The Aircraft Cases: Canada and Brazil

The disputes between Canada and Brazil over subsidies to the regional aircraft industry were the first cases under Part II (covering prohibited subsidies) of the Agreement on Subsidies and Countervailing Duties (SCM Agreement) of the World Trade Organization (WTO). The PROEX case, involved the scope of the concept of “special and differential treatment” under Article 27 of the SCM Agreement, and the interpretation of the first paragraph of Item (k) of the Illustrative List of Export Subsidies as set out in Annex I to the SCM Agreement. The Canada — Aircraft case involved, for the first time, Article 1 of the SCM Agreement, which defines what practices constitute a subsidy, and Article 3, which prohibits subsidies “contingent, in law or in fact, upon export performance.” The case also dealt with important procedural issues relating to WTO dispute settlement. The author reviews critically these decisions with respect to both substantive and procedural issues.