29. The Article 21.5 Panel then held, as regards this argument of Brazil, that:

� we do not consider it necessary to examine Brazil's argument that "nothing has changed" because TPC assistance continues to "specifically target" the Canadian aerospace and regional aircraft industries.²⁸

30. The Article 21.5 Panel went on to examine the merits of Brazil's three other arguments and rejected each of them. The Article 21.5 Panel, therefore, concluded that it was "unable to accept Brazil's claim that Canada has not implemented the recommendation of the DSB concerning TPC assistance to the Canadian regional aircraft industry."²⁹
     
31. Brazil's present appeal is limited to the Article 21.5 Panel's treatment of its argument relating to the "specific targeting" of the Canadian regional aircraft industry because of its export-orientation.³⁰ On appeal, Brazil submits that the Article 21.5 Panel erred by failing to examine the revised TPC programme for its consistency with Article 3.1(a) of the SCM Agreement, as required by Article 21.5 of the DSU and by the Article 21.5 Panel's terms of reference.³¹ Instead, Brazil asserts that the Article 21.5 Panel limited its review to an examination only of whether Canada had amended the TPC programme to make it consistent with "the recommendations and rulings of the DSB".³² Brazil contends that in so doing, the Article 21.5 Panel erred by confining itself to the original panel's findings in Canada - Aircraft and by declining to consider Brazil's "specific targeting" argument.
     
32. Article 4.7 of the SCM Agreement provides:

If the measure in question is found to be a prohibited subsidy, the panel shall recommend that the subsidizing Member withdraw the subsidy without delay. � (emphasis added)

33. Pursuant to this provision, the recommendations and rulings of the DSB in the original proceedings required Canada to "withdraw" the measure "found to be a prohibited export subsidy". As we have already noted, the Article 21.5 Panel's terms of reference embrace only the measures taken by Canada with a view to restructuring the TPC programme, which was found to involve prohibited export subsidies.³³ As such, the present proceedings involve only the measures taken by Canada for the purpose of "withdrawing" the prohibited export subsidies through the restructuring of the TPC programme. We are, therefore, not asked, in this appeal, to address any other aspect of Canada's obligation, under Article 4.7 of the SCM Agreement, to "withdraw" the measures found to be prohibited export subsidies.
     
34. Canada restructured the TPC programme by amending TPC's operating documentation, with effect from 18 November 1999. In that respect, Canada introduced, inter alia, the following new TPC documents: "Special Operating Agency Framework Document"; "Terms and Conditions"; "Investment Application Guide"; and, "Investment Decision Document". The new TPC "Terms and Conditions" document states that the "granting of contributions will not be contingent, either in law or in fact, upon actual or anticipated export performance" (Section 6.1). This is repeated in the TPC Investment Application Guide (Section 5). Section 5 of that Guide also states that "administering officials will not request or consider information concerning the extent to which applicant or recipient enterprises do or may export."
     
35. The subject-matter of these proceedings is determined by Article 21.5 of the DSU, as well as, of course, by the Panel's terms of reference. Article 21.5 of the DSU stipulates:

Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. �

36. Proceedings under Article 21.5 do not concern just any measure of a Member of the WTO; rather, Article 21.5 proceedings are limited to those "measures taken to comply with the recommendations and rulings" of the DSB. In our view, the phrase "measures taken to comply" refers to measures which have been, or which should be, adopted by a Member to bring about compliance with the recommendations and rulings of the DSB. In principle, a measure which has been "taken to comply with the recommendations and rulings" of the DSB will not be the same measure as the measure which was the subject of the original dispute, so that, in principle, there would be two separate and distinct measures³⁴: the original measure which gave rise to the recommendations and rulings of the DSB, and the "measures taken to comply" which are - or should be - adopted to implement those recommendations and rulings. In these Article 21.5 proceedings, the measure at issue is a new measure, the revised TPC programme, which became effective on 18 November 1999 and which Canada presents as a "measure taken to comply with the recommendations and rulings" of the DSB.
     
