Canada—Export Credits and Loan Guarantees for Regional Aircraft (WT/DS222/R): A Comment
Files
Description
This panel report represents another installment in the long-standing litigation between Canada and Brazil over subsidization of sales of commuter jets by both countries. The report addresses a set of claims by Brazil closely related to prior claims concerning the practices of the Export Development Corporation as well as industrial policy entities in the Canadian province of Quebec. Brazil specifically challenged certain recent transactions where these federal and provincial entities provided certain kinds of financing assistance in connection with the sale of Bombardier aircraft (namely to Air Wisconsin, Atlantic Coast Airlines, Comair, Kendell, and Air Nostrum). For the most part the panel applied existing jurisprudence on export subsidies to the factual record. In particular, the panel applied a “private investor principle”, verifying in all instances whether the conditions that were granted by the export development and industrial policy agencies were more favorable than the conditions that were available from alternative private sources. However, it is extremely difficult to provide an adequate commentary on the panel’s comparison between the conditions available in the market and those granted by the agencies because vital factual information concerning the transactions in question has been removed from the panel report for reasons of commercial confidentiality. Thus, in our Report, we focus on several specific areas, largely of a procedural and preliminary nature, where the panel made apparently novel findings of law that have some systemic or general significance for WTO jurisprudence and practice. Some preliminary comments on the general approach of the panel may however be in order. It is striking that the panel paid a lot of attention to the distinction between programs that leave some discretion to the authorities granting subsidies which may be unlawful and programs which instruct the authorities to do so. According to the panel, only programs which instruct the authorities to grant unlawful export subsidies are as such unlawful, despite the fact that the declared objective of these programs is to grant export subsidies (which are likely to be unlawful). Hence, everything appears as if the programs are not unlawful because one can exclude that they may not pursue the objective that has been assigned to them. The apparent contradiction between the objectives assigned to the agencies and the behavior that they are meant to pursue in order to comply with the WTO framework is reinforced by the application of the private investor principle. According to this benchmark, particular loans and guarantees are lawful if they could have been obtained from private investors. Here again, the behavior of the agency is lawful where it mimics the behavior of private sources of funds—which suggests that they should not have been public agencies in the first place or at the very least that their public status (and the particular objectives that they are supposed to pursue in light of this status) should be seen as irrelevant. Overall, one can thus wonder about the effectiveness of a legal framework that imposes behavioral norms on an institution that are in contradiction with its “raison d’être”. This raises the broader question of whether the constraints imposed by the SCM agreement are reasonable. A discussion of this issue goes much beyond the scope of this chapter. It is worth mentioning however that subsidies can sometimes be highly desirable and that the blanket prohibition on export subsidies contained in the SCM agreement may not be warranted.
Source Publication
The WTO Case Law of 2002: The American Law Institute Reporters' Studies
Source Editors/Authors
Henrik Horn, Petros C. Mavroidis
Publication Date
2005
Recommended Citation
Howse, Robert L. and Neven, Damien J., "Canada—Export Credits and Loan Guarantees for Regional Aircraft (WT/DS222/R): A Comment" (2005). Faculty Chapters. 871.
https://gretchen.law.nyu.edu/fac-chapt/871
