RESTRICTEDWORLD TRADE
ORGANIZATIONTCA/M/11
22 December 2000
(00-5641)
Committee on Trade in Civil Aircraft
MINUTES OF THE MEETING
HELD ON 15 NOVEMBER 2000
Chairperson:  Mr. Didier Chambovey
1. The Committee on Trade in Civil Aircraft (the "Committee") held a meeting on
15 November 2000.
2. The Committee adopted the following agenda:
A. CONSIDERATION OF THE STATUS OF THE 1979 AGREEMENT ON TRADE IN CIVIL
AIRCRAFT UNDER THE WTO .........................................................................................................1
B. CONSIDERATION OF THE NEED TO AMEND ARTICLE 1 OF THE AGREEMENT WITH
RESPECT TO "AIRCRAFT GROUND MAINTENANCE SIMULATORS "................................................2
C. U PDATE OF HS HEADINGS IN THE PRODUCT COVERAGE ANNEX OF THE 1979
AGREEMENT ON TRADE IN CIVIL AIRCRAFT AND EXTENSION OF PRODUCT
COVERAGE ............................................................................................................................... ...4
D. UPDATE OF HS HEADINGS IN THE PRODUCT COVERAGE ANNEX TO INCORPORATE HS
CHANGES THAT WILL ENTER INTO FORCE IN 2002 ......................................................................9
E. " END-USE" CUSTOMS ADMINISTRATION ....................................................................................10
F. S TATISTICAL REPORTING OF TRADE DATA ................................................................................11
G. EUROPEAN REGULATION ON AIRCRAFT AND ENGINE NOISE .....................................................12
H. CERTIFICATION IN EUROPE OF UNITED STATES CIVIL AIRCRAFT ...............................................13
I. GOVERNMENT SUPPORT FOR THE DEVELOPMENT OF LARGE CIVIL AIRCRAFT ..........................14
J. BELGIAN AIRCRAFT INDUSTRY SUPPORTS THROUGH EXCHANGE RATE MECHANISMS .............14
K. OTHER BUSINESS .......................................................................................................................15
1. United States Legislation "Air 21"........................................................................................15
2. Canada/Brazil aircraft subsidies dispute..............................................................................17
L. DATE OF NEXT REGULAR MEETING ............................................................................................18
M. ADOPTION OF ANNUAL REPORT .................................................................................................18
A. CONSIDERATION OF THE STATUS OF THE 1979 AGREEMENT ON TRADE IN CIVIL AIRCRAFT
UNDER THE WTO
3. The Chairperson recalled that in April 1999, he had sent to Signatories a draft Protocol
concerning technical rectifications needed to br ing the Aircraft Agreement into the WTO framework.
He had since urged Signatories to adopt the April 1999 draft protocol, on the understanding that thisTCA/M/11
Page 2
was a neutral transposition that did not change the existing relationship of the Aircraft Agreement
with the other WTO Agreements, including the Agreement on Subsidies and Countervailing
Measures.  At the last Committee meeting in June 2000, Signatories had still been unable to agree to
adopt this draft Protocol.  Since then, he had received no indication that the views of delegations had
converged on this issue.  He asked whether he was correct in understanding that there was still noagreement among Signatories on the adoption of this draft Protocol of technical rectifications?
4. The delegate of the European Communities stated that unfortunately this understanding
seemed correct.
5. The Chairperson stated that there was no need for him to again remind Signatories of the
uncertainties regarding the legal status of the Aircraft Agreement.  He was in their hands.  He asked
whether it was useful for the Committee to continue to revert regularly to this issue, or should the itembe eliminated as a regular item on the agenda of the next Committee meeting?
6. The delegate of the United States stated that his delegation believed that it was important to
consider rectifying the Agreement and the Chairperson had underlined the importance of this over a
number of years.  He stated that this matter should remain on the agenda and Signatories shouldcontinue to make efforts both bilaterally and plurilaterally between meetings to try to make some
progress.  He suggested that perhaps it could be reverted to at a less formal interim meeting of the
Technical Sub-Committee before the next regular meeting of the Committee in order to get at the
heart of the differences and see if there was some resolution in sight.
7. The delegate of the European Communities said that his delegation shared the view expressed
by the representative of the United States.  Although it was very unsatisfactory that Signatories had
not made progress, his delegation was of the view that they should still try to do so.  They could go
along with the suggestion of trying a different avenue in order to make some progress.
8. The Chairperson stated that there were se veral ways of advancing - bilaterally and
plurilaterally or in the Technical Sub-Committee.  He  stated that if Signatories wished to retain this
issue on the agenda for the next meeting, this would be done.  He underlined that he was in their
hands for any consultations and would convene any meetings, but that this initiative could not be
launched unless there were signs of progress in Signatories' positions on this matter.
9. The Committee took note of the statements made.
B. CONSIDERATION OF THE NEED TO AMEND ARTICLE 1 OF THE AGREEMENT WITH RESPECT TO
"AIRCRAFT GROUND MAINTENANCE SIMULATORS "
10. The Chairperson recalled that at the meeting of the Technical Sub-Committee in
October 2000, one Signatory had raised the issue whether the Committee needed to consider whether
to amend Article 1 of the Agreement in order to reflect the addition of "aircraft ground maintenance
simulators" in the revised draft Product Coverage Annex.  At the 14 November 2000 meeting of the
Technical Sub-Committee, this issue was discussed in conjunction with the text of the Product
Coverage Annex, and with the inclusion of “aircraft ground maintenance simulators” in the list ofitems in the Annex.  He had proposed that the Committee revert to the issue as it related to Article 1
of the Agreement at this meeting today.  Acco rdingly, he opened the floor to comments from
delegations.
11. The representative of Canada stated that her delegation had listened with interest to the
interventions that had been made in the Technica l Sub-Committee with respect to duty-free treatment
for aircraft ground maintenance simulators.   She recalled that Signatories had agreed in
December 1999 that this product be added to the duty-free coverage under the Agreement and thatTCA/M/11
Page 3
there had been discussion in the Technical Sub-Committee about how to effect such treatment.
Questions had arisen with respect to wording contained in the Agreement.  Canada had earlier taken
the view that no specific amendment to the Agreement was needed.  Article 2.1 made reference to an
"Annex" and as long as aircraft ground maintenanc e simulators were contained within the Annex of
product coverage, this would be sufficient to grant them duty-free treatment as provided for underArticle 2.1.  However, some delegations had questio ned that position.  Therefore, although Canada
was still of the view that an amendment was not specifically required, in order to make it clear and
that there be no legal ambiguities in the future, Canada proposed that Article 1.1 of the Agreement be
amended in order to include a sub-item "(e)  all aircraft ground maintenance simulators".  There had
also been a discussion at the Technical Sub-Committee meeting as to whether Canada was seeking to
have parts of these ground maintenance simulators also included in the product coverage.  As they had
reported to the Technical Sub-Committee, this was not the case.  The amendment they were proposingwould only cover the ground maintenance simulators themselves.  They considered that this would
necessarily have to be done under the amendment provision in Article 9.5 of the Agreement, although
they were open to other suggestions.
12. The delegate of the United States stated that the United States had long been in support of
adding ground maintenance simulators to the Annex.  When the proposal had first been made in 1994,
the United States had supported it in a written communication to the Chairperson.  However, this
proposal would change one main Article of the Agreement without dealing with the rest of the
Agreement which needed some technical updating.  Therefore, it could create some problems as to the
relationship of the Agreement to other Agreements which his delegation had previously raised, andthey had to consider the proposal in that context.  Therefore, his delegation was reluctant to support
this amendment as a stand-alone, although in principle they supported adding ground maintenance
simulators to the list of duty-free items.  Based on the work and discussion in the Technical Sub-
Committee, his delegation wondered if there was a way to deal with this as an interim measure so as
not to put the proverbial "cart before the horse" by updating the Annex without first rectifying thebody of the Agreement.
13. The representative of the European Communities stated that his delegation could support the
proposal by Canada.  While they did see the link raised by the United States, they were a little less
concerned.  They were open as to how to achieve the practical result which all Signatories wished to
achieve.  If a more creative solution were necessary, they were willing to explore this.  However, he
wished to have it on record that they would ha ve no problem with the more direct way proposed by
Canada.
14. The delegate of Canada stated that she appreciated the comments of the European
Communities and could understand the United States' concerns relating to other changes to the
Agreement.  With respect to an interim way of d ealing with this issue, her delegation suggested that
the Committee could take a decision to recommend that the Signatories apply this amendment
immediately until a formal amendment was made to Article 1.1.  This would have the effect of giving
some forward movement in respect of this issue.  Although this would not necessarily be a binding
obligation, it would at least put this issue to rest un til the so-called "later-in-time" issue could be dealt
with.  She stated that she did have a formal spec ific proposal to make, but, as it built upon a proposal
made in the Technical Sub-Committee relating to the next agenda item, she suggested that she would
defer the discussion of the wording until the next agenda item.
15. The Committee took note of the statements made.TCA/M/11
Page 4
C. UPDATE OF HS HEADINGS IN THE PRODUCT COVERAGE ANNEX OF THE 1979 A GREEMENT
ON TRADE IN CIVIL AIRCRAFT AND EXTENSION OF PRODUCT COVERAGE
16. The Chairperson recalled that, since the last meeting of the Committee, the Technical Sub-
Committee had met twice -- on 24 October 2000 and 14 November 2000 -- in order to discuss the
update of Harmonized System headings in the Product Coverage Annex and the extension of product
coverage, on the basis of documents TCA/W/5/Re v. 1 and TCA/W/5/Rev. 2, respectively.  The
discussion had taken place in two parts.  First, Signatories had addressed the changes to be made to
the Product Coverage Annex.  Second, Signatories had discussed the timing and modalities for the
entry into force of the revised Protocol and Product  Coverage Annex.  With respect to the first issue,
it appeared that Signatories had no remaining areas of disagreement regarding the items to be included
in the Product Coverage Annex.  He asked whether he was correct in this assumption and in assumingthat the Technical Sub-Committee had concluded its discussions on this matter for the time being?
17. The delegate of Egypt wished to inform the Committee that, with respect to the updating of
Harmonized System headings in the Product Coverage Annex and the extension of Product Coverage
of the Annex, his delegation was unable to take any position at this stage as they had received noinstruction and the matter was still under examination by the authorities concerned.  They were
therefore unable to join any po ssible consensus for the time being.
18. The Chairperson stated that he understood that Egypt would have to reserve its position on
this item, and asked whether it could nevertheless be understood that Egypt had taken no firm
opposition to what had been discussed.
19. The delegate of Egypt stated that, as his delegation had received no instructions, they could
not take any position as yet.
20. The Chairperson then turned to the second issue, relating to the timing and modalities for the
entry into force of the revised Protocol and Product Coverage Annex.  He recalled that, at the meeting
of the Technical Sub-Committee in October 2000, certain Signatories had indicated that they may not
be in a position to accept the Protocol (2000)  Amending the Annex to the Agreement on Trade in
Civil Aircraft, either within the timeframes currently being discussed, or at all.  In the case of at least
one Signatory, difficulties seemed to arise due to an apparent perception on the part of that delegation
that the acceptance and entry into force of the Protocol might have an impact upon the existing legalrelationship of the Agreement on Trade in Civil Aircraft with other WTO Agreements.
21. As he had already done at the two recent meetings of the Technical Sub-Committee, he again
emphasized that it was his understanding that this exercise of transposition of the Harmonized System
1996 changes into the Product Coverage Annex and the extension of product coverage of the Annexwas being conducted under the understanding that this was a neutral exercise that did not change the
existing relationship of the Agreement with other WTO Agreements, including the Agreement on
Subsidies and Countervailing Measures.  In addition, this exercise did not prejudge any other issues
currently being considered within the Committee,  including the technical rectification of the
Agreement to bring it into the WTO framework.  He be lieved that his understanding reflected also the
understanding among Signatories as to the nature of this exercise.
22. While it did not appear that the Committee would be in a position formally to adopt the draft
revised Protocol today as originally envisaged, there had been a constructive discussion in the
Technical Sub-Committee yesterday which indicated that Signatories might very well be in a positionto move forward on this issue pending the formal adoption of the Protocol.  These discussions in the
Technical Sub-Committee had indicated first, the possibility that Signatories would be able and
willing to consider the insertion of certain language in the Protocol with a view to its adoption by
Signatories in the very near future; and second, the possibility of adoption by Signatories of a decisionTCA/M/11
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on interim application of duty-free treatment to the list of products in the proposed Product Coverage
Annex, pending the formal adoption by Signatories of the Protocol.  The Chairperson recalled for the
benefit of Signatories specific language that was discussed and that could be considered in this regard.
As a new paragraph 6 to be inserted in the Protocol, there had been two drafting proposals.  The first
read:  "Nothing in this Protocol shall have the result of changing Signatories' existing rights andobligations under the WTO Agreement, except with respect to the products covered by this
Agreement".  The second read:  "This Protocol deals only with customs duties and charges under
Article 2 of the Agreement on Trade in Civil Aircraft.  Nothing in this Protocol shall have the result of
changing the existing relationship between the Agreement on Trade in Civil Aircraft and the other
WTO Agreements, including the Agreement on Subsidies and Countervailing Measures".  The
Chairperson observed that while the Signatories would certainly not be in a position to take a formal
decision today, the purpose of this discussion was to identify draft language to be considered forinsertion into the Protocol.
23. The delegate of the United States wished to make  it clear that his delegation also was not in a
position to adopt the Protocol today.  However, without prejudice to their position on the Protocol and
in a positive spirit to move this effort forward, his delegation suggested a melding of the twoproposals as language for further consideration by the Signatories:  "This Protocol deals only with
customs duties and charges under Article 2 of the Agreement on Trade in Civil Aircraft.  Nothing in
this Protocol shall change the Signatories' existing rights and obligations under the WTO Agreement,
except with respect to the duty-free treatment covere d by this Protocol."  Without taking a specific
position on it themselves, their delegation believed this proposal was worthy of further consideration.
