WORLD TRADE  
ORGANIZATION  G/SCM/Q2/CAN/23 
12 September 2006 
 (06-4328) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Responses to Questions Posed by the UNITED STATES1 
Regarding the New and Full Notification of CANADA2 
 
  The following communication, dated 11 September 2006, is being circulated at the request of the Delegation of Canada.  
_______________ 
 
 
Question 1 on Canadian Network for the Ad vancement of Research, Industry and Education 
(CANARIE) 
 
The description of this programme states that, "maximum assistance is either 50 per 
cent or 100 per cent of eligible costs depending on the type of project".  Please explain what types of expenditures are considered to be "eligib le costs" for the purposes of this programme. 
 
Reply
 
 
 The contribution to CANARIE Inc. to unde rtake the Phase 3 program was not to exceed 
50 per cent of eligible costs incurred by Lead Contractors and participants of each sub-project.  Eligible costs for CANARIE Inc. project  management and administration was 100 per cent.  
The types of expenditures considered to be “elig ible costs” under this programme include labour, 
material, special purpose equipment and audit costs. 
   
Question 2 on The Structured Financing Facility 
 
Based on the description of this programme  provided in Canada’s notification, it 
appears that various forms of financing assi stance are provided to purchasers/lessors of 
Canadian built vessels.  To the extent that in centives through this programme are specific to 
purchases of Canadian built vessels, this progr amme could be considered a prohibited subsidy 
as provided under Article 3 of the Agreement  on Subsidies and Countervailing Measures 
(Subsidies Agreement).  Please explain how this programme confor ms with Canada’s 
commitment under Article 3(b) of the Subsidies Agreement not to provide prohibited subsidies. 
 
                                                     
 
1 G/SCM/Q2/CAN/22 + 22/Corr.1 
2 G/SCM/N/123/CAN G/SCM/Q2/CAN/23 
Page 2  
 
  Reply
 
  The SFF conforms with Canada's commitmen t under Article 3 of the ASCM because any 
assistance provided is not contingent upon the u se of domestic over impor ted goods or upon export 
performance.  
 
Question 3 on the Canadian Support Programme for the Economy of Gaspé and the Magdalen 
Islands   In the description of this programme it states that, "assistance is provided to any 
individual, corporation, municipalities, non-prof it organizations and SMEs planning to carry 
out an eligible project".  Please explain what types of project are considered to be "eligible 
projects" under this programme.  
Reply
 
  
 As noted in Canada’s notification, this programme was terminated in August 2005.  
Assistance was provided to any individual, cor poration, municipalities, non-profit organizations 
(NPOs) and small and medium sized enterprises (SMEs) planning to carry out an eligible project .  
Eligible projects  were related to the various com ponents of the program, namely the  enhancement of 
federal infrastructure, the development of medium -sized businesses, youth, community empowerment 
and emerging initiatives.  For example, eligib le projects under the community empowerment 
component were to result in a contribution, made in accordance with the terms and conditions of the 
Community Futures Program, to the region’s Community Futures Development Corporations 
(CFDCs) to hire an additional resource.  Question 4 on The Regional Strategic Innovation Programme  
In the description of this programme it states that assistance is provided "in the form of 
non-repayable contributions to non-profit organizations up to 90 per cent of eligible costs and repayable contributions to SMEs up to 50 per cent of  eligible costs".  Please explain what types 
of expenditures are considered to be "eligible  costs" for the purposes of this programme. 
 
Reply
 
  Eligible costs, for all components of this pr ogramme, include all costs deemed reasonable and 
necessary to carry out the projects, including: 
 
- Costs of projects involving the preparation of strategies and action plans; 
- Consultancy fees for professional or technical services; 
- Costs of labour assigned to a projects and of material used; 
- Capital costs deemed necessary to carry out an eligible “catalyst project”, excluding 
the costs of land, motor vehicles not used exclusively on the project site and the 
portion of the cost of an asset that exceeds its fair market value; 
- The costs of equipment required to carry out a project;   
- Operating costs of an SME association of SME support organization; 
- Travel expenses; and  
- Costs of producing and disseminating promotional material. 
  G/SCM/Q2/CAN/23 
 Page 3 
 
 
  Question 5 on Western Economic Partnership Agreements 
 
The description of this programme states that one of the key sectors for which assistance 
is provided under this programme is the area of trad e.  In addition, this notification states that 
these partnership agreements are "int ended to focus on those strategic priorities that will enable 
the West to take advantage of opportunities  and to become a more dynamic, globally 
competitive economy".  Please explain in furt her detail what kinds of projects are funded 
through Canada’s Western Economic Partnership Agreements.  Please also explain in further 
detail the conditions that must be met for a project to qualify for funding under this programme.   
 
Reply
 
  Eligible activities include those where economic and/or employment benefits accrue primarily 
within Western Canada.  While each of the agreemen ts (four in total, one with each of the four 
Western provinces) differs slightly, all four target Western Diversification’s (WD) priorities including 
innovation, business development and community ec onomic development. Each of the agreements 
also reflects priorities identified by the signing provincial government.   Projects funded under the 2003 Western Economic Pa rtnership Agreements must comply with 
the terms and conditions of WD’s Western Divers ification Program (WDP) which was approved on 
12 August 2003.  Under those terms and conditions, c ontributions, may be made to legal entities such 
as non-profit organizations, post-secondary institutions , hospitals and regional health care centres, 
cooperatives, native bands and prov incial and municipal governmental  entities.  WD’s operational 
policy ensures that no assistance is provided to for-profit entities.      Question 6 on Investissement Québec  
Investissement Québec is an economic develo pment organization that provides financial 
assistance to companies in Québec.  Assistance is normally provided through loan or financial 
commitment guarantees and non-refundable financia l contributions. For example, in December 
2004, Investissement Québec provided $750 million in loan guarantees to Bombardier in order 
to back sales of about 100 regional jets. In vestissement Québec also plans to provide $118 
million in financing for a plant near Montreal th at will be used to assemble Bombardier’s new 
C-Series aircraft.  In addition, in May 200 5 Investissement Québec provided $75 million in 
royalty-based financing to Pratt & Whitney for research and development. This will be 
distributed over 3 years and repayment is  not scheduled to begin until 2030. 
 
Please explain why this programme does not qualify as notifiable under Article 25 of the 
Subsidies Agreement.  If the programme does  qualify as notifiable, please provide the 
information required under Article 25. 
 
Question 7 on additional Assistance to the C-Series Aircraft  
 
Based on publically available information, it appears that Bombardier may be receiving 
assistance for the production of its new C-Series aircraft. In addition to the assistance mentioned above, in May 2005 the government of Quebec announced that it plans to build and lease back an assembly plant in Mirabel to be used  in the production of C-Series aircraft.  This 
is valued between $270 and $350 million. 
 
Please explain why this programme does not qualify as notifiable under Article 25 of the 
Subsidies Agreement.  If the programme does  qualify as notifiable, please provide the 
information required under Article 25. G/SCM/Q2/CAN/23 
Page 4  
 
   
Reply to Questions 6 and 7
 
  Canada agrees that sub-fede ral subsidy programmes that are determined to meet Canada’s 
obligation under Article 25 of the ASCM should be notified.  As such, the federal government is 
engaged in on-going consultations with the pr ovincial governments regarding subsidy notification 
requirements.  During those consultations, Cana dian provinces have not advised the federal 
government of any provincial programmes that meet the criteria for the purposes of notification.  No 
government monies have been provided to Bombardier for the C-Series.  Question 8 on assistance to the Film Industry   
 
Information from public sources indicates th at Canada administers several programmes 
at both the Federal and sub-Federal level, which benefit the film industry.  Many of the programmes administered at the Federal leve l, including the Canadian Film or Video 
Production Tax Credit Programme, the Film or Video Production Services Tax Credit 
Programme (PSTC), the Canadian Television Film Fund and the Culture Industries Development Fund, appear to be specific to the f ilm industry and also appear to be notifiable 
under Article 25 of the Subsidies Agreement.  In addition, there are other significant programmes administered at the provincial level,  such as the Ontario Production Services Tax 
Credit (OPSTC), the Ontario Film and Television Tax Credit (OFTTC), the Ontario Computer 
Animation and Special Effect Tax Credit (OCASE), and the Quebec Film or Television 
Production Services Tax Credit, which also appe ar to meet the notification requirements of 
Article 25.   Please explain why Canada's programmes which benefit the film industry, such as those 
listed above, do not qualify as notifiable und er the Subsidies Agreement.  If these programmes 
do meet the requirements of Article 25, plea se provide the information required under that 
article.  In doing so, please provide inform ation regarding all programmes administered by 
either the Canadian Federal or provincial governments that benefit the film industry. 
 
Reply
 
 
 Canada notes that the audio-visual indu stries are recognized as a service under the WTO's 
General Agreement on Trade in Services (GATS), wh ich, unlike the ASCM for trade in goods, does 
not contain subsidy disciplines.  Canada has already  notified the assistance programmes that clearly 
apply to cultural goods, such as books and periodicals/ magazines, and that fall within the meaning of 
Articles 1 and 2 of the ASCM.  Furthermore, Ca nada notes that it has not made any commitments 
pertaining to audio-visual services under the GATS.   
__________