RESTRICTED
WORLD TRADE G/SCM/Q2/CAN/8
30January 1997
ORGANIZATION(97-0344)
Original: French Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies ofCANADA to
Questions posed byARGENTINA1,theEUROPEAN COMMUNITY2,
JAPAN3.NORWAY4,THAILAND5andtheUNITED STATES6
Thefollowing communication, dated 21October 1996, hasbeenreceived from the
Permanent Mission ofCanada.
_______________
Questions from Argentina
Industrial Goods
1. “Regarding industrial subsidy programmes forresearch anddevelopment, canCanada specify
thepercentage share ofsubsidies inthetotalcostofthesubsidized project, asrequired inArticle 8.2(a)
oftheAgreement? Also, canCanada specify thetypes ofcosts covered bythese subsidies? ”
Thereview ofCanada ’snotification isinrespect ofassistance notified pursuant toArticle 25
oftheWTO Subsidies Agreement andArticle XVI:1 oftheGATT 1994, notArticle 8oftheWTO
Subsidies Agreement. Canada, todate,hasnotnotified anyprogrammes pursuant toArticle 8ofthe
Subsidies Agreement.
Agricultural Goods
1. “Thepresentation ongeneral programmes andthose forvarious products would seemtoshow
thatanextensive system ofassistance foragricultural production exists. Although theinformation
presented doesnotprove theexistence ofspecific subsidies under Article 2oftheAgreement, itwould
1G/SCM/Q2/CAN/4
2G/SCM/Q2/CAN/3 andG/SCM/Q2/CAN/7
3G/SCM/Q2/CAN/2/Rev.1
4G/SCM/Q2/CAN/1
5G/SCM/Q2/CAN/6
6G/SCM/Q2/CAN/5 +Suppl.1G/SCM/Q2/CAN/8
Page2
beimportant tohaveadditional information onthesectoral breakdown ofthegeneral programme so
thatitcanbeanalyzed indetail andmore thoroughly. ”
Canada doesnotsupport thepremise ofthequestion thatmore information onthesectoral
breakdown isrequired, when aprogramme isgenerally available.
2. “Concerning theprogramme tosubsidize transportation oflivestock feedtoareas lacking this
input, questions ariseabout theeffect ofthesubsidy onthefinalcostoftheproduct. Would itbepossible
tofindouttheimpact ofthisfreight subsidy perproduct? ”
TheFeedFreight Assistance Programme wasterminated on31December 1995. Atthetime
thatthetermination oftheFeed Freight Assistance Programme wasannounced bytheGovernment,
theestablishment ofaone-time, transitional adjustment fund, theFeedFreight Assistance Adjustment
Fund, wasalsoannounced. Itprovides funding overa14month period tothose affected bythe
termination oftheFeed Freight Assistance Programme. Itwasestablished inMarch 1996 andwill
beincluded inCanada 's1996update ofthenotification under Article XVI(GATT 1994) andArticle 25.
3. “Inthedairysector,theassistanceprogrammepresentedraisesaquestionabouttheprogramme’s
effect onproduction levels andthegeneration ofexportable surpluses thatcould besenttovarious
markets, adversely affecting competition. Would itbepossible tofindouttheimpact ofthisprogramme
ontheamounts exported andtheexport prices ofdairy products? ”
Theindustrialmilksubsidydoesnotaffectproductionlevelsorexportvolumes.Milkproduction
inCanada isrestricted through farmlevelproduction quotas. Thesubsidy ispaiddirectly toproducers
ofindustrial milkandcream ontheirproduction within aquota designed tomeetCanadian domestic
requirements. Thesubsidy hastheeffect oflowering domestic consumer prices inCanada forindustrial
dairy products. Itisnotfactored intoexport prices.
4. “Concerning theinformation presented inTables 2and3,forporkandbeefrespectively, an
increase inexports isnoted thatcould beduetoassistance programmes forthesesectors, which would
leadtolower export prices. Could Canada explain ifthere isanyconnection between these assistance
programmes andexport prices? ”
Thereisnoconnectionbetweenassistanceprogrammesandexportprices.Canadaisaprice-taker
oninternational markets forbeefandpork, sothatCanadian export prices arenotaffected byany
domestic support programme. Producers, whether indomestic orexport markets, seekthebestpossible
return from thesaleoftheirproducts.
5. “Withregard totheinformation given inTables Nos.2and3onporkandbeef,respectively,
anincrease inexports maybenoted, which could belinked withtheassistance programmes forthese
production sectors astranslated intolower export prices. Could Canada explain whether there isany
suchrelationship? ”
There isnoconnection between assistance andexport prices. Asthisquestion appears tobe
arestatement ofQuestion 4,please seeresponse toQuestion 4.G/SCM/Q2/CAN/8
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Questions from theEuropean Community
I. NOTIFIED SUBSIDY PROGRAMMES
A. Agricultural Programmes
(i) NetIncome Stabilization Account Programme
“Under thisprogramme, contribution rates maybeenhanced bygovernments forselected
commodities, aswasdoneinOntario andBritish Columbia in1993 and1994. given theapparent
flexibilityforgovernmentstodecideonaccessofbeneficiariestothisprogramme,theCommunityrequests
confirmation fromCanada onwhether thisprogramme isspecific under theprovisions oftheSubsidies
Agreement. ”
TheNetIncomeStabilizationAccount(NISA)programmeisgenerallyavailabletotheagricultural
sector. Basic coverage under NISA isidentical forallproducers inallprovinces.