24. The delegate of Canada stated that Signatories would recall that her delegation was in favour
of trying to move forward with the Protocol.  A lot of work had been done towards the closure of the
work on the updating and expansion of the Product Coverage Annex.  Her delegation was wholly in
favour of, and would certainly support, the insertion of a paragraph of this sort which would thenenable Signatories that had concerns with respec t to the relationship between the Agreement and the
existing agreements (particularly the SCM Agreement), to move forward.  She would take this
language back for consideration and further instructions, but, as an initial reaction, she indicated that
she did not believe they had any significant problems with any of the three versions that had been
suggested. Her delegation was encouraged that other Signatories were looking at this proposal in the
spirit in which it was intended.
25. The representative of the European Communities stated that his delegation was trying to be as
constructive as it could.  He believed that the proposal brought forward by the United States was an
improvement over the two earlier proposals.  In the first version, there was no reference to the duties
and other charges, which were the only thing the Protocol dealt with.  Maybe there had to be further
thought about the beginning of the sentence in th e second version ("This Protocol only deals with
customs duties and charges…").  Some fine-tuning might lead to reflection about whether it was the
duties or the list of products covered by the duties that was actually being dealt with.  The Protocol
itself did not directly deal with customs duties, this was dealt with under Article 2.  This was one way
of solving the problem, and they hoped to be able to return with a positive response.  This also
showed that there should be some progress on the rectification itself, in order to avoid problems ofthat kind.
26. The Chairperson stated that, with respect to the language that could be inserted in the Protocol
itself, he believed that there had been a good discussion.  He urged Signatories to reflect on this
promptly so that the Committee might be in a positi on at the next meeting to come to an agreement on
the wording and formally to adopt the Protocol.  He recalled that the Technical Sub-Committee had
considered certain proposals on the interim application of the Protocol.  The earlier discussion dealing
with the consideration of the need to amend Article 1 obviously had a direct impact on the wording
that could be taken into consideration with respect to the interim application of the changes to theTCA/M/11
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Product Coverage Annex.  He recalled that there had been a specific proposal under consideration at
the Technical Sub-Committee meeting:  "The Committee decides to recommend Signatories to apply
immediately, on an interim basis and until a revised Annex is formally adopted by Signatories, duty-
free treatment to the goods of the proposed Product Coverage Annex outlined in WTO document
TCA/W/5/Rev. 3 and to inform the Committee accordingly".
27. The delegate of Canada stated that at the Technical Sub-Committee meeting on
14 November 2000, Signatories had discussed a way of moving forward and taking account of
progress that had been made in terms of updating the product coverage and of expanding it to include
aircraft ground maintenance simulators.  However, there had been no agreement to adopt the Protocol.
Her delegation considered that one way to move fo rward would be, on an interim basis, have the
Committee recommend that Signatories apply the so-called "revised" Annex.  As some Signatorieshad considered that the inclusion of aircraft ground maintenance simulators also necessitated a formal
amendment to Article 1.1, which Canada had earlier proposed at this meeting.  Her delegation saw
merit in expanding the wording of the proposal now on the table with respect to an interim decision to
include reference to that future formal amendment.  Building upon the current proposal, her
delegation proposed the following:  "The Committee decides to recommend Signatories to applyimmediately, on an interim basis and" -- and then her delegation would propose inserting:  "until a
formal amendment to Article 1.1 to include aircraft ground maintenance simulators is adopted by the
Signatories under Article 9.5 of the Agreement and until a…", before the remaining part of the
sentence --"revised Annex is formally adopted by Signatories, duty-free treatment to the goods of the
proposed Product Coverage Annex outlined in WTO document TCA/W/5/Rev. 3 and to inform theCommittee accordingly".  The reference to WTO document TCA/W/5/Rev. 3 was on the
understanding that TCA/W/5/Rev.2 would be update d as a consequence of the discussions at the
Technical Sub-Committee on 14 November 2000.
28. The Chairperson said that this also reflected his understanding about the reference to
document TCA/W/5/Rev. 3.  He asked whether Si gnatories agreed to adopt this decision.
29. The delegate of the European Communities thanke d all involved in the work to fine-tune this
language.  His delegation could agree to what the Chairperson had proposed, but commented that
there might be a need to change the last line to make clear about what the Committee would be
informed.  His delegation proposed that the last part of the proposal become a sentence with the idea
that Signatories shall inform the Committee on steps taken in respect of interim application.  Thiswould make it clear the information was what Signatories had done to apply, on an interim basis, the
revised Annex.
30. The Chairperson proposed to capture the sense of the proposal by the European Communities
by adding the following, after the reference to th e document and a period:  "Signatories shall inform
the Committee on steps they have taken relating to such interim application."
31. The delegate of the European Communities confirmed that this reflected their concerns.
32. The delegate of the United States stated that, considering what had been said earlier
concerning whether or not there was support for am ending the Annex or amending Article 1.1 of the
Agreement, let alone on any specific language, perhaps the proposal could be simplified so as to not
prejudge the outcome.  The proposal could simply say:  "The Committee decides to recommend
Signatories to apply immediately, on an interim basis, duty-free treatment to the goods of the
proposed Product Coverage Annex outlined in WTO document TCA/W/5/Rev. 3.  Signatories shall
inform the Committee of the steps they have taken relating to such interim application".  This would
leave out the reference to any particular future contingency which the Committee evidently today
could not decide upon, although it still wished to move ahead and include these items and have them
applied.  The United States had already applied duty-free treatment to these items.TCA/M/11
Page 7
33. The Chairperson stated that this proposal by the United States was to drop all references in
the decision to any formal amendment of Article 1.1 as well as to formal adoption of the Protocol by
the Committee.  He invited comments on this proposal.
34. The delegate of Canada stated that, although it was the view of her delegation that aircraft
ground maintenance simulators were covered by just amending the Annex, and that the wording as
proposed by the United States might do that, there were some other delegations that considered that
this was not sufficient and it was for that reason that Canada had proposed an amendment to
Article 1.1.  With that in mind, her delegation suggested a further amendment to the text to include
specific reference to aircraft ground maintenanc e simulators, after the reference to the WTO
document (by inserting the phrase:  ", including aircraft ground maintenance simulators").  Thiswould make it crystal clear that the product coverage also included those products.
35. The delegate of the United States, noting that the Committee had decided in December 1999
to include aircraft ground maintenance simulators, stated that his delegation had no objection to citing
them specifically, particularly as they were not currently covered in Article 1.1.  Therefore, perhapsthey required a specific declaration.  They would support this amendment proposed by Canada.
36. The Chairperson noted that there were no objections to this latest amendment proposed by
Canada.  He also noted that, as Article 2 of the Agreement used the terms "Signatories agree…", he
suggested that, in order to be consistent with this, the decision could use the term "Signatories"instead of "Committee".
