Voluntary Submission

1. Name of the case

Appellate Body Report, Canada–Measures Affecting the Export of Civilian Aircraft,
WT/DS70/AB/R, adopted on 20 August, 1999.
2. Facts
Brazil made claim regarding the activities of the Export Development Corporation,
including export subsidies provided by Technology Partnerships Canada (TPC) to
Canadian regional aircraft industry. The Panel concluded that TPC assistance does
constitute prohibit export subsidies, which is inconsistent with some articles of SCM
Agreement. Canada appealed, claiming that Panel erred in interpreting the meaning of
“benefit”.
3. Issue
Whether the “cost to government” and Annex IV of SCM Agreement relevant to the
term “benefit” in the context of Article 1.1(b) of the same Agreement or not.
4. Rules
Agreement on Subsidies and Countervailing Measures
Article 1: Definition of a Subsidy
1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:
(a)(1) there is a financial contribution by a government or any public body
within the territory of a Member (referred to in this Agreement as
"government"),…
…
(b) a benefit is thereby conferred.
Article 14: Calculation of the Amount of a Subsidy in Terms of the Benefit to the
Recipient.
5. Application
After looking into the ordinary meaning of the word “benefit” in dictionary, the
Appellate found several different meanings to it, including “advantage”, “good”, “gift”,
“profit” or “a favourable or helpful factor or circumstance”. Hence it believes that the
Panel did not make a mistake by stating “the ordinary meaning of ‘benefit’ clearly
encompasses some form of advantage.”
Regarding the term “benefit”, the Appellate Body focuses more on the receiving end
as it stated that the benefit could not happen without a recipient to receive it. Also, from
the language of Article 1.1(b) of the SCM Agreement, the word “confer” is used in
passive from “conferred” following the word “thereby”, which indicates that the article
calls for an inquiry into “what was conferred on the recipient.” The term “the benefit to
the recipient” is mentioned in Article 14 on guidelines for calculating the amount of
subsidy. This article also makes explicit reference to Article 1, implying that the word
“benefit” in both articles should be interpreted in the same way, which is focusing on the
recipient.
The Appellate Body also analyzes the structure of Article 1.1(b) and believes that
since the element of the article concerns with the action of the government, it would be
logical to think that the second element in the article is concerned with the recipient by
that action taken by the government. The “cost to government” argument made by
Canada, however, focuses on the grantor of the benefit, hence being not relevant to the
interpretation of the term.
Also, the claim of “cost to government” made by Canada would exclude the case
when benefit is given by a private body under the direction of government, which is
clearly stated in the text of Article 1.1(a).
Regarding Canada’s claim of the use of Annex IV, the Appellate Body states that
Annex IV of this Agreement is used for calculating the total ad valorem subsidization
under the case of “serious prejudice” in Article 6, hence it has no meaning in the
interpretation of the term benefit in Article 1.1.
6. Conclusion
The Appellate Body concluded the Panel has not erred in its interpretation of the term
“benefit” and that the concept of “cost to government” as well as Annex IV of the
Agreement should not be used to interpret the term “benefit”.