(ii) Feed Freight Assistance Adjustment Fund
“Thisisaprogramme under which payments aremade tolivestock producers infeeddeficit
areas tolower theirfeedcostsinorder tomaintain aviable livestock industry. Thebulkofthepayments
aremade inAtlantic Canada, British Columbia, andeastern Quebec. Smaller amounts arepaidto
producers innorthern Ontario, theNorthwest Territories, andYukon. Thefunds directed towards Feed
Freight Assistance in1994/95 totalled $15million. TheCommunity requests confirmation fromCanada
onwhether thisprogramme isspecific under theprovisions oftheSubsidies Agreement. ”
TheFeedFreight Assistance Programme, which wasincluded inCanada 'sprevious subsidy
notification, terminated on31December 1995. Atthetimethatthetermination oftheFeedFreight
Assistance Programme wasannounced bytheGovernment, theestablishment ofaone-time, transitional
adjustmentfund,theFeedFreightAssistanceAdjustmentFund,wasalsoannounced.Itprovidesfunding
overa14month period tothose affected bythetermination oftheFeedFreight Assistance Programme.
Itwasestablished inMarch 1996andwillbeincluded inCanada 's1996update ofthenotification under
Article XVI(GATT 1994) andArticle 25.
B. Industrial Programmes
(i) Industrial andRegional Development Programme
“Thisprogrammehasasitsobjective,topromoteregionalindustrialdevelopmentthroughsupport
ofprojects, industries andtechnologies having thegreatest potential foreconomic return, sustained
growth andinternational competitiveness. Inrelation tothepotential ofeligible businesses for
international competitiveness, theCommunity requests information onwhether grants, contributions,
etc.aremade based onexport performance. ”
Financial assistance granted under theIndustrial andRegional Development Programme was
notbased onexport performance. Theassistance wasbased solely onanassessment ofthecommercial
viability oftheproject, including theability torealize theprojected sales. Once aproject isapproved,
theassistance isdisbursed onthebasis ofthecostincurred andinaccordance withtheagreement on
thecost-sharing ratio.G/SCM/Q2/CAN/8
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(ii) Microelectronics andSystems Development Programme
“Thisprogramme hasasitsobjective, toenhance theinternational competitiveness andgrowth
ofthemanufacturing, processing andservice industries inCanada. Inrelation toenhancing the
international competitiveness ofeligible businesses, theCommunity requests information onwhether
grants, contributions, etc.aremade based onexport performance. ”
Financial assistance granted under theMicroelectronics andSystems Development Programme
wasnotbased onexport performance. Theassistance wasbased solely onanassessment ofthe
commercial viability oftheproject, including theability torealize theprojected sales. Once aproject
wasapproved, theassistance wasdisbursed onthebasis ofthecostincurred andinaccordance with
theagreement onthecost-sharing ratio.
II. ADDITIONAL PROGRAMMES NOT NOTIFIED TOTHE WTO
“...Canada isrequested toexplain whytheprogrammes listed below havenotbeennotified
andtoprovide notifications inthestandard Article 25format ifappropriate. Canada isalsorequested
tonotify anyother subsidies which fallwithin thescope ofArticle 25.2andwhich aregranted either
bythefederal government, jointly bythefederal government andtheprovinces, bytheprovinces or
bytheCrown corporations. ”
A. Federal/Provincial Subsidies
(i) “TheCanada/NewfoundlandFishingIndustryDevelopmentAgreementhasasitsprimary
objective toprovide aclimate inwhich theNewfoundland fishing industry canbeself-
sustaining andviable inapresent resource short environment. ”
TheCanada-NewfoundlandCooperationAgreementonFishingIndustryDevelopmentwassigned
on25March 1994, andwillremain ineffect fortheperiod 1April 1993to31March 1998. Assistance
under theagreement isavailable toanyindividual, firm,association oreducational orresearch institution
having aninterest inthedevelopment ofthefishing industry within theProvince ofNewfoundland
andLabrador.
ThisAgreement provides aframework within which theNewfoundland fishing industry can
explore anddevelop opportunities ormodify activities tobecome more self-sustaining inaresource
short environment. Theassistance applies toresearch anddevelopment thatencourages industry to
bemore efficient intheutilization offishmaterial currently being harvested, orencourages increased
useofunderutilized species aswellasencourage adding value totraditional products produced.
Expenditures under theagreement wereprovided onacostshared 70:30 ratiobyCanada and
theProvince ofNewfoundland. Theexpenditures amounted to$496,000 in1994-95 and$1.1million
in1995-96 (there wasnoexpenditures in1993-94). Thetotalfunding available foranyproject cannot
exceed $250,000.
(ii) "Strategic technologies -Canada/Newfoundland Strategic Investment andIndustrial
Development Agreement (SIID) -eligible industries aremanufacturing industry,
transformers andservice industries which offerexporting possibilities. Thetypeofaid
offered cancover thecostoflabour, special equipment, land, etc.”
TheCanada/Newfoundland Strategic Investment &Industrial Development Agreement (SIID)
isapartofanumber ofbilateral agreements administered byACOA under itsCOOPERATION
Programme. TheProgramme willbenotified in1996.G/SCM/Q2/CAN/8
Page5
TheCOOPERATIONProgrammeincludesallACOAcost-sharedfederal-provincialagreements.
Theobjective oftheprogramme istoimprove theenvironment foreconomic growth inAtlantic Canada
through cooperation withalllevels ofgovernment, theprivate sector andinstitutions.
AssistanceisprovidedunderthelegislativeauthorityoftheAtlanticCanadaOpportunityAgency
Act,andisusually provided intheform ofanon-repayable contribution.
Theprogramme provides assistance toprovincial andmunicipal governments, economic
development andbusiness associations, universities, research institutes andbusinesses principally in
fiveareas, entrepreneurship, innovation, andtechnology transfer, inhuman resource development,
marketing andtrade development, andtheenvironment.
ACOA disbursed $70.7 million in1993-94, which include payments totheprovincial and
municipal governments.
B. Provincial Subsidies
(i) Prince Edward Island allegedly spent ingrants toenterprises: C$149million in1994,
C$136million in1995 andC$119million in1996.
Concerning assistance noted fromtheprovinces ofPrince Edward Island (P.E.I.) andOntario,
amore detailed description oftheassistance inquestion isrequired byprovincial government officials
inorder torespond totheEC’srequest forinformation. Forexample, inthecaseofP.E.I., theEC
hasnotmentioned anyparticular programme under which theamounts noted bytheEChavebeen
provided bythegovernment ofP.E.I. InthecaseofOntario, officials could notidentify thetwo
programmes citedbytheECas“MDNM ”.Regarding theprogramme noted from theprovince of
British Columbia, thefederal government isdiscussing theprogramme withBritish Columbia to
determine iftheprogramme meets thenotification obligations under theAgreement. Provided below,
however, isinformation ontheparticular programmes noted fromtheProvinces ofAlberta, Manitoba
andQuebec.
(ii) TheED&TMarket Development Assistance Programme (MDAP) inAlberta provides
costshare financial support. ”
MDAP provides assistance toanyAlberta business seeking entry intonewgeographic markets
outsideAlberta,includingeitherwithinCanadaoroutsideCanada,forexportingtheirgoodsandservices,
onabasis thatiscommensurate withbenefits toAlberta.
Theprogramme doesnotsupport export initiatives tomaintain existing markets orobtain new
business where theapplicant isalready established. Other limitations oftheprogramme include: non-
availability forapplicants receiving similar funding fromthefederal government oranyother funding
agency; maximum payment available toanyapplicant within afiscal yearis$7,500; and,eligible
costs arerestricted toout-of-province market identification and/or salestrips, trade show exhibitions
andbuyer ’svisits. Total funding fortheprogramme forfiscal year1995-96 wasroughly $440,000.
(iii) “TheHydrogen Technology Research Programme inAlberta isaprogramme jointly
funded bygovernment andindustry toprovide financial support. ”
While there doesnotappear tobeaprogramme entitled “Hydrogen Technology Research
Programme ”,there isaprogramme entitled “TheAlberta Hydrogen Research Programme (AHRP) ”.
Theaimofthisprogramme istofindways ofproducing andusing hydrogen more efficiently.G/SCM/Q2/CAN/8
Page6
Programme priorities andprojects tobefunded aremade byaSteering Committee comprising
representation ofindustry, government, universities andresearch institutes.
Eligible research includes fundamental research, pre-competitive technology development, and
demonstration projects. Eligible applicants include individual firms, industry associations, universities
andresearchinstitutes.Theprogrammeencouragesjointindustry/university/instituteproposals,including
jointproposals inpartnership withCanadian orinternational firms orresearch institutes provided that
suchproposals fulfil anAlberta needandinvolve anAlberta company orinstitution.
Current funding fortheprogramme isapproximately CAN$1.28 million ofwhich theAlberta
Government contributes CAN$600,000. Theprogramme aims atmaintaining aprivate industry
contribution ofgreater than50percent. Firms andinstitutions fromCanada, theUS,France andItaly
arecurrently involved insome oftheprojects under theprogramme.
(iv) British Columbia 'sPartners inProgress Programme inAlberta isaprogramme jointly
funded bygovernment andindustry toprovide financial support.
Answer stillpending.
(v) Quebec 's"financial support forthemarketing ofunderfished species" provides grants
ofupto60percentofthetotalcostofaproject toamaximum of$500,000 perproject.
Theprogramme isaimed atdeveloping fishing ofunderexploited species orstocks, diversifying
theactivities ofprocessing enterprises inmaritime regions anddeveloping themarketing ofunderfished
species.
Theaidoffered isprimarily technical, intheformofgovernmental supply ofadvisory services
onprogress ofwork oraction programmes, preliminary technical checks, inventories ofresources,
andavailable andnecessary equipment.
Thetechnical aidmaybesupplemented byfinancial aidthatmaycover upto60percentof
thetotalcostofaproject. Theminimum project costis$100,000, maximum annual aidmaynotexceed
$350,000, andthetotalfortheduration ofaproject maynotbemore than$500,000.
Fishermen, processing enterprises andconsortiums ofprocessing firms areeligible under the
programme.
Theprogramme came intoforce on1April 1994 andwillendon31March 1997. Atotal
amount of$154,346 wasgranted tofourprojects in1994-95. Theprogramme doesnotinclude any
localorCanadian content constraints forthepurchase ofequipment.
Theprogramme isaimed atallthefisheries sector, including marketing enterprises and
processors. Thegoalistodevelop theuseofunderfished species anditisaimed atthemaritime regions,
andthushasahighcomponent ofregional development andeconomic diversification (remote regions).
Thisprogramme wasnotnotified because ithasnotradeincidence inviewofthesmall amounts
involved.
(vi) Quebec -TheQuebec Industrial Development Corporation (Société dedéveloppement
industriel duQuébec -SDI)-"Export" programme. TheSDIfinancially supports the
export activities ofsmall andmedium enterprises.G/SCM/Q2/CAN/8
Page7
TheSDI'sfinancial participation takes either ofthefollowing forms: aloanatmarket interest
rates(variable orfixed) orafinancial commitment guarantee. Thisfinancial participation isprovided
inlinewithfinancial market terms.
Consequently, theSDIprogramme wasnotnotified because itisnotasubsidy programme
within themeaning ofArticle IoftheAgreement onSubsidies andCountervailing Measures.
(vii) TheManitoba Industrial Opportunities Programme allows theprovincial government
toenter intoanagreement withacompany whereby, inreturn forcertain provincial
incentives, thefirmwillestablish newoperations orexpand existing operations in
Manitoba. ”
TheManitoba Industrial Opportunities Programme isabroadly based programme thatprovides
seedfunding forcommercially viable projects. Anyfirminvesting inprojects thatmeetthecriteria
oftheprogramme iseligible forsecured loanorloanguarantee assistance. Eligible projects include
private capital investment inmanufacturing, processing orproduction ofanyother value added goods
andservices.
(viii) TheManitoba Capital Fund, which provides investment capital, focuses on,among
others, export oriented industries.
TheManitoba Capital Fund provides non-subsidized loans, toanysmall andmedium-size
province-based firms thatmeetthecriteria oftheFund. TheFund islargely capitalized byprivate
sector contributions, although theProvince provided some initial capital. TheFund operates atarm's
length from thegovernment.
(ix) Ontario -"MDNM -Programme d'encouragement audéveloppement commercial"
(x) Ontario -"MDNM -Programme d'aideausecteur desservices échangeables"
Noinformation onthese programmes.
C. Crown Corporations
Export Development Corporation (EDC)
Theservices offered through theExport Development Corporation (EDC) werenotincluded
intheWTO subsidy notification process asthese areoffered atterms consistent withtheOECD
Consensus onExport Credits. EDCisaself-sustaining Crown corporation thatoperates oncommercial
principles. EDC generates itsoperating revenues through fees,premiums andinterest onloans, and
doesnotreceive Parliamentary appropriations. Profits arereinvested inthecorporation 'scapital base
tosupport future growth ofCanadian exports. EDC funds itscapital requirements ininternational
anddomestic capital markets through theissuance ofbonds, debentures, notes andother evidence of
indebtedness ofthecorporation.G/SCM/Q2/CAN/8
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Supplementary Question From theEuropean Community
(Document G/SCM/Q2/CAN/7, 16September 1996)
1. When willCanada beinaposition tonotify allspecific subsidies granted bysub-federal entities?
Canada hasnotified allprogrammes, including sub-federal programmes, initsnewandfull
notification (submitted inDecember 1995) thatCanada determined metitsnotification obligations.
Canada intends tosubmit anupdate toitscurrent newandfullnotification inthecoming weeks which
willcontain allprogrammes thatCanada determines meets thenotification requirements. Anumber
ofprovincial government programmes wereraised bytheEuropean Community inthecontext ofthe
review ofCanada ’snotification, heldduring theweek of22July1996. Canada isdiscussing these
programmes withtherelevant provinces. Inthepreparation ofitsnotification, Canada generally consults
withsub-federal entities withaviewtoincluding programmes thatmeetthenotification criteria ofthe
WTO Subsidies Agreement.G/SCM/Q2/CAN/8
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Questions From Japan
1. “Wehearthereisasubsidy programme toautomobile components industries called Automobile
Components Initiative (ACI). Please explain thecontents andthereason whythesubsidy isnotnotified. ”
TheAutomotive Components Initiative isnotaprogramme perse.Itisaninitiative under
theSector Campaigns Programme, which itself wasnotified in1995.
2. “Wehearthatthere isasubsidy programme tosupport pre-competitive development activities
inthefields ofinformation technology, newmaterials andbiotechnology called ‘Strategic Technologies
Programme ’.Please explain thecontents ofthesubsidy andthereason whythesubsidy isnotnotified.
TheStrategic Technologies Programme wasnotified under Section XVII (seepage 32of
G/SCM/N/3/CAN/Rev.1, dated 7February 1996).G/SCM/Q2/CAN/8
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Questions From Norway
Q.1 “Thenotification fromCanada doesnotseemtoinclude notifications ontheprovincial level.
Could Canada explain whytheyhavenotmade these notifications andrefer tothearticles inthe
Agreement onSubsidies andCountervailing Measures thatexempt these subsidies fromnotification. ”
Canada agrees thatsub-federal subsidy programmes thataredetermined tomeet Canada ’s
obligations under WTO Subsidies Agreement andArticle XVIoftheGATT 1994should benotified.
Canadian provinces havenotadvised thefederal government ofanyprogrammes thatmeetthecriteria
under Article 25oftheSubsidies Agreement andArticle XVIoftheGATT 1994, forthepurposes
ofnotification.
Q.2 ”Could Canada alsogiven anindication onhowmuch theprovincial subsidies amount toas
apartofthetotalamount ofsubsidies. ”
Since provinces havenotadvised ofanyprogrammes thathavebeendetermined tomeetthe
notification obligations under Article 25oftheSubsidies Agreement andArticle XVIoftheGATT
1994, itisimpossible toprovide anindication ofhowmuch provincial subsidies might amount toas
partoftotalsubsidies.G/SCM/Q2/CAN/8
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Questions From Thailand
1. “TheCanadian Export Development Corporation (EDC) istheauthority which provides export
financingguaranteeandinsurance.AccordingtotheSecretariatreportofCanadianTPRM(C/RN/G/51),
thevolume ofexports financed orinsured byEDC during 1993 totalled arecord CAN$ 13.1billion.
Togetassistance, aCanadian content requirement mustbefulfilled, generally itisaminimum of50per
cent. Please givedetails oftheexport assistance programmes provided byEDC, particularly thelocal
content requirement. WillCanada terminate thelocal content requirement by1997? ”
Theservices offered through theExport Development Corporation (EDC) areoffered atterms
consistent withtheOECD Consensus onExport Credits. EDC isaself-sustaining Crown corporation
thatoperates oncommercial principles. EDCgenerates itsoperating revenues through fees,premiums
andinterest onloans, anddoesnotreceive Parliamentary appropriations. Profits arereinvested in
thecorporation ’scapital basetosupport future growth ofCanadian exports. EDC funds itscapital
requirements ininternational anddomestic capital markets through theissuance ofbonds, debentures,
notes andother evidence ofindebtedness ofthecorporation. Regarding thematter oflocalcontent
requirement, Canada doesnothavealocalcontent requirement.G/SCM/Q2/CAN/8
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Questions From theUnited States
1. “Your notification indicates thatthe‘Sector Campaigns ’programme assistance isprovided
toselected sectors toenhance international competitiveness. Could Canada please identify thespecific
sectors which participate inthisprogramme? ”
TheSector Campaigns programme wasnotified under Section XIVoftheNotification submitted
inDecember 1995. Assistance wasprovided to:advanced manufacturing technologies; automotive
components; environmental industries; fashion apparel; furniture; forest products; medical devices;
microelectronics; telecommunications equipment andsoftware products.
2. "With respect totheAtlantic Enterprise Programme, isthisprogramme administered bythe
ACOA? Ifnot,please explain thenature andfunctions oftheACOA. ”
TheAtlanticEnterpriseProgrammeisadministeredbytheAtlanticCanadaOpportunitiesAgency
(ACOA) fortheprovision ofassistance tobusinesses located intheprovinces ofNewfoundland, New
Brunswick, Nova Scotia andPrince Edward Island, andbytheFederal Office ofRegional Development
(Quebec) fortheprovision ofassistance tobusinesses located intheGaspé region ofQuebec. Since
1988, ACOA hasnotapproved assistance tonewprojects intheAtlantic provinces. However, ithas
continued tomake payments relating tobothloaninsurance andinterest baton contracts which had
beenauthorized under theprogramme. ACOA ’sexpenditures under theAECamounted to$2.2million,
$2.8million and$1.5million forfiscal years 1992-93, 1993-94 and1994-95, respectively.
ACOA isaregionally-based agency which, inpartnership withtheprivate sector andfederal
andprovincial departments andagencies, works toincrease opportunities foreconomic development
inAtlantic Canada and,more particularly, toenhance thegrowth ofearned incomes andemployment
opportunities intheregion. TheAgency ismandated todevelop anddeliver locally-sensitive business
programmes andservices, coordinate federal economic development programme activities andadvocate
theregion ’sinterests inthedevelopment ofnational policies, programmes andservices. Itisalso
mandated toprovide asingle point ofaccess tofederal government programming andservices forthe
small business sector inAtlantic Canada.
3. “Under theNISA programme, weunderstand thatthepercentages thatproducers andthe
governments maycontribute totheprogramme havebeenchanging. Arethemostrecent levels reflected
inCanada ’snotification? ”
Inthe1995 stabilization year, producers cancontribute upto3percentoftheirneteligible
saleswithmatching federal andprovincial government contributions ofupto2percentand1percent,
respectively.
4. “Whywastheinformation onthedairy stabilization programmes shifted frombeing listed under
theLivestock andProducts section inCanada ’sprevious notification tobeing listed asacomponent
oftheFIPA inthisnotification? ”
Theprevious general subsidy notification wasthefirstoneprepared since theestablishment
oftheWorld Trade Organization (WTO), andthecombination ofthenotification requirements for
Article XVIoftheGATT 1994 withArticle 25oftheAgreement onSubsidies andCountervailing
Measures. Asaresult, theorganization ofoursubmission andcoverage ofournotification was
examined.
TheFarm Income Protection Act(FIPA) collects under onelegislative framework asetoffarm
programmes andsafety netsforawiderange ofagricultural commodities. Asaresult, itwasdecidedG/SCM/Q2/CAN/8
Page13
toreport alloftheprogrammes forwhich FIPA provides thelegislative authority under oneheading,
although theindividual sub-programmes were alsoidentified andreported separately byname.
Theauthority provided under theFIPA replaces theauthority previously provided bythe
Agricultural Stabilization Actfortheindustrial milksubsidy. TheFederal Budget of1995announced
a30percentreduction intheindustrial milksubsidy inthe1995-96 and1996-97 dairy years (15per
centineachyear); while theFederal Budget of1996announced thephased elimination oftheprogramme
infiveequal steps starting withthe1997-98 dairy year, andending asof1August 2001.
5. “Could Canada better explain howthedairy subsidy operates? Forexample, please explain
towhom itispaidandhowitgetsfactored intotheexport price. Inaddition, anexplanation ofhow
thesubsidy functions inrelation tothenewpooling structure would beappreciated. ”
Theindustrial milksubsidy ispaiddirectly toproducers ofindustrial milkandcream ontheir
production within aquota designed tomeet Canadian domestic requirements. Thesubsidy hasthe
effect oflowering domestic consumer prices inCanada forindustrial dairy products. Itisnotfactored
intoexport prices. Dairy producers receive apayment fromthefederal government equal totheamount
ofthesubsidy perstandard hectolitre times theireligible production. Thispayment isindependent
oftheoperations ofthedairy price pooling system.
Therateofthedirect payment iscurrently $4.62 perstandard hectolitre (containing 3.6kg
ofmilkfat) andwillbereduced to$3.80 perstandard hectolitre on1August 1996. Thefederal
government announced initsMarch 1996 budget thatthesubsidy would bephased-out infiveannual
reductions of$0.76 perhl,starting August 1997. Thiswillendthedirect support payment completely
asof1August 2001.
6. “Whyisthere nodescription ofthenewdairy pooling programme? IsitCanada ’sviewthat
thisprogramme doesnotfallwithin thenotification requirements ofeither Article 25oftheSubsidies
Agreement orArticle XVIoftheGATT 1994? Please explain. ”
Thedairy pricepooling system doesnotfallwithin thenotification requirements ofArticle 25
oftheSubsidies Agreement because itisneither afinancial contribution byagovernment orpublic
body, norprice orincome support inthesense ofArticle XVIoftheGATT 1994. Thedairy price
pooling system doesnotfallwithin thenotification requirements ofArticle XVIoftheGATT 1994
because itdoesnotconfer asubsidy.
7. “Under theWestern Grain Transportation Actthere isnoindication ofthelump sumpayouts
thatweremade tofarmers afterthisprogramme expired. DoestheGovernment ofCanada notconsider
thatpayout tobeasubsidy subject tonotification? ”
Atthetimetheagricultural component oftheprevious subsidy notification wasprepared
(June 1995) theWestern Grain Transportation Actwasstillineffect. Thisprogramme terminated
on1August 1995, eliminating allgovernment financed export subsidies inthegrains andoilseeds sector.
IntheFebruary 1995federal budget, theGovernment ofCanada announced theWestern Grain
TransitionPaymentsProgramme(WGTPP).Underthisadjustmentmeasure,aone-time,capitalpayment
of$1.6billion isbeing made toowners ofprairie farmland inrecognition oftheimpact onlandvalues
thatareexpectedtoresultfromtheterminationofthelong-standingWGTAfreightsubsidy.TheWestern
Grain Transition Payments Programme willbeincluded inCanada 'snextArticle 25-Article XVI
notification.G/SCM/Q2/CAN/8
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8. “Weareaware ofthefollowing programmes, measures andactivities inCanada, allorsome
portion ofwhich maymeetthenotification requirements referenced above. Please explain thebasis
onwhich Canada determined thateachofthefollowing activities didnotfallwithin thenotification
requirements ofGATT Article XVI:1 andArticle 25.2oftheAgreement onSubsidies andCountervailing
Measures. ”
A. Investment TaxCredits
Canada haseliminated allregional investment taxcredits withtheexception oftheAtlantic
Canada Investment TaxCredit. ThisITCisavailable inrespect ofanyinvestment inqualified property
foruseinCanada ’sfourAtlantic provinces andtheGaspé Peninsula intheprovince ofQuébec. The
taxcredit isbroadly based andnottargeted toanyparticular industry. Anytaxpayer anywhere inCanada
orabroad, thatissubject totaxation inCanada, maybeeligible tobenefit from theACITC.
B. Export Credit Insurance through theExport Development Corporation (EDC)
Theservices offered through theExport Development Corporation (EDC) werenotincluded
intheWTO subsidy notification process asthese areoffered atterms consistent withtheOECD
Consensus onExport Credits. EDCisaself-sustaining Crown corporation thatoperates oncommercial
principles. EDC generates itsoperating revenues through fees,premiums andinterest onloans, and
doesnotreceive Parliamentary appropriations. Profits arereinvested inthecorporation ’scapital base
tosupport future growth ofCanadian exports. EDC funds itscapital requirements ininternational
anddomestic capital markets through theissuance ofbonds, debentures, notes andother evidence of
indebtedness ofthecorporation.
C. Programme forExport Market Development (PEMD)
Thisprogramme wasnotnotified asitisgenerally considered thatanycountervailable benefit
would benegligible. Under PEMD, anycompany withannual salesof$10million orlessiseligible
forarepayable financial contribution (uptoamaximum of$50,000) toassist withtheimplementation
ofamarket development plantargeted atanewexport market. There arealsorepayable contributions
forsmall companies thatarenewtoexporting andwanttovisitanexport market/trade fair(upto$7,500)
orarebidding onamajor international capital project andrequire bidpreparation assistance (upto
$50,000). Theprogramme contribution cannot exceed a50percentsharing oftheeligible costswith
thecompany andthecontribution isrepayable bythecompany outofanycompany salesorrevenues
earned inthetarget market overthesubsequent fouryears.
D. Industrial Research Assistance Programme (IRAP)
Theprogramme willbenotified in1996. Thefactitwasnotnotified wasanomission onour
part.
IRAP’sobjectiveistoassistfirmsinCanadatoimprovetheirtechnologicalcapability.Assistance
isprovided through shorttermnon-funded technical advice andnon-repayable contributions toapproved
industrial research anddevelopment projects, usually lessthan50percentofproject costs.
Assistance isfortechnical work only, notforcapital, commercialisation orother business
expenses. There arenorestrictions astocompany ownership, industry sector, region inCanada or
technical field. Company-proposed projects arereviewed andapproved according toobjective criteria.
Expenditures were $52.0 million in1992-93, $52.2 million in1993-94.G/SCM/Q2/CAN/8
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E. Canada-Quebec Subsidiary Agreement ontheEconomic Development ofQuebec
Theproper titleis:Canada-Quebec Subsidiary Agreement ontheEconomic Development of
Quebec Regions (Entente Auxiliaire Canada-Québec surledéveloppement économique desrégions
duQuébec).
Thisprogramme willbeincluded intheupdate toCanada 'scurrent fullnotification.
ThisAgreement wasconcluded on9June1988inorder toestablish aconcerted andharmonized
programme ofactivities tomeetthespecific needs oftheQuebec regions andtoagree onaflexible
andefficient management andcooperation mechanism tocarry outtheprogrammes.
Theprogrammes under thissubsidiary agreement provided forthegrant offinancial aidto
manufacturing ortourist enterprises incentral regions andresource regions ofQuebec. Theaidwas
granted toprojects relating totechnological studies, innovation anddevelopment, fixed assets or
marketing. Financial aidcould alsobegranted tofacilitate thelaunch anddevelopment ofsmall firms
engaged intechnological innovation, toincrease thepossibilities ofrecreational fishing, andtosupport
theestablishment ofinfrastructure tofacilitate theestablishment ofmanufacturing ortourism enterprises.
Theaidthusgranted represented apercentage ofallowable costs andvaried from oneprogramme to
another.
Outlays byBFDR(Q) forthese programmes totalled $57.0 million for1992-1993 and
$69.8 million in1993-1994.
F. Research andDevelopment Assistance Under theCanadian Forest Services
TheCanadian Forest Service (CFS) doesnotgrant funds toprivate sector companies forthe
express purpose ofresearch anddevelopment assistance. Funds are,however, disbursed touniversities,
non-governmentorganizationsandnot-for-profitresearchagencies(specificallyFORINTEKandFERIC)
asthefederal government 'scontribution tospecific collaborative research projects. Onoccasion, the
CFSwillsupport aspecific private sector research endeavour pertaining tothemandate andobjectives
ofitsmainbudget science programme. Ontheseoccasions, itispreferable therebeother contributors
commensurate withtheanticipated future benefits oftheresearch.
G. Cooperative Industrial andMarket Development Partnership (CIMPD)
TheCooperative Industrial andMarket Development Partnership was,andis,notafinancial
programme perse.Itisadelivery mechanism foranumber ofprogrammes. Assistance provided
under thisinitiative wascharged totheSector Campaigns programme, which, itself, hasbeennotified.
H. Export Promotion Assistance under theCanada Business Service Centres (CBSC)
Thepurpose oftheCooperative Industrial andMarket Development Partnership istoprovide
streamlined “single window ”access tobusiness-related programmes andservices offered byfederal
departments andagencies, including Crown corporations. Assistance distributed through thisvehicle
hasbeenreported under theappropriate programmes.
I. Canadian Commercial Corporation
TheCanadian Commercial Corporation (CCC) isaCrown Corporation, wholly owned bythe
Government ofCanada which facilitates tradebetween Canada andother nations. Itdoessonormally
byacting asprime contractor inatransaction. ThisistheGovernment ofCanada 'smechanism forG/SCM/Q2/CAN/8
Page16
facilitating salesonagovernment-to-government basis where thatisthecontract structure preferred
bythebuyer abroad. Asprime contractor, CCC conducts atechnical, managerial andfinancial review
ofacompany, assesses theattendant risks oftheproposed saleanddetermines whether, according
toitspolicies andprocedures, theCorporation isabletoactinaparticular transaction. Ifso,CCC
signs thecontract withthebuyer abroad, andthensigns aback-to-back contract which flows those
obligations totheCanadian exporter.
CCC'sprogrammeandservicesarenotdirectedtohelpinganyparticularindustriesorenterprises.
Eligibility toutilize CCC services isautomatic onceestablished objective criteria assetoutunder the
CCC Actaremet.
J. Canadian Advanced Technology Programme
Thisisnotaprogramme. Canada, however, hasnotified theAdvanced Manufacturing
Technology Application Programme andAdvanced Train Control System Programme.
K. Centre forInformation Technology Innovation (CITI)
TheCentre forInformation Technology Innovation isnotaprogramme, itisanadministrative
unitoftheDepartment ofIndustry. Assuch, theCITIdoesnotprovide financial assistance tobusinesses.
L. Communications Research Centre (CRC)
TheCommunications Research Centre isacomponent ofIndustry Canada. Anyassistance
provided bytheCentre would benormally bereported under therelevant programme 'sname.
M. Access North America
Thisprogramme wasdiscontinued thisyear. Access North America wasagenerally available
programme offering access todatabases andmarket information, aswellascost-shared trademissions
forCanadiancompaniesthatwishedtopursueemergingopportunitiesintheNorthAmericanmarketplace.
N. Industry Canada Grant andContribution Programmes
Industry Canada Grant andContribution Programmes arenotseparate programmes. Canada
hasnotified allgrants andcontribution programmes administered bytheDepartment ofIndustry at
thetimethenotification wasprepared.
O. Exchange Programme fortheInnovation Centre forInformation Technologies
TheExchange Programme fortheInnovation Centre forInformation Technologies could not
beidentified. Further detail onthenature ofassistance allegedly provided further tothisitemisrequired
inorder torespond totheUSA’srequest forinformation.
P. Network Centres ofExcellence
TheNetwork Centres ofExcellence areajointeffort between theDepartment ofIndustry and
theNatural Sciences andEngineering Research Council andtheMedical Research Council. Thepurpose
istostimulate thecarrying outofleading-edge fundamental andlongtermapplied research ofimportance
toCanada. Virtually allthefinancial assistance for1992/93 and1993/94 wasgranted touniversity
andresearch centres.G/SCM/Q2/CAN/8
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Q. National Technology Investment Programme
ToCanada ’sknowledge, the“National Technology Investment Programme ”doesnotexist.
R. Freight Transportation Subsidies under theAtlantic Region Freight Assistance
Theprogramme provided asubsidy formovements bytruck andrailoriginating intheAtlantic
region andformovements within theregion asdefined under theAtlantic Region Freight Assistance
ActandtheMaritime Freight Rates Act,forawiderange ofcommodities. These programmes were
terminated 30June1995.
S. Science Research andExperimental Development (SR&ED) tosmall Canadian-
Controlled Private Corporations (CCPCs)
There isnotaScience Research andExperimental Development Programme tosmall Canadian-
Controlled Private Corporations perse.TheCanadian Income TaxAct,however, provides foratax
credit forqualifying expenditures onscientific research andexperimental development. Thistaxcredit
isavailable toallcompanies andindividuals, notjustR&D firms, thatmeetthecriteria under theIncome
TaxAct. Anenhanced taxcredit isavailable toallsmall CCPCs thatmeetthecriteria under theAct.
Theformula under theActphases outthisenhanced credit onthebasis oftaxable income.
Supplementary Questions From theUnited States
1. Regarding USQuestion 8.A:“Could Canada provide additional explanation andinformation
withrespect tothequestion ofwhether suchinvestment taxcredits areregionally specific?
Asindicated intheresponse toUSQuestion 8.A., special investment taxcredits forregional
development wereeliminated asof31December 1994, other thanthe15percent“Atlantic Canada ”
investmenttaxcredit(ACITC).TheACITC,however,wasreducedto10percent(subjecttotransitional
relief) forproperty acquired after1994. This10percentACITC isavailable forinvestment inqualified
property acquired after1994foruseintheprovinces ofNewfoundland, Nova Scotia, NewBrunswick,
PrinceEdwardIslandandtheGaspéPeninsulaintheProvinceofQuebec,aswellasaprescribedoffshore
region offtheAtlantic coast. TheACITC isavailable inrespect ofcapital property thatisqualified
property acquired primarily foruseintheAtlantic region noted above.
TheACITCisavailabletoalltaxpayersliablefortaxationinCanada(whetherresidentinCanada
orabroad) thatpurchase “qualified property ”foruseintheareadescribed above. Qualified property
isdefined asanewbuilding ornewequipment primarily usedformanufacturing orprocessing ofgoods
forsaleorlease,certainactivitiesinvolvingoilandgasoperations,miningandcertainprimaryprocessing
ofminerals, oilandgasexploration, prospecting, logging, farming orfishing, grain storage, producing
industrial minerals orproducing energy orsteam. TheACITC isnotdirected ataspecific industry;
itisavailable foralloftheforegoing economic activities.
2. Regarding USQuestion 8.F: “Could Canada provide anillustrative description, including
examples ifpossible, ofthekinds ofentities which participate inthisprogramme?
- Reply willcome soon.