WORLD TRADE
ORGANIZATIONG/SCM/Q3/THA/15
4 September 2002
(02-4692)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies by THAILAND to Follow-Up Questions Posed
by the UNITED STATES1 and ECUADOR2
The following communication, dated 2 September 2002, has been received from the
Permanent Mission of Thailand.
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Pursuant to Article 27.4 of the SCM Agreement, Thailand would like to submit its written
replies to the additional questions posed by the United States (G/SCM/Q3/THA/14) and Ecuador
(G/SCM/Q3/THA/13).
Replies to Questions Posed by the United States
Investment Promotion Incentives (BoI)
Export Market Diversification Promotion Programme (EXIM)
Industrial Estate Authority of Thailand (IEAT)
1. Thailand has explained its plans for phasing out these programmes, and the reasons for
the duration of the phase-out plans.  For two of these programmes, incentives provided underthe Board of Investments’ Promotion Incentives and under the Industrial Estate Authority of
Thailand, this phase-out is expected to last 13 and 10 years, respectively.  Could Thailand please
explain how, in its view, the phase-out periods for these programmes are consistent with
developing country Members’ original obligation to phase-out their export subsidies –
preferably in a progressive manner – the normal extension procedures under Article 27.4, andthe extension period provided for in the special extension procedures under G/SCM/39?
Reply
Since the date of entry into force of the WTO Agreement, several measures have been taken
in order to phase-out the two export subsidy programmes.  Details are as follows:
                                                     
1 G/SCM/Q3/THA/14.
2 G/SCM/Q3/THA/13.G7SCM/Q3/THA/15
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1. IEAT
Thailand's intent to abolish its export subsidy under the IEAT programme has been
demonstrated through its effort to amend the IEAT Act during the past 6 years.  The IEAT has indeed
begun the law amendment process since 1996 by establishing the Working Group on the amendmentof the IEAT Act.  In addition, several measures have been implemented in order to gradually
eliminate the privileges previously realized only by exporters.  Coupled with the tariff-restructuring
plan, resulting in the reduction of tariff rates on imported machinery, most operators under the current
programme receive approximately similar treatments from the IEAT regardless of their export
orientation.
2. BoI
The BoI has completely eliminated its export requirement scheme since August 2000.  As a
result, there has been no privilege or benefit granted to any operator with export condition since then.
However, the original grace period of some projects with export condition approved before
August 2000 extends beyond the last authorized period.  Hence, the request for extension covers onlythose projects with export condition approved before August 2000.
We would like to emphasize again that our requests were not exclusively based on the merits
of the export subsidy programmes.  Thailand has in deed requested for extension of the two subsidy
programmes for two different reasons as follows:
(1) Investment Promotion Incentives (BoI)
The ground for this request is to maintain policy coherence and prevent the divestment of
confidence in government developmental plans.  The immediate termination of the subsidy would
affect 1,392 projects of Thai and foreign investments, including those from the United States, Japan
and the European Communities, which were approved before the export requirement scheme was
abolished in August 2000.
(2) Industrial Estate Authority of Thailand (IEAT)
The only reason on which our request for an extension of this subsidy programme is based is
to acquire adequate time to complete the law amendment process.
Regarding the extension period provided for in the special extension procedures under
G/SCM/39, the extension period cannot be applied to the IEAT's and the BoI's export subsidy
programmes since these programmes do not meet criteria set forth in paragraph 2 of G/SCM/39.
Replies to Questions Posed by Ecuador
1. We should be grateful if Thailand would provide further, detailed, full and reasoned
information showing why, out of the eight subsidy programmes notified in document
G/SCM/N/71/THAI, Thailand does not consider the Credit Refinancing Schemes and the
Merchant Marine Financing and Machinery Upgrading Financing programmes as not being
prohibited export subsidies within the meaning of Annex I of the Agreement on Subsidies and
Countervailing Measures, in particular paragraph (k).  In this connection, account should alsobe taken of the fact that the Merchant Marine  Financing and Machinery Upgrading Financing
programmes have been supported by funds from the structural adjustment loan to the Thai
government, co-financed by the World Bank and the Asian Development Bank, as indicated
under points 4 on pages 14 and 16, respectively, of document G/SCM/N/71/THAI.G7SCM/Q3/THA/15
Page 3
Reply
These three programmes are not considered to be export subsidies as reasons provided as
follows:
Credit Refinancing Schemes
Operators who would like to receive the subs idy under the BoI's Credit Refinancing Schemes
programme are not limited in scope to only exporters.  In fact, the programme focuses on providing
financial assistance to any operator who meets the programme's criteria regardless of its export
involvement (see G/SCM/N/71/THA/Suppl.1 page 4).
Merchant Marine Financing
The merchant marine business is categorized into the service industry.  Therefore, the
subsidies under this programme are not governed by the SCM Agreement.
Machinery Upgrading Financing
Since the focus of the Export and Import Bank of Thailand (EXIM) is principally to facilitate
export and import activities, the distribution of the fund under this programme is thus involved onlywith exporters and importers.  However, in practice other Thai operators who share the same
characteristics as those eligible to the subsidy, but do not export or import, can obtain similar
preferential treatment from the BoI.  This being the case, most Thai operators who meet the same set
of requirements will obtain a similar kind of loan.
2. As regards the Credit Refinancing Scheme s, would Thailand please supply information
on the conditions for granting market-related loans and statistical data for assessing the
subsidy's trade effects?
Reply
Answers can be found in  G/SCM/N/71/THA/Suppl.1.
3. With regard to the Investment Promotion Incentives, the Credit Refinancing Schemes
and the Export Market Diversification Promotion, Machinery Upgrading Financing and
Industrial Estate Authority programmes, we would ask Thailand to present an itemized
breakdown (disaggregated at no less than the HS four-digit level) of export products benefiting,processed or foreseen under these programmes.
Reply
All of the operators benefiting from the subsidy programmes were granted privileges or
benefits on the basis that they meet criteria set forth in each subsidy programme.  The privileges or
benefits are not granted based on products they produce.  In other words, the subsidies are operator-
specific and not product-specific in nature.  Therefore, the itemized breakdown of export products of
those operators benefiting from the programmes has never been conducted.
4. As Thailand bases its request for "an extension of the period of exemption in relation to
certain prohibited subsidies notified" on Article 27.4 of the SCM Agreement, it must also apply
the subsequent provisions, in particular paragraphs 5 and 6, of this Article, since there is a
necessary and logical correlation and a substantive linkage between these two paragraphs,G7SCM/Q3/THA/15
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which are legally indissociable.  It is therefore necessary to determine the competitive position of
exports of products covered by the subsidy prog rammes referred to in the previous paragraph.
Accordingly, Thailand should also present a deta iled and duly substantiated analysis of the
competitiveness of exports of all the products covered by these programmes, pursuant to
Articles 27.5 and 27.6, using an HS four-digit heading for each product.
Reply
Since all subsidies are granted on the operator-specific basis and not on the product-specific
basis, the data of the products associated with the subsidies has never been collected.
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