RESTRICTEDWORLD TRADE
ORGANIZATIONTN/RL/M/4
8 November 2002
(02-6149)
Negotiating Group on Rules
SUMMARY REPORT OF THE MEETING
HELD ON 16-18 OCTOBER 2002
Note by the Secretariat
1. The Negotiating Group on Rules held a formal meeting on 16-18 October 2002.
A. ADOPTION OF THE AGENDA
2. The  Group adopted the following agenda:
A. Adoption of the AgendaB. Regional Trade Agreements
C. Subsidies and Countervailing Measures, including Fisheries Subsidies
D. Anti-Dumping
E. Other Business
- Timing of the submission of papers for c onsideration at the next formal meeting of
the Group
B. 
REGIONAL TRADE AGREEMENTS
1. The Chairman noted that the Group had not received any new document since its last meeting
in July, and suggested that, as foreshadowed in his fax to delegations, open-ended informal
discussions on transparency of regional trade agreements (RTAs) could take place upon conclusion of
the formal debate.  The Chairman's initiative met with agreement within the Group.
2. Various participants, noting that RTAs were a major MFN derogation, said that the increased
number of RTAs was welcomed to the extent that they paved the way for further multilateral trade
liberalization.  At the same time, the primacy of the multilateral trading system and the primary
objective of trade liberalization on a MFN-basis had to be maintained.  Given the present proliferation
of RTAs, negotiations were to ascertain that WTO rules on RTAs corresponded to the needs of the
Members.  For one delegation, negotiations should result on guidelines to be followed whenconcluding RTAs, so as to ensure that multilateral obligations were respected.  Another delegation felt
that the Group should first clarify its aims in light of the Doha Declaration, and in particular whether
the purpose was to solve the impasse in the Committee on Regional Trade Agreements (CRTA) or
rather to ensure that RTAs contributed positively to the multilateral trading system.
3. Various issues were discussed regarding the Group's mandate vis-à-vis  RTAs notified under
the Enabling Clause.  Some participants were in favour of considering the relationship between GATT
Article XXIV and the rules on RTAs under the Enabling Clause, while stressing that any spill-over
effects, beyond the Doha mandate (clarification of RTA disciplines), should be avoided.  OneTN/RL/M/4
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participant noted that the Enabling Clause allo wed for the formation of preferential arrangements
among developing countries that fell short of reaching the high standards of Article XXIV, and that as
such it had facilitated partial trade liberalization among these countries.  While the negotiations
should not alter the right of developing countries to conclude RTAs falling short of Article XXIV
requirements, results achieved on clarification of rules and transparency would be useful for all RTAs.It was further noted that the Enabling Clause could be read to mean that, while developing countries
were allowed to exchange tariff preferences, non-tariff measures and disciplines could be subject to
criteria agreed upon by Members.
4. Most participants were of the view that "grandfathering" or retroactivity possibilities should
be considered at a later stage, once any new rules would have been outlined.  However, some
participants observed that a consideration of the issue in parallel with discussions on new rules might
assist negotiators in assessing the potential discriminatory nature of the issue.  One delegation notedthat while retroactivity could be looked at in the co ntext of clarifying existing disciplines, the possible
development of new disciplines entailed a different approach.  Also, a clear distinction had to be made
on whether any new disciplines were of a procedural or of a substantive nature.  Another delegation
noted that retroactivity could not be sought, as  this would amount to require conformity with
disciplines for RTAs concluded prior to their enforcem ent.  Rather, the matter at issue related to the
new disciplines being applied to future RTAs and those in force at the time of their adoption.  A
distinct but related point raised referred to the possibility of allowing a certain period of time for
RTAs conforming with any new disciplines.  It was suggested that the Secretariat might be asked to
prepare a background note on retroactivity so as to clarify the issues involved.
5. The Group pursued its work towards setting priorities for the negotiations.  Some participants
expressed the view that the Group should move cautiously in this respect, in particular because many
of the procedural issues would quickly translate into systemic ones.  Regarding priorities, the
Chairman recalled that informal consultations on "t ransparency of RTAs" would take place following
the Group's formal meeting that day.
6. It was generally felt that notification requirements, submission of information, periodical
reporting and the examination process formed a core group of issues to be addressed first.  The
different elements outlined in Chile's submission gathered significant support by participants.  A
number of delegations objected however that RTAs under the Enabling Clause be notified to the
CRTA instead of the Committee on Trade and Development.  Several participants highlighted the
need for early notification of RTAs, and for greater precision on the phrase "promptly notify"
contained in paragraph 7 of Article XXIV of GATT 1994.  One delegation also asked for a more
precise definition of the information to be provided on RTAs, suggesting that adherence to theStandard Format be assessed, and that a format be designed for the provision of information when
changes were introduced to RTAs.  In that context, the clarification of "substantial changes" that had
to be notified, as contained in Article XXIV:7(c) and paragraph 9 of the Understanding on Article
XXIV, would be useful.  On counter-notification, one participant stressed the need to ensure that
RTAs under the Enabling Clause would not be subject to counter-notification under Article XXIV.Finally, it was noted that the lack of transparency of various RTAs posed a problem not only for their
examination by the CRTA, but also for exporters wanting to trade with countries which were parties
to such RTAs.
7. The clarification of the expressions "substantially all the trade" (SAT) and "substantial
sectoral coverage", as well as "other regulations of commerce" (ORCs) and "other restrictiveregulations of commerce" (ORRCs), were identified by participants as priority areas for negotiation.
On SAT, the proposal contained in Australia's submission was viewed as an avenue worth exploring.
One delegation indicated the need to verify how the proposed mechanism would fully capture trade
liberalization among RTA parties, given that commitments were often made on the basis of HS eight-
digit level.  Further, in the case of plurilateral RTAs, a quantitative analysis would require decision onwhether the scope of trade liberalization should be assessed on an aggregate basis or for each pair ofTN/RL/M/4
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parties to the RTA.  Though noting that questions on preferential rules of origin were linked to the
SAT issue in some respects, they have been mainly raised in the context of discussions on ORCs.
Trade remedy measures have been identified as an issue to be addressed in the context of ORRCs.
One delegation noted that the Group should also consider the relationship and differences between
ORCs and ORRCs, proposing that the Secretariat throw light on the negotiating history of both terms.Another participant reminded the Group that minimizing the adverse impact of RTAs on third parties
was equally, if not more important, than meeting any other conditions of Article XXIV.  Better
guidance was required to assess such impact.  Hence, the Group should grant priority to the definition
of the SAT, ORC and ORRC concepts and to a clos er alignment of disciplines between customs union
and free-trade areas.  It was further suggested that negotiating issues be grouped by themes, to ease
their consideration.  Trade aspects (SAT and "substantial sectoral coverage"), tariff and non-tariff
regulations, legal aspects (overlapping of agreements, accession clauses, exceptions), and role ofpreferential rules of origin in investment diversion and anti-competitive practices were proposed as
possible groups of issues.
8. One participant informed that his delegation would be soon issuing a submission with
proposals regarding (i) clarification of the legal framework applying to RTAs; (ii) improving the
effectiveness of the CRTA; (iii) basic systemic issues, namely SAT, rules of origin and regulatoryharmonization within RTAs; and (iv) general topics, such as development and dispute settlement.
C. 
SUBSIDIES AND COUNTERVAILING MEASURES , INCLUDING FISHERIES SUBSIDIES
9. Under this agenda item, the Group first took up two submissions related to fisheries subsidies.
10. The first submission introduced was entitled "Korea's Views on the Doha Development
Agenda, Discussion on Fisheries Subsidies" (TN/RL/W/17). The sponsor noted the lack of factsregarding the nature and level of fisheries subsidies,  and considered that the existence of a causal link
between subsidization and depletion of fish stocks had not been established.  It believed that
inadequate management of fisheries resources was the principal cause of stock depletion and that
more efforts should be extended to improve fish resources management and strengthen the capacity of
coastal states to suppress illegal, unreported, unregulated fishing activities and the over-catch and by-catch of small fish. The sponsor disputed the notion that sector-specific rules for fisheries subsidies
were necessary due to the particularities of the sector.  In short, the sponsor considered that the
sectoral treatment of fisheries subsidies could lead to the fragmentation of the SCM regime and that
no convincing case had been made for sector-specific disciplines in this area.
11. The second submission entitled "Adverse Trade and Conservation Effects of Fisheries
Subsidies" (TN/RL/W/21), was also introduced. The sponsor focused on the relationship between
fisheries subsidies and adverse trade and conservation effects. It referred to the outcome of the WorldSummit on Sustainable Development (WSSD) Plan of Implementation which in its view recognised
the role of the fisheries sector in sustainable development and that harmful fisheries subsidies can
further exacerbate the overexploitation of fish stocks, and called on countries to eliminate such
subsidies. The sponsor criticised global fisheries subsidies as stimulating excess harvesting capacity
rather than a rational and efficient use of available resources. While recognising the importance ofsound management in this sector, the sponsor was of the view that subsidies made management issues
more difficult to address.
12. There was a general discussion on both submissions, with divergent views expressed. Some
participants asserted that eliminating trade-dist orting fisheries subsidies is an imperative. They
considered that existing remedies within the Agreement on Subsidies and Countervailing Measures("SCM Agreement") are ineffective in addressing fisheries subsidies and that a special approach is
needed to address the peculiarities of this sector. Reference was made to the heterogeneity of fisheries
products, to the ineffectiveness of countervailing measures in situations where subsidizing states were
not major exporters, and to the ways in which fisheries subsidies give rise to adverse effects, e.g.,TN/RL/M/4
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through lower global prices and depletion of the resource. These participants acknowledged the
importance of management issues to sustainability, but noted that management regimes often were
weakened by political pressure and poor enforcement, and that subsidies themselves increased
pressure on management efforts.  In any event, it was argued that the discussion on the need for
sector-specific disciplines was unnecessary as the Ministers had provided a specific mandate fornegotiations in this area.
13. On the other hand, some participants considered that the burden of proof was on the
demandeurs to establish a need for sector-specific disciplines in this sector.  In the view of these
participants, it had not been established that fisheries subsidies had peculiarities such that sector-
specific disciplines were appropriate.  Nor had th e causal link between fisheries subsidies and stock
depletion been demonstrated.  In fact, it was noted, many of the fisheries subsidies identified were
positive from the perspective of fish stock sustainability.  In this regard, one participant noted thatsubsidies in respect of aquaculture had a positive impact on sustainability.  It was suggested that the
issue of stock depletion was outside the Group' s mandate, which envisions only the negotiation of
trade-distorting subsidies.  Several participants suggested that efforts to improve disciplines in this
area could perhaps be accomplished through horizontal rather than sector-specific efforts; the
restoration of Article 6.1 of the SCM Agreement was mentioned in this regard.
14. The Group next took up a submission entitled "Countervailing Measures: Illustrative Major
Issues" (TN/RL/W/ 19). The sponsor noted that many provisions relating to countervailing measures
mirrored those of the Agreement on Implementation of Article VI of GATT 1994 ("AD Agreement").
This suggested that proposals to clarify and improve that Agreement would also be applicable in the
countervail context.  Further, the AD Agreement was in some cases more detailed than analogousprovisions of the SCM Agreements; this asymmetry needed  to be addressed.  It was in this context
that the sponsor identified some illustrative majo r issues related to countervailing measures that
needed to be clarified and improved. The sponsor explained that most of the ideas presented in its
submission were based on discussions of tiret 80 of the implementation issues in the Committee on
Subsidies and Countervailing Measures. The paper enumerated certain issues that could benefit fromclarification, in particular those related to Articles 11, 12, 14, 15, 18, 19 and 21 of the SCM
Agreement.
15. Various participants took the floor in regard to this submission.  There was widespread
support for the proposition that there should be "symmetry" or "parallelism" between analogous
provisions of the AD and SCM Agreements, and that issues relating to anti-dumping and countervail
procedures should be jointly considered and resolved.  Those participants who had sponsored or
supported particular proposals in the context of anti-dumping that were mirrored in this paper alsowelcomed this development.  With regard to Article 14, a number of participants agreed that
additional guidelines with respect to subsidy calculation methodologies in Article 14 of the SCM
Agreement were desirable.
16. The submission provoked a number of questions. One participant mentioned that the paper
did not refer to whether the current 1% de minimis level of subsidization under Article 11.9 was fairand sufficient or to whether any specific numeric definitions for negligible import volumes was
necessary. With respect to Article 14, another participant inquired whether the benefit from a long-
term loan that is tied to the acquisition of assets should be allocated over the life of the assets
purchased or the length of the loan, and suggested that the report issued by the Informal Group of
Experts several years ago could be a useful roadmap for the consideration and possible resolution ofsubsidy calculation issues. A third participant asked how the sponsor related its proposal regarding
"product under investigation" under Article 11 to footnote 46 of Article 15 of the SCM Agreement. It
also asked why the sponsor considered that a provision on sampling should be included in Article 14
as opposed to Article 12 of the SCM Agreement.TN/RL/M/4
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17. The sponsor stated that it may present additional contributions relating to countervail, where
proposals on the de minimis subsidization and the negligible import volume could be included.  As
regards the link between the "product under investigation" and footnote 46 of Article 15 of the
ASCM, the sponsor asserted that there is a link between consideration of the product under
investigation and the like product in terms of injury analysis, since the SCM Agreement lacks a cleardefinition of the scope of the product for injury investigations.  Regarding sampling, the sponsor
indicated that although it had suggested addressing this under Article 14, the locus for such a
provision could be elaborated during the negotiations.
18. The Group next considered two papers presented by one participant. The first was entitled
"Basic Concepts and Principles of the Trade Remedy Rules -- Communication from the United
States" and was distributed as a room document.
1 The sponsor stated that the paper outlined its
understanding of the Doha mandate, as well as a co nceptual framework that should guide the work of
the Group. The paper underlined the important role played by trade remedies as an effective response
to trade-distorting practices. It noted the importance of transparency, predictability and adherence to
rule-of-law to exporters in both developed and developing countries.  It observed that maintaining
confidence in the enforcement of agreed rules, addressing the harmful effects of trade-distorting
practices and where possible reducing or eliminating those practices were essential to the long-termviability of the WTO and the prosperity of its Members. A critical component of maintaining
confidence was an effective dispute settlement system that neither added to nor diminished negotiated
rights and obligations of Members.  The paper emphasized that enhancing disciplines on trade-
distorting practices was important because these practices are typically the root cause of unfair trade
and the need for trade remedy laws.
19. The second paper, entitled "Addressing Market Distortions in the Global Steel Sector -
Submission by the United States to the Discip lines Study Group of the OECD" (TN/RL/W/24), was
then introduced.  The sponsor stated that under the Negotiating Group's mandate Members needed to
focus efforts not just on remedies for unfair trade, but at enhancing disciplines to address the
underlying trade-distorting practices. This paper, which had been submitted to the Disciplines StudyGroup at the OECD and was provided to the Negotiating Group for informational purposes, was a
concrete illustration of how market-distorting practices could be addressed.  The paper proposed work
to develop stronger disciplines or commitments in the steel sector with respect  to subsidies and
related measures, other forms of government or official support that have been important factors in
the steel sector, anti-competitive conduct, and tariffs and other market access measures.  Although the
sponsor had not yet staked out firm positions as to where and how this work should occur, the
Negotiating Group could offer a particularly advantageous setting to pursue or at least finalize workon improving subsidies disciplines.
20. The two papers triggered a variety of reactions. One participant noted that the work of the
Group had to balance the need to make improvements to  trade remedy rules with the need to get at the
rot causes of trade distortions which may provoke trade remedy responses, while another agreed with
the sponsor regarding the role of trade remedies.  A number of participants however inquired aboutthe concept of trade-distorting practices, what it encompassed, and how such practices related to the
work of the Negotiating Group.  One participant indica ted surprise that the concept of trade-distorting
practices in the mandate was as broad as the US paper seemed to suggest, while another asked
whether the United States was proposing to negotiate such issues as tariffs and anti-competitive
practices in the Group.  A number of participants indicated that the focus of the Group's work shouldbe the clarification and improvement of disciplines on the use of trade remedies, and suggested that
the abuse of trade remedies was itself a trade-distorting practice. With respect to steel specifically, one
participant had indicated its support to the US st eel paper tabled at the OECD High Level Process,
while another noted that the paper reminded the Group that some sectors, such as fisheries and steel,
were characterized by large and chronic government involvement, and considered that the Group was
                                                     
1 Subsequently circulated as TN/RL/W/27.TN/RL/M/4
Page 6
an appropriate forum for such work.  However, one participant recalled that under Article III.2 of the
WTO Agreement the WTO shall provide the forum for negotiations on issues concerning matters
under the covered Agreements. Thus, negotiations could not be undertaken in the OECD, while there
was no mandate for sectoral negotiations on steel issues in the Negotiating Group, nor any showing
that existing provisions were inadequate.  It was also observed that there was as yet no consensus inthe OECD about feeding issues into the WTO.
21. In response to comments from other participants, the sponsor noted that participants had
identified an important question regarding the inte raction of the WTO and OECD.  It recognized that
trade-distorting practices could go beyond the scop e of the Negotiating Group or indeed of the WTO.
Some such practices, for example subsidies, were however clearly before the Group.
D. 
ANTI -DUMPING
22. The Group first considered five papers involving questions and answers pertaining to
submissions that had been discussed at previous meetings.  The first was entitled "Comments on
Document TN/RL/W/10 on Anti-Dumping Measur es" (TN/RL/W/23). This paper, which had
previously been made available as a room document, offered comments and raised questions
regarding a paper submitted by a group of thirteen participants in document TN/RL/W/10. Responses
were provided by in document TN/RL/W/18.  In addition, the Group had before it three other sets ofquestions regarding previous submissions:  "Questions from the European Communities on
Documents TN/RL/W/6 and TN/RL/W/10" (TN/RL /W/20); "Comments on Document TN/RL/W/6
on Anti-Dumping Measures" (TN/RL/W/22); and "Questions from the United States on papers
submitted to the Rules Negotiating group" (TN/RL/W/25).  As these questions had been provided
recently, participants were not yet in a position to respond at the meeting, but indicated they wouldrespond at the November meting.
23. In the ensuing general discussion, some participants expressed further views regarding the
"Submission from the European Communities Concerning the Anti-Dumping Agreement"
(TN/RL/W/13), which had been presented at the Group's previous meeting.  Some participants
associated themselves with specific points of this submission, such as suggestions for improveddisclosure and access to non-confidential documents, mandatory application of the lesser duty rule
and public interest test, and an accelerated dispute settlement mechanism to challenge the initiation of
anti-dumping investigations. Several participants observed that accelerated dispute settlement on
initiations had to be accompanied by clear initiation standards, while another noted that, with respect
to lesser duty/public interest, the issue of methodology presented itself.  Several participants opposed
the sponsor's suggested two-step approach to S&D treatment, recalling that implementation proposals
relating to Article 15 of the Anti-Dumping Agreement were to be addressed by the Committee onAnti-Dumping Practices by the end of this year.
24. One participant asked the Chairman to consider if it would be useful to ask the Secretariat to
prepare a compilation describing various Members' initiation practices.  Before taking up this specific
idea, the Chairman suggested an understanding that requests for such papers should come from the
Group, i.e., there should be consensus in the sense that no participant finally and formally objected.One Participant opposed the suggestion, stating that the issue of Secretariat papers should be
addressed horizontally and coordinated through the TNC; another participant questioned whether this
would be a useful  way for the Group to spend its time.  The Chairman indicated that he would consult
further informally on the matter.
25. Some participants also returned to an interv ention by one Participant at the July meeting of
the Group.
2  Disagreement was expressed with that participant's view that the proliferation of the anti-
dumping measures resulted from increased trade rather than the misuse of anti-dumping measures; it
                                                     
2 See TN/RL/M/3, para. 5.TN/RL/M/4
Page 7
was noted that increased trade should reduce rather than increase the use of anti-dumping, and that the
results of dispute settlement demonstrated that anti-dumping was being abused.  In response to
remarks at the July meeting that rigid rules had disadvantages, it was noted that, while a certain
degree of flexibility in the anti-dumping rules might be desirable, arbitrariness should be avoided, and
that filling in lacunae in the AD Agreement could re duce abuse.  One participant recalled that there
were links between the work of the Negotiating Groups on Rules and Market Access.
26. One participant expressed the view that some of the anti-dumping proposals before the Group
were beyond the Group's mandate of clarifying and improving the existing disciplines. The Group
should not create new obligations and burdens, nor disturb the balance of rights and obligations under
the AD Agreement.  This participant noted that many of the issues being discussed were already
before the AD Committee's Group on Implementation.
27. The Group next turned to a document entitled "Second submission of India (Anti-Dumping
Agreement)" (TN/RL/W/26). The sponsor explained that its paper highlights technical issues in the
AD Agreement that need clarification and improvement while ensuring that the Agreement is not
misused for protectionism purposes. The paper focused on three main areas: the initiation of AD
investigations (back-to-back investigations, standing in the case of a domestic industry consisting of
small-scale or unorganised sector producers); dumping margins (hierarchy of options underArticle 2.2.2, application of a reasonability test under Article 2.2, prohibition on zeroing); and injury
(introduction of rules for determining injury margins, elaboration of injury factors in Article 3.4, non-
attribution clause in Article 3.5, special care requirement in respect of threat determinations). The
paper also addressed price undertakings, rules relating to reviews, concurrent application of anti-
dumping and safeguard measures, resort to facts available under Article 6.8, and Annex II and Article15 of the AD Agreement.
28. A number of participants welcomed the submission.  One participant appreciated that the
paper went beyond implementation issues, while another observed that certain proposals overlapped
with those made by a group of other participants.  One participant noted that injury margin
methodology needed to be discussed before a decision could be taken on whether the lesser duty ruleshould be made mandatory.  Another observed that  paragraph 7.1 of the Decision on Implementation
was not sufficiently clear on the issue of back-to-back initiations of investigations.
29. In closing, the Chairman noted that progress was being made.  More positions were being
placed before the Group, some on serious problems.  The Chairman urged participants to clear their
lines with capitals earlier, as there could be no serious reactions to submissions circulated
immediately before a meeting.  Noting the interest of some participants in having access to written
versions of other participants' statements, the Chairman urged participants, when they providedwritten copies of their statements to the Secretariat for the use of interpreters, to note on the statement
whether or not it could be made available to delegations which requested it.
E. O
THER BUSINESS
30. The Chairman recalled that the next formal meeting of the group would take place on 25-
27 November 2002.3  Proposals and any other documentation for consideration at that meeting should
be submitted to the Secretariat by 4 November 2002, in order to insure that they could be circulated
and translated in a timely manner.
__________
                                                     
3 On 27 November,  the Group will meet in the morning only.