37. The delegate of the European Communities stated that this was a Committee decision that
would go into the Committee minutes, so retaining the term "Committee" might be more appropriate.
He also had no difficulty with the United States proposal to delete the middle phrases in the proposal,although he suggested that it was not really transparent as to why the Committee was deciding on this
approach of interim application.  He wondered whether the first sentence of the decision should begin
with something like:  "Pending a possible form al amendment of the Agreement and the Annex….".
38. The Chairperson stated that retaining the te rm "Committee" seemed appropriate, as the
delegate of the European Communities had observed.  It was for the Signatories to decide upon the
appropriate wording of the decision.  He asked whether Signatories were in a position to adopt thedecision on the basis of the wording that had been discussed.
39. The delegate of Japan stated that he would discuss with Tokyo this proposal by Canada
relating to interim application.  Tokyo still had some legal concerns about whether aircraft ground
maintenance simulators could be accommodated without amending Article 1.1, and they were leaningtowards the opinion that Article 1.1 had to be amended in order formally or precisely to accommodate
ground maintenance simulators.  The proposal by the United States had been to delete the reference
and the link to Article 1.1 in this decision, and he would have to see.  He suggested that if the
reference to the amendment of Article 1.1 were deleted, and in case the Committee never decided to
amend Article 1.1, this decision might be in a legally clumsy position.  He suggested softening thelanguage, and replacing "decides to recommend" by something like "urge", which he could then take
back to Tokyo for consideration as an interim understanding among Signatories.
40. The Chairperson invited comments from the floor as to whether the replacement of
"recommend" by "urge" was acceptable.
41. The representative of Canada stated that her delegation would prefer the word "recommend"
and recalled that the Committee had already taken a decision to include aircraft ground maintenance
simulators in the Annex.  She did not understand why there was difficulty on Japan's part with theTCA/M/11
Page 8
word "recommend" but if it helped the Japanese delegation, then her delegation could go along with
this change in wording to "urge".
42. The delegate of the United States stated that his delegation had no problem with either
"recommend" or "urge".  He noted that in Article  2 of the Agreement, the duty-free treatment would
apply to the repair of civil aircraft.  Since ground maintenance simulators were not defined as "civil
aircraft", Canada might wish to consider whether th ey wished to add "or their repair" in conjunction
with ground maintenance simulators.
43. The Chairperson invited comments on this suggestion by the United States.
44. The representative of the European Communities observed that the language in the Article
said "whether used for repair", so just saying "and repair" might not capture this.  A reference to
Article 1.1 in a more generic way might solve this problem.  In the end, it was for Canada to ensure
that the language reflected what they wished to accomplish and his delegation was open to any
suggestions.
45. The representative of Canada stated that their proposal had been with respect to Article 1.1
and duty-free treatment with respect to aircraft ground maintenance simulators.  Her delegation did
not wish to overcomplicate matters and hold things up so, for the time being, the discussion had
focused on the aircraft ground maintenance simulators.
46. The delegate of the United States clarified that he had been referring to the language not in
Article 2.1.1, but rather in Article 2.1.2, to eliminate customs duties and charges levied on repairs on
civil aircraft.  He presumed that there could be repairs on aircraft ground maintenance simulators.
However, considering that Canada did not feel any necessity to press this point, and they were the
main exporters of this product, his delegation would withdraw their suggestion.
47. The delegate of Canada wanted it to be clear that what they had been talking about up until
that point had been aircraft ground maintenance simulators and an amendment to Article 1.1.  Her
delegation did not rule out the possibility at a future meeting to suggest an amendment to
Article 2.1.2, but they were not doing so today and this was therefore not up for consideration.  This
was not to say they might not do so at a future point in time.
48. The Chairperson proposed that the Committee adopt the following decision:
"The Committee decides to urge th at Signatories apply immediately,
on an interim basis, duty-free treatment to the goods of the proposed
product coverage Annex outlined in WTO document TCA/W/5/Rev.3, including aircraft ground maintenance simulators.  Signatories
shall inform the Committee on steps they have taken relating to such
interim application."
1
49. The Chairperson asked whether the delegation of Japan could confirm later in the meeting
whether they were able to agree to this decision.  Other Signatories would also have an opportunity toreflect on this.  He recalled that Signatories had also been considering language for insertion into the
Protocol and urged Signatories to reflect upon this  so that the Signatories would be in a position
formally to adopt the Protocol at the next meeting on the basis of the wording that had been discussed.
While delegations might have amendments to suggest to this wording, this could be taken up at the
next meeting.  The Chairperson proposed that the Committee take note of the statements made andalso revert at the next meeting to the proposal by Canada to amend Article 1.1 of the Agreement with
                                                     
1 As subsequently confirmed by Japan in document TCA/W/7, dated 20 November 2000.TCA/M/11
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respect to "aircraft ground maintenance simulators".  It  seemed appropriate to state at this point that it
was his understanding that all Signatories intended to adopt and accept the Protocol in due course and
that Signatories intended to avoid different levels of obligations.
50. The Committee so agreed.
51. The delegate of Japan stated that in light of the time difference, he would now be unable to
confirm Tokyo's position that day.  However, so as not to hold back the entire Committee on this
item, he could propose to adopt this decision on an ad referendum  basis and, after consulting with
Tokyo, his delegation could circulate a communication to Signatories indicating their position.
52. The Chairperson stated that the Japanese communication would be immediately circulated to
all other Signatories.  He proposed that Signatories agree to this decision ad referendum  in accordance
with the earlier discussions and awaiting subseq uent confirmation by the delegation of Japan.2
53. The Committee so agreed.
D. UPDATE OF HS HEADINGS IN THE PRODUCT COVERAGE ANNEX TO INCORPORATE HS CHANGES
THAT WILL ENTER INTO FORCE IN 2002
54. The Chairperson recalled that at the meeting of the Technical Sub-Committee in
October 2000, one delegation had raised the issue of whether the Committee should also undertake
the exercise of transposing into the Product Coverage Annex the changes to the Harmonized System
that will take effect on 1 January 2002.  The requested research undertaken by the Secretariat had thus
far revealed a number of HS subheadings in the Product Coverage Annex relevant in this context.3
There had also been changes in the texts of the descriptions of a number of headings (including 84.19and 85.18) of which Signatories should be aware.  He emphasized the importance for Signatories tofind a way for this exercise to reach fruition in the form of an effective agreement among Signatories.
Having said this, he asked whether Signatories agreed to instruct the Secretariat to produce a further
revision of the draft Product Coverage Annex for review by Signatories?
55. The delegate of Canada stated that her authorities had identified, after a quick review, certain
HS changes that might need to be looked at in terms of the HS 2002.4  Her delegation also suggested
that document TCA/W/5/Rev. 3 be used as a basis for this next update, so that the Committee couldmove forward from that document and only look at th e changes that needed to be made as a result of
the HS 2002 changes.
56. The Chairperson proposed that Signatories agree to instruct the Secretariat to produce a
further revision of the draft Product Coverage Annex for review by Signatories and agree to use the
latest revision resulting from the work undertaken in the Technical Sub-Committee to transpose the
current list to the 1996 version of the Harmonized System.  He invited all Signatories that might find
HS headings or sub-headings that might be affected by the changes to the Harmonized System that
would enter into force on 1 January 2002 to inform th e Secretariat, so that these could be taken into
account in the next revised draft of the Product Coverage Annex.
57. The Committee so agreed.
                                                     
2  See confirmation by Japan in document TCA/W/7, dated 20 November 2000.
3 4009.50; 4011.30 (French text only); 4012.10 and .20; 8415.81, 8471.50; 8483.90; 8518.30; 8805.20.
4 These included 4009.50; 4012.10 and 8805.20.TCA/M/11
Page 10
E. "END-USE" CUSTOMS ADMINISTRATION
(i) Updating information regarding civil/military identification for customs
purposes
58. The Chairperson recalled that at the November 1998 meeting, the Committee had accepted
the proposal by the Chairperson that the factual in formation regarding civil/military identification for
customs purposes contained in document AIR/TS C/W/49 should be updated.  To date, Bulgaria,
Canada, the European Communities, Japan and the United States had provided the requisite
information.  He again urged other Signatories to submit the updated information to the Secretariat, in
order that it could be circulated for the information of other Signatories.
(ii) Military vs. Non-military Definition
59. The Chairperson recalled that Canada had made a proposal concerning the definition of "civil
aircraft" for the purposes of the Agreement.  Canada's proposal was circulated in document TCA/W/4.
60. The Chairperson noted that there were two general issues concerning this proposal by
Canada.  First, the substance of the definition of "civil aircraft" that Canada was proposing.  Second,
the modalities of any adoption by the Committee of such proposal, in the event that there were no
objections to the proposal by Signatories.  Both of these areas had been touched upon briefly at the
last meeting of the Committee, and he proposed that the Committee once again deal with these twoissues separately.  He therefore opened the floor first with respect to the substance of the proposal.
61. The representative of Canada recalled that the proposal in TCA/W/4 had been discussed by
the Committee at previous meetings.  Her delegation wished to address some questions that had been
posed by the delegates of the United States and Japan at the last meeting of the Committee.  Withrespect to the question of whether or not the change of definition of "civil aircraft" would also cover
parts and components, she stated that it would.  Article 1.1 of the Agreement talked in terms of all
civil aircraft engines and their parts and components; therefore, whatever the definition was for "civil
aircraft", it would also cover parts and components.  With respect to the question of what would
happen when an aircraft was initially certified as a civil aircraft but was later modified, it was their
position that if the aircraft were re-certified as a civil aircraft following modifications, it would still be
covered.  If it were modified such that it was suitable only for military operations and could not beeasily re-configured for civil operations, it would not be covered.  With respect to the question of how
to control parts as not all parts were certified, the information that she had received was that every
part for civil aircraft was certified, even down to the exit labels.  Her delegation hoped that they might
be in a position by the next meeting to come fo rward with some suggestions with respect to the
modalities for effecting the change.  This might help to focus the discussion.
62. The delegate of the United States thanked Canada for its proposal and stated that, in principle,
his delegation could support what Canada was attempting to do.  If he understood the proposal
correctly, the idea was to get at the certification of the aircraft, not the end-user.  If an aircraft were
certificated for use by civil users, it was a civil aircraft, even though the same aircraft could, in fact,be used by a military unit.  This was the underlying concept for the United States definition of "civil
aircraft" with respect to the application of the Agreement and their law.  Thus, they could support the
proposal in principle, but there remained certain de tails on the margin that needed clarification.  For
example, in the United States, their Federal Aviation Authority only gave a type certificate to three
products -- a complete aircraft, a propeller, and an engine.  It did not give a type certificate to otherparts of aircrafts.  Secondly, there were questions about the registration of airplanes that might have to
be dealt with.  Thirdly, there were issues concerning the definition of "civil aircraft" as it appeared in
Article 1.2 of the Agreement.  The phrase "civil aircraft" was in quotes, which meant an aircraft itselfTCA/M/11
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that was not a military aircraft, and then all other products that were set out in Article 1.1.  The words
"civil aircraft" meant both a complete aircraft and the parts.
63. The delegate of Japan thanked the delegate of Canada for the explanation.  He understood that
Canada's intention was to come up with concrete pr oposals for the next meeting.  For the information
of the Committee, the authorities in his capital were still considering the impact of agreeing to this
proposal.  It related somewhat to the elements the United States had just mentioned.  They were still
studying how military and civil aircraft -- and especially their parts -- were handled and certified in
Japan.  They were not absolutely certain whether they could clearly delineate the two issues so as to
accommodate the Canadian proposal.  His delegation would return to this in more detail at the next
meeting, but wanted to flag that they might have technical difficulties in accommodating this handling
of the distinction between the two concepts.
64. The Committee took note of the statements made.  The Chairperson stated that the Committee
would revert to this point at the next meeting.
F. STATISTICAL REPORTING OF TRADE DATA
65. The delegate of Switzerland recalled that the Signatories had reported on their trade data on
civil aircraft since decisions taken in 1980 and 1982.  These decisions were not binding per se , but
were rather to endeavour to inform other Signatories of trade flows in civil aircraft.  After having
checked with the Secretariat and having looked at the rate of notifications, they had noted that therewere very few Signatories providing these on a regular basis.  The Swiss delegation was one of the
few to have provided this information on a regular basis to the Committee, and it seemed that recently
it had been the only delegation to provide notifications on an annual basis.  The question that arose
was:  Did Signatories view this notification as usef ul?  Should Signatories continue with this practice,
perhaps with somewhat more discipline?  Or did Signatories feel that this notification was not usefulor relevant, and that they could easily do without it?
66. The delegate of the European Communities observed that there might be another question
hidden behind this question, concerning how each of the Signatories implemented the Annex.  In the
European Communities, for example, they had codified their commitments under the Aircraft
Agreement at the eight-digit level, which meant they had trade statistics for exports, imports and intra-
Community trade.  However, they understood that other Signatories might have implemented theAgreement in other ways, for example, using an additional code.  For the moment, the European
Communities did supply the information, but probably not separately.  It was probably included in the
general trade information submitted under the GATT.  His delegation wondered what other
Signatories were doing.  Perhaps then they could go back and reflect on what they wanted to do in the
future on this item.
67. The representative of the United States stated that his delegation also supplied general trade
information, which was also generally on-line to anyone that was interested, and there was no need to
wait for formal notifications.  They had noted that, with the exception of Switzerland, there had been
very few notifications.  The question was whether Signatories should attempt it for another year, andrequest Signatories to submit information.  This information could then be reviewed, and Signatories
could see if there was a need to continue.  If there were no response to that proposal, perhaps it should
be terminated.  However, his delegation would be willing to submit a special submission to the
Committee.  They were aware that there were some conflicts in data between records of imports and
exports with their trading partners on aircraft items.  This Committee had not been established tosolve those differences, but it might serve some purpose in the context of its other work.  His
delegation would certainly be interested in hearing any other views, either in support, or against, the
idea of these notifications.TCA/M/11
Page 12
68. The representative of Canada recalled that the decisions on statistics had been taken in the
1980's and wondered whether the Secretariat could provide some background as to why the decisions
had been taken.  Her delegation had also taken note of the comments of the European Communities
and the United States, particularly with respect to data being available on-line, which had not been the
case in the 1980's.  Her delegation also wondered what use delegations had made of past submissions.
69. The Chairperson stated that the main reason that Signatories had been encouraged to submit
trade statistics had been to create more transparency with respect to the coverage of the Agreement.
The Chairperson encouraged Signatories to reflect upon the usefulness of these notifications and
proposed that Signatories agree to endeavour to communicate trade statistics for the last year by
1 May 2001.  As the next meeting of the Committee would take place after that date, the Committee
could then examine the status of notifications.  He clarified that the period concerned was the mostrecent annual period for which data were available.  This would be for the year 2000, or, if not, for the
most recent annual period for which data were available.
70. The Committee so agreed.
G. EUROPEAN REGULATION ON AIRCRAFT AND ENGINE NOISE
71. The delegate of the United States stated that his delegation had raised this item before and
wished to update the Committee and observers of the status of the situation and of their concerns.  He
stated that they had originally raised this matter because the European Union, in April 1999, hadadopted a regulation that, in their view, raised some concerns, in that it was a design standard instead
of a functional standard, it only affected imported aircraft and it appeared to controvert obligations
under the Chicago Convention on International Civil Aviation which established international
regulations on the environment, and this was a noise regulation.  At the time of adopting the
regulation, the European Communities had delayed its implementation for one year to allowdiscussion and negotiation with concerned parties, including the United States.  No resolution had
been reached, so on 14 March 2000, the United States had asked that the International Civil Aviation
Organization ("ICAO") arbitrate this matter.  They had submitted a memorial stating their concerns
with the regulation.  The ICAO Council was meeting th at day in Montreal to review the Signatories'
preliminary objections to the United States' memorial.  The Signatories were represented by the
European Commission, which was not itself a Signator y.  His delegation hoped that there would be a
speedy decision on this; they did not see any merits to the preliminary objections and would say sothat day in Montreal.  They thought it would be beneficial to the process of regulation and would take
this issue away from having the appearance of a trade barrier -- if not absolutely being a trade
barrier  -- if this was speedily ar bitrated in ICAO.  They hoped that the Signatories to the Aircraft
Agreement that were also signatories to the Chicago Convention and participating in the ICAO
Council would share that view and move that this be  decided rapidly, rather than delayed.  The United
States reserved all of its rights under the provisions under the Aircraft Agreement and under the WTO
Agreement to pursue this matter.  They would welcome any update from other Signatories with regard
to the status of this regulation.
72. The delegate of the European Communities observed that the minutes of the last meeting,
(TCA/M/10, paras. 63-68) clearly showed that they had had this discussion before.  His delegation
certainly agreed with the United States that a speedy resolution of this issue would be in everyone's
interest.  As the issue was being adjudicated elsewhere, he did not think he needed to comment on the
substance.  Their views were well laid out not only in this Committee, but also in the forum which the
United States delegate had mentioned.
73. The Committee took note of the statements made.TCA/M/11
Page 13
H.  CERTIFICATION IN EUROPE OF UNITED STATES CIVIL AIRCRAFT
74. The delegate of the United States stated that his delegation had raised the matter of delay in
certification of certain US-origin aircraft -- specifically new models of the 737 aircraft and the
Gulfstream G-5 -- as potential trade barriers to those aircraft.  These aircraft had been certified byUnited States authorities some years ago and given a recommendation of certification by the Joint
Airworthiness Authorities of Europe in 1998, and subsequently those aircraft were certificated by
Members of the JAA, with the exception of one party (France).  His delegation wished to know
whether there had been any change in status with resp ect to certification of that aircraft in line with
the recommendation of the JAA.  France was a member of the JAA and had participated in that
review.
75. The representative of the European Communities stated that his delegation was not of the
view that there were any irregular procedures going on here.  They had pointed out a number of times
that a JAA recommendation was one thing, and that requests for additional information were another
thing.  As far as they were concerned, the status of this issue had not changed, but he could confirm
that there was a dialogue going on between the authorities in question and the producer of the aircraftin question.  To his knowledge, this had led to a meeting not long ago and there seemed to be some
questions that remained open on what exactly the pr oducer should bring forward as far as information
and testing went.  These issues seemed to be still pending.  It was up to the partners in that dialogue to
find an adequate solution.
76. The representative of the United States thanke d the delegate of the European Communities for
this information.  He also understood that there was a request for additional information.  There
seemed to be unending requests for information on this aircraft, and further testing.  It raised the
question of what confidence one could place in the JAA recommendation if parties to the JAA found
it inadequate to proceed with certification.  His delegation invited the European Communities, orFrance, to inform them of the problems that they had that made its recommendations not lead to
adequate safety.  If this was not the problem, his delegation wished to know what other considerations
had played a role in this decision not to proceed.  He noted that the United States manufacturer had
made changes to this aircraft to make automatic over wing doors to speed the exit.  These did not exist
in any other similar sized aircraft.  These were already on the record of the Committee, so he could be
brief.  The aircraft was certificated for its full passenger complement in every other JAA participant
and other certification authorities.  However, in France, it was only certificated up to the amount ofpassengers that a competing aircraft manufactured in France held.  His delegation was concerned that
competitive factors may have slipped into this decision.
77. With respect to the Gulfstream G-5, the delegate of the United States noted that this aircraft
was certificated by the FAA over three years ago and that it had tens of thousands of in-performancemiles on it, and yet there was no recommendation from the JAA.   They understood from the
manufacturer that they had reluctantly agreed to a plan with the JAA which would add yet another
year, making it four years since certification by the FAA, to do additional testing and to provide
additional data.  This would be at some $15 million minimal cost to the company, plus, of course, the
direct loss in sales of the aircraft.  However, they were proceeding with that and there was no need todiscuss this further at this meeting.  They wished  to revert to this at the next meeting of the
Committee.
78. The representative of the European Communities st ated that, as with all of these issues, it was
not a question of competition, but rather a question of safety, which was at stake.  Regarding the first
case, it was not a question of certifying the aircraft, but rather on agreeing on exactly the number of
seats.  As he had said, this would hopefully be resolved through the direct contacts that were ongoing.
They were confident that this was possible.  Regarding the Gulfstream aircraft, his delegation was
happy to hear that this issue had seemed to go aw ay.  According to the information they had received,TCA/M/11
Page 14
the FAA had actually advised the company in questi on that the requirements brought forward by the
JAA were legitimate and they should not pursue this matter in any other way than to agree to the tests
and following the procedures in question.  There seemed to be a happy convergence of views among
the authorities in question, which served to underscore the point that nothing was being done here
which was not seen on both sides of the Atlantic as a justified way to ensure airworthiness and safety.
79. The Committee took note of the statements made and agreed to revert to this item at the next
meeting.
I. GOVERNMENT SUPPORT FOR THE DEVELOPMENT OF LARGE CIVIL AIRCRAFT
80. The delegate of the United States stated that, as the Committee was aware, the United States
and the European Communities had entered an agreement in 1992 whereby they could discuss matters
relating to government support for the development of large civil aircraft.  However, they also had
responsibilities in the context of the Aircraft Agreement to keep the other Signatories informed of
what was going on. His delegation had noted that there had been quite a few press articles indicating
that various governments of participants in Airbus manufacturing had intentions to support the launchthrough developmental aid of the A3XX aircraft.  There were also reports on considerations for
support for engines of this aircraft, and they wanted to know from those governments what was the
status of that.  In addition, given the status of the aircraft industry in Europe -- last year Airbus had
55 per cent of the market and various engine manufacturers were doing quite well -- a question arose
as to why there needed to be government aid of any kind.
81. The delegate of the European Communities took note of the points made by the delegate of
the United States.  His delegation was pleased that reference had been made to the US-EC bilateral
agreement.  It was precisely these cases which had led to the conclusion of such an agreement.  They
thought the adequate body to discuss these issues should be under the purview of that agreement,since it addressed the precise issues at stake.  It was obvious to their delegation that the WTO
Agreement, the Aircraft Agreement and possibly others, played a role, but the information available to
him indicated that recent contacts between th eir respective political leaders had shown some
convergence of views that consultations should take place, which he did not wish to prejudge in this
forum.  For reasons of transparency, he believed other Signatories would be happy to hear that
consultations had started on that issue.  Under which forum this would be done, whether under the
1992 agreement or under some other forum, there remained some outstanding doubts as to howexactly that issue should be addressed.  In no case would the Committee be drawn into those
discussions.
82. The representative of the United States thanke d the delegate of the European Communities for
providing this information, and noted that there was some effort to try to have some consultations on
this matter.  His delegation also felt an obligation to keep this Committee informed as well, since
other Signatories had an interest as both producers and consumers of these products.  The 1992
agreement also stated that it was without prejudice to rights and obligations under the WTO
Agreement, and the United States reserved all of its rights with respect to the Aircraft Agreement,
GATT 1994 and the WTO Agreement with respect to any support, aid or subsidies that theparticipating governments in Airbus might decide to provide.  His delegation hoped that those
governments were mindful of those obligations and would conform with them.
83. The Committee took note of the statements made.
J. BELGIAN AIRCRAFT INDUSTRY SUPPORTS THROUGH EXCHANGE RATE MECHANISMS
84. The delegate of the United States recalled that his delegation had raised this matter before in
the Committee.  They were concerned that this exchange rate mechanism had the appearance of a dualTCA/M/11
Page 15
exchange rate, perhaps a subsidy, and also raised questions of inconsistency with regard to the IMF
Agreement.  They had heard there was consideration of terminating the mechanism and replacing it
with something compatible with international oblig ations.  His delegation wished to know the status
of that.  If the status had not changed, they wished to revert to this item at the next meeting.
85. The representative of the European Communities stated that his delegation had repeatedly
taken note of that issue and had clearly stated the intention of the actors involved to remedy the
situation, so it was a more a question of procedure here.  The successive federal governments of
Belgium had for some time decided to introduce a new industrial policy that would be better tailored
to the needs of the enterprise concerned and to a large extent -- to repeat what he said at the last
meeting -- the provisions, the structure and the mechanisms of that policy were in the final phase and
had been decided.  However, while the coordination of that policy with the relevant institutions at thefederal and regional level with the relevant financial institutions had reached an advanced stage, it had
not yet been finalized.  His delegation underlined again that this policy was meant to ensure that no
distortion of international trade in civil aircraft would ensue, and hoped that gave some comfort to the
United States.  Changes had taken place in the federal government of Belgium, in particular affecting
the responsible politician, which was the state secretary for foreign trade.  This was against thebackground of constitutional negotiations -- which further complicated the issue -- under which the
competences of foreign trade issues were to be partially devolved to the sub-federal entities of
Belgium by the end of this year.  The combination of these events had unfortunately held up the
progress expected on the setting up of this new policy.  However, he could confirm that the Belgian
federal government remained committed to bringing into force the new policy as soon as possible.His delegation would certainly agree to keep the Committee informed on this issue and to bring any
new developments to the Committee's attention without delay.
86. The Committee took note of the statements made.
K. OTHER BUSINESS
1. United States Legislation "Air 21"
87. The delegate of the European Communities stated that his delegation had raised this issue at
the last meeting of the Committee, and had expressed a number of concerns relating to the Aviation
Investment and Reform Act for the Twenty-First Ce ntury, in particular relating to the allocation of
slots.  It was clear to them that the criteria for allocating slots in four major airports in the United
States seemed to be constructed in a way that it would favour companies flying a specific
manufacturer's products and discriminate against th ose flying a different manufacturer's products.  As
a new element in this discussion, they had information that in July 2000, one United States airline
who applied for slots complained to the FAA that a competing petitioner was flying not Boeing butAirbus planes and that they therefore should not be granted slots.  This was a quote that seemed to
give evidence for the fact that this legislation actually had some effect of a discriminatory character.
He would appreciate any further information from the United States about the implementation and
effects of this legislation.
88. The delegate of the United States was pleased to be able to reply that the United States
intended to implement -- and, indeed, had implemented -- the legislation in a WTO-compatible
manner.  With regard to the specific concern relating to certain language, there were a number of
criteria for the allocation of slots.  The specific criteria to which the European Communities had
objected had not been used.  With regard to the decisions last summer, there was a written opinionavailable on-line and this would indicate that the criteria had not been used.  As most of the slot re-
allocation was sort of a one-time affair, the slots had been re-allocated and he did not think there was
any evidence of misuse or discrimination against foreign products in the allocation of slots.  If the
European Communities had any allegations to make about damage, his delegation would appreciateTCA/M/11
Page 16
hearing them.  They did not believe that there was any reason to raise these, as there were none.  This
could be distinguished from the "hush-kit" regulation, which they deemed to be discriminatory against
the United States (and other third countries), which they were arguing in ICAO, and which was, in
fact, fully implemented when they did not implement the controversial language to which the
European Communities had objected in this particular legislation.  These were not co-equals.Reverting to the agenda item on "government support for the development of large civil aircraft", he
wished to note that engines were not covered in the bilateral agreement and therefore, at some point,
they wanted to discuss potential aid on engines in another context, perhaps the context of this
Committee.  His delegation was concerned that there was cut-rate pricing, particularly by Rolls-
Royce, in selling engines.  Their finances seemed to be suffering from this, and yet they were seeking
aid, and they had been getting aid for some years for various engines, the last being for the A340
500/600, and his delegation did not feel that this model of operation -- to offer low prices, sufferfinancial losses, and then seek more aid or forgiv eness of old aid repayments -- was compatible with
international obligations.  His delegation hoped that the United Kingdom would not succumb to
requests from Rolls-Royce for aid for engines for the A3XX.
89. The delegate of the European Communities wished to avoid any unnecessary escalation and
thus limited himself to two basic comments.  He was happy to hear that the United States claimed that
the provision in question (that the Secretary of Transportation, when considering a petitioning air
carrier's proposal to get a slot, may consider, among other factors, whether the air carrier's proposal
provides the maximum benefit to the US economy, including the number of US jobs and the type of
aircraft which was used) had not been used.  Even if the opinion in these cases did not say so -- itwould be foolhardy to do so -- the point was that it had a chilling effect.  It was very difficult to prove
that it had been used, but the spirit of the legislation certainly pointed in a direction that his delegation
found extremely worrisome.  For the time being, he took note of the statement made that this
provision had not been used, although they had some doubts about this.  The other point was, even not
wanting to take up the point about the development of large civil aircraft, he could point out that oneof the major US manufacturers had received an enormous amount of benefits over the years under the
"Foreign Sales Corporations" scheme, which had been declared illegal by a competent body.  This
was much harder evidence of illegal support than anything which might or might not happen with the
construction of the A3XX.  This was still sub jurice , and would, he believed, be returned to the
relevant bodies, but he wished to note that there was a case which surpassed these discussions by far
and perhaps the Committee wished to take note of the benefits foregone by the United States
government from a specific manufacturer of large aircraft.
90. The delegate of the United States wished to respond briefly to make it clear that all criteria
were stated in the decisions with respect to slot allocations.  If there was no mention of the use of that
provision, he could formally assure the Committee that that criteria had not been used.  Every
decision was published, they were quite transparent on that, so there should be no concern that theywere implementing that law in a WTO-compatible manner.  With regard to benefits that a US
manufacturer might receive, this was a matter of dispute, was litigated in the WTO, and the
United States Congress had taken action the day before to make the law compatible with that finding.
The legislation would shortly be submitted to the US President for signature.  They had thus taken
action, and the European Communities might reflect on this as perhaps the proper way to go.
91. The delegate of Canada stated that her delegation had taken note of the statements made by
the representative of the United States.
92. The Committee took note of the statements made.TCA/M/11
Page 17
2. Canada/Brazil aircraft subsidies dispute
93. The delegate of Canada stated that, with a vi ew to informing the Committee of issues relating
to areas covered by the Agreement, her delegation wished to provide the Committee with a status
report on disputes they had been having with Brazil.  At the heart of this dispute lay PROEX, aBrazilian export subsidy that reduced financing costs for Brazilian exports under its "interest
equalization" component.  Canada had been particularly concerned about its application in the aircraft
sector, where it had cost Canadian firms up to $1.5 billion in lost annual sales.
94. In 1998, after unsuccessfully attempting to resolve the matter bilaterally, Canada sought a
WTO dispute settlement panel to examine the matter.  In 1999, the WTO DSB ruled that PROEX was
a prohibited export subsidy as applied to regional aircraft.  The DSB gave Brazil until 18 November1999 to withdraw its illegal measure.  In Canada's vi ew, Brazil failed to comply fully with the rulings.
Consequently, Canada requested a compliance panel to formally assess Brazilian implementation.
That panel confirmed that Brazil had not brought PROEX into compliance with its obligations.  Brazil
appealed the ruling, but the panel's decision was upheld by the Appellate Body.  Brazil also contested
Canada's request for WTO authority to impose countermeasures on Brazil.  In August 2000, a WTOarbitration panel ruled that Canada could impose countermeasures totalling $344.2 million per year as
a result of Brazilian non-compliance with its obligations.
95. In a related WTO panel, it was determined that Technology Partnerships Canada and EDC's
Canada Account were also prohibited export subsidies as applied to regional aircraft.  Canada acted tobring those programmes into compliance with its obligations.  However, in response to Canada's
challenge of PROEX implementation, Brazil challenged the compliance of Canada's revisions to the
two programmes.  The panel examining Canada's implementation found that Technology Partnerships
Canada had been fully brought into compliance with Canada's obligations.  This was confirmed on
appeal.  On EDC's Canada Account, the panel ruled that the revisions were not sufficiently binding.
No transactions were affected by this ruling.  The panel also provided a detailed set of criteria that
would be of use in determining whether export fina nce transactions will qualify for an exception from
WTO disciplines on export subsidies.  Canada chose not to appeal the ruling on the Canada Account,
and is in the process of developing a regulation to implement the guidance of the panel.
96. Returning to PROEX compliance, Brazilian officials had indicated that, on the basis of their
interpretation of the WTO ruling on this dispute, a ll that was required in order to bring PROEX into
compliance was the introduction of the OECD Commer cial Interest Reference Rate as a minimum
rate below which PROEX will not buy down interest rates determined by market forces.  In Canada's
view, this would not bring the PROEX export subs idy programme into compliance with Brazil's WTO
obligations.  In addition to the Commercial Interest Reference Rate, Brazil must adopt the other key
elements of the OECD consensus on export credits in order to bring PROEX into compliance.
97. Although this might not be an appropriate occasion to go into the details of this dispute, her
delegation believed that it was, however, appropriate to indicate that Brazil's interpretations of its
obligations and the disciplines of the Agreement on Subsidies and Countervailing Measures had
significant implications for long-standing efforts to limit and reduce, rather than increase, the use ofexport subsidies.  She wished to point out to the Committee that both sides were working bilaterally to
arrive at a mutually satisfactory resolution to this dispute.  Canada had, however, indicated its
willingness to exercise its WTO rights in the event that bilateral negotiations failed to bring about
such resolution.
98. The Committee took note of the statements made.TCA/M/11
Page 18
L. DATE OF NEXT REGULAR MEETING
99. The Chairperson proposed that the date of the next regular meeting be 6 June 2001.  In order
to take into account the decision made concerning the transposition of the Harmonized System
headings in the Product Coverage Annex to the HS 2002 version, a meeting of the Technical Sub-
Committee could be scheduled in advance of this date in order to discuss the transposition of the HS
2002 changes and other related issues, including the formal adoption by Signatories of the Protocol
(2000).
100. The Committee so agreed.
M. ADOPTION OF ANNUAL REPORT
101. The Chairperson recalled that, under Article 8.2 of the Agreement on Trade in Civil Aircraft
and Article IV.8 of the Marrakesh Agreement Establishing the World Trade Organization, the
Committee reported annually to the General Council.
102. The Committee adjourned in order for Signatories to consider the revised draft Annual
Report.
103. Following the adjournment, the Chairperson introduced the revised draft Annual Report.  A
number of changes were proposed to paragraphs 2, 4, 6 and 7 of the draft revised Annual Report.
104. The Committee adopted the annual report, as amended.5
103. The meeting was adjourned.
__________
                                                     
5 Subsequently circulated as WT/L/374.