37. Brazil asserts that this revised TPC programme is not "consistent" with Article 3.1(a) of the SCM Agreement, and Canada agrees that the Article 21.5 Panel was entitled to examine the revised TPC programme for its "consistency" with Canada's obligations under Article 3.1(a).³⁵ We agree with the parties that the "consistency" of the revised TPC programme with Article 3.1(a) of the SCM Agreement is the relevant issue. Furthermore, in our view, the obligation of the Article 21.5 Panel, in reviewing "consistency" under Article 21.5 of the DSU, was to examine whether the new measure - the revised TPC programme - was "in conformity with", "adhering to the same principles of" or "compatible with" Article 3.1(a) of the SCM Agreement.³⁶ In short, both the DSU and the Article 21.5 Panel's terms of reference required the Article 21.5 Panel to determine whether the revised TPC programme involved prohibited export subsidies within the meaning of Article 3.1(a) of the SCM Agreement.
     
38. We add also that the examination of "measures taken to comply" is based on the relevant facts proved, by the complainant, to the Article 21.5 panel, during the panel proceedings. Therefore, the "minimum implementation standard" that the Article 21.5 Panel expressed and which, it said, was "effectively" agreed between the parties, should be viewed with caution.³⁷ The Article 21.5 Panel said that Canada's implementation should " 'ensure' that future TPC assistance to the Canadian regional aircraft industry will not be de facto contingent on export performance."³⁸ (emphasis added) The use in this standard of the words "ensure" and "future", if taken too literally, might be read to mean that the Panel was seeking a strict guarantee or absolute assurance as to the future application of the revised TPC programme. A standard which, if so read, would, however, be very difficult, if not impossible, to satisfy since no one can predict how unknown administrators would apply, in the unknowable future, even the most conscientiously crafted compliance measure.
     
39. In conducting its review under Article 21.5 of the DSU, the Article 21.5 Panel declined to examine Brazil's argument that "the Canadian regional aircraft industry continues to be 'specifically targeted' for TPC assistance because of its undisputed export orientation."³⁹ The Article 21.5 Panel stated that this argument "did not form part" of the reasoning of the original panel and was "not relevant to the present dispute, which concerns the issue of whether or not Canada has implemented the DSB recommendation�".⁴⁰ (emphasis added)
     
40. We have already noted that these proceedings, under Article 21.5 of the DSU, concern the "consistency" of the revised TPC programme with Article 3.1(a) of the SCM Agreement.⁴¹ Therefore, we disagree with the Article 21.5 Panel that the scope of these Article 21.5 dispute settlement proceedings is limited to "the issue of whether or not Canada has implemented the DSB recommendation". The recommendation of the DSB was that the measure found to be a prohibited export subsidy must be withdrawn within 90 days of the adoption of the Appellate Body Report and the original panel report, as modified - that is, by 18 November 1999. That recommendation to "withdraw" the prohibited export subsidy did not, of course, cover the new measure - because the new measure did not exist when the DSB made its recommendation. It follows then that the task of the Article 21.5 Panel in this case is, in fact, to determine whether the new measure - the revised TPC programme - is consistent with Article 3.1(a) of the SCM Agreement.
     
41. Accordingly, in carrying out its review under Article 21.5 of the DSU, a panel is not confined to examining the "measures taken to comply" from the perspective of the claims, arguments and factual circumstances that related to the measure that was the subject of the original proceedings. Although these may have some relevance in proceedings under Article 21.5 of the DSU, Article 21.5 proceedings involve, in principle, not the original measure, but rather a new and different measure which was not before the original panel. In addition, the relevant facts bearing upon the "measure taken to comply" may be different from the relevant facts relating to the measure at issue in the original proceedings. It is natural, therefore, that the claims, arguments and factual circumstances which are pertinent to the "measure taken to comply" will not, necessarily, be the same as those which were pertinent in the original dispute. Indeed, the utility of the review envisaged under Article 21.5 of the DSU would be seriously undermined if a panel were restricted to examining the new measure from the perspective of the claims, arguments and factual circumstances that related to the original measure, because an Article 21.5 panel would then be unable to examine fully the "consistency with a covered agreement of the measures taken to comply", as required by Article 21.5 of the DSU.
     
42. Consequently, in these proceedings, the task of the Article 21.5 Panel was not limited solely to determining whether the revised TPC programme had been rid of those aspects of the original measure - the TPC programme, as previously constituted - that had been identified in the original proceedings, in the context of all of the facts, as not being consistent with Canada's WTO obligations. Rather, the Article 21.5 Panel was obliged to examine the revised TPC programme for its consistency with Article 3.1(a) of the SCM Agreement. The fact that Brazil's argument in these Article 21.5 proceedings "did not form part" of the original panel's reasoning relating to the previous TPC programme does not necessarily mean that this argument is "not relevant" to the Article 21.5 proceedings, which relate to the revised TPC programme. In our view, the Article 21.5 Panel should have examined the merits of Brazil's argument as it relates to the revised TPC programme. We conclude, therefore, that the Article 21.5 Panel erred by declining to examine Brazil's argument that the revised TPC programme "specifically targeted" the Canadian regional aircraft industry for assistance because of its export-orientation.⁴²
     
43. With a view to resolving this dispute, and considering that the undisputed facts on the record are adequate for this purpose, we believe that we should complete the Article 21.5 Panel's analysis by examining this argument. In so doing, we observe that the essence of Brazil's argument is that the Canadian regional aircraft industry is "specifically targeted" for assistance in two different ways under the revised TPC programme.
     
44. First, Brazil notes that the "Eligible Areas" for TPC assistance include "Aerospace and Defence", and that these industrial sectors are the sole such sectors to be identified expressly as eligible for TPC assistance. The other two "Eligible Areas" are "Environmental Technologies" and "Enabling Technologies", which could involve projects drawn from any industrial sector, including "Aerospace and Defence". In Brazil's view, the express identification of "Aerospace and Defence" as "Eligible Areas" puts these industrial sectors, which include the Canadian regional aircraft industry, in a privileged position and represents "specific targeting" of the Canadian regional aircraft industry. Second, Brazil maintains that the Canadian regional aircraft industry is also "specifically targeted", in practice, through the allocation of TPC funding assistance. According to Brazil, 65 per cent of TPC funding has, in the past, "gone to the [Canadian] aerospace industry".⁴³
     
45. Brazil maintains that the reason for these two types of "targeting" is the high export-orientation of the industry. In support of this argument, Brazil relies on a series of statements made by Canadian Government Ministers, Members of Parliament, other government officials, and by the TPC itself, regarding the objectives of TPC.⁴⁴ Brazil acknowledges that the statements it relies upon were made in connection with the old TPC programme, as previously constituted. Brazil argues, nevertheless, that the "specific targeting" is a fact that tends to establish that the revised TPC programme involves subsidies which are de facto export contingent.
     
46. Canada does not contest any of the factual assertions made by Brazil in presenting its "specific targeting" argument. However, Canada emphasizes that the statements Brazil relies upon were made in relation to the old TPC programme, not to the revised programme. Canada also states that no TPC assistance has been granted or committed under the revised TPC programme to the Canadian regional aircraft industry. In other words, Canada asserts that there have been, thus far, no transactions involving the Canadian regional aircraft industry under this new measure. Brazil does not contest this assertion.
     
47. It is worth recalling that the granting of a subsidy is not, in and of itself, prohibited under the SCM Agreement. Nor does granting a "subsidy", without more, constitute an inconsistency with that Agreement. The universe of subsidies is vast. Not all subsidies are inconsistent with the SCM Agreement. The only "prohibited" subsidies are those identified in Article 3 of the SCM Agreement; Article 3.1(a) of that Agreement prohibits those subsidies that are "contingent, in law or in fact, upon export performance".⁴⁵ We have stated previously that "a subsidy is prohibited under Article 3.1(a) if it is 'conditional' upon export performance, that is, if it is 'dependent for its existence on' export performance." We have also emphasized that a "relationship of conditionality or dependence", namely that the granting of a subsidy should be "tied to" the export performance, lies at the "very heart" of the legal standard in Article 3.1(a) of the SCM Agreement.⁴⁶
     
48. To demonstrate the existence of this "relationship of conditionality or dependence", we have also stated that it is not sufficient to show that a subsidy is granted in the knowledge, or with the anticipation, that exports will result.⁴⁷ Such knowledge or anticipation does not, taken alone, demonstrate that the granting of the subsidy is "contingent upon" export performance. The second sentence of footnote 4 of the SCM Agreement stipulates, in this regard, that the "mere fact that a subsidy is granted to enterprises which export shall not for that reason alone be considered to be an export subsidy�". (emphasis added) That fact, by itself, does not, therefore, compel the conclusion that there is a "relationship of conditionality or dependence", such that the granting of a subsidy is "tied to" export performance. However, we have also said that the export-orientation of a recipient "may be taken into account as a relevant fact, provided it is one of several facts which are considered and is not the only fact supporting a finding" of export contingency.⁴⁸ (underlining added)
     
49. Recalling all this, at its core, we see Brazil's argument about "specific targeting" essentially as a contention that the SCM Agreement precludes the two types of targeting Brazil identifies simply because of the high export-orientation of the Canadian regional aircraft industry. However, in our view, the fact that an industrial sector has a high export-orientation is not, by itself, sufficient to preclude that sector from being expressly identified as an eligible or privileged recipient of subsidies. Nor does the high export-orientation of an industry limit, in principle, the amount of subsidies that may be granted to that industry. As we have said, granting subsidies, in itself, is not prohibited. Under Article 3.1(a) of the SCM Agreement, the subsidy must be export contingent to be prohibited. The two "targeting" factors may very well be relevant to an inquiry under Article 3.1(a) of the SCM Agreement, but they do not necessarily provide conclusive evidence that the granting of a subsidy is "contingent", "conditional" or "dependent" upon export performance. In these proceedings, we do not see the two "targeting" factors, by themselves, as adequate proof of prohibited export contingency.
     
50. Moreover, the evidence that Brazil relies upon in seeking to demonstrate that the Canadian regional aircraft industry is "specifically targeted" because of its high export-orientation relates to the TPC as previously constituted, and not to the revised TPC programme.⁴⁹ In particular, Brazil relies upon evidence of the high proportion of TPC funding allocated to the Canadian regional aircraft industry under the old TPC programme and on statements made in connection with that programme by Canadian Government Ministers, Members of Parliament, officials, and by TPC itself. The burden of explaining the relevance of the evidence, in proving the claim made, naturally rests on whoever presents that evidence. Brazil has not offered any convincing explanation as to why the evidence relating to the old TPC programme continues to be relevant to the revised TPC programme. We do not believe we should simply assume that this particular evidence is relevant in respect of the revised TPC programme.
     
51. For all these reasons, we find that Brazil has not sufficiently established that the Canadian regional aircraft industry is "specifically targeted" because of its high export-orientation.
     
52. We conclude that Brazil has failed to establish that the revised TPC programme is inconsistent with Article 3.1(a) of the SCM Agreement. We also conclude that Brazil has failed to establish that Canada has not implemented the recommendations and rulings of the DSB. The outcome of the present proceedings does not, of course, preclude possible subsequent dispute resolution proceedings regarding the WTO-consistency of the revised TPC programme, or of specific instances of assistance actually granted under that programme.

V. Findings and Conclusions

53. For the reasons set out in this Report, the Appellate Body finds that the Article 21.5 Panel erred by declining to examine Brazil's argument that the revised TPC programme is inconsistent with Article 3.1(a) of the SCM Agreement on the ground that the Canadian regional aircraft industry is "specifically targeted" for TPC assistance because of its export-orientation. However, the Appellate Body finds that Brazil has failed to establish that the revised TPC programme is inconsistent with Article 3.1(a) of the SCM Agreement and, accordingly, that Brazil has failed to establish that Canada has not implemented the recommendations and rulings of the DSB.

Signed in the original at Geneva this 12th day of July 2000 by: