highly undesirable outcome.   
25. This case involved another important issue for deve loping countries. That issue related to the 
Appellate Body's reasoning based on the contingency test aimed at establishing whether or not a 
subsidy was an export subsidy.  Brazil was concer ned about the Appellate Body's finding in this 
regard.  The Appellate Body had ruled that even  100 per cent export-oriented industries might be 
selected to receive subsidies, as long as the gran ting of these subsidies was not contingent on export 
sales.  In the original proceedings, Brazil had poi nted out that in order to meet the repayment 
requirements of the TPC, the recipients had to achieve sales targets.  Since their production was 
entirely directed to foreign markets, the contingency would be evident:  i.e. in order to repay they had 
to sell and in order to sell they had to export.   Not surprisingly, the TPC's recently amended 
regulations were quite vague on the repayment aspect of the Programme.  However, in the 
proceedings this had been considered to be sufficient.   The Appellate Body had stated that Article 3 of 
the SCM Agreement did not preclude an industrial s ector that had a "… high export-orientation from 
… being expressly identified as an eligible or privil eged recipient of subsidies", and that there was 
also no limitation on " … the amount of subsidies that  may be granted to that industry" (paragraph 49 
of ABR).  This was a very costly enterprise and one that developing countries could not afford.   
26. Under the previous item, he had already expr essed his country's concerns regarding export 
financing, a crucial factor in the area of high technology, high cost, and high value-added products.  
He had shown how tilted the playing field was in fa vour of developed countries in the area of export  WT/DSB/M/87 
 Page 7 
 
 
 financing.  Brazil found that also in the case concer ning the subsidies granted to the Canadian aircraft 
manufacturer - an instrument that was liberally used to support other high technology and highly export-oriented Canadian companies - the playing fi eld was anything but level.  Brazil believed that 
not just a few adjustments to the WTO disciplines were required, if developing countries were to 
become modest players in industries that develope d countries were determined to maintain captive.  
Brazil considered that the standard chosen by th e Appellate Body to assess the new TPC's conformity 
with the WTO disciplines was very low.  Howeve r, the Appellate Body had recognized that the 
outcome of Article 21.5 proceedings "does not, of  course, preclude possible subsequent dispute 
resolution proceedings regarding the WTO consistenc y of the revised TPC programme, or of specific 
instances of assistance actually granted under th at programme" (paragraph 52 of ABR).  Brazil 
carefully noted the Appellate Body's wording in this regard. 
27. The representative of the European Communities
 said that the EC noted with satisfaction the 
clarification provided by the Appellate Body with re gard to the scope of the Article 21.5 procedure.  
In the interest of prompt settlement of disputes,  a panel examining implementation issues should not 
only examine whether measures taken by a Member were in conformity with the DSB's 
recommendations, but should also ensure the overa ll conformity of such measures with the WTO 
Agreements. 
28. The DSB took note  of the statements and adopted  the Appellate Body Report contained in 
document WT/DS70/AB/RW and the Panel Report c ontained in WT/DS70/RW, as modified by the 
Appellate Body Report. 
 
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