WORLD TRADE WT/DS126/1
G/SCM/D20/1
ORGANIZATION 8May1998
(98-1840)
Original: English
AUSTRALIA -SUBSIDIES PROVIDED TOPRODUCERS AND
EXPORTERS OFAUTOMOTIVE LEATHER
Request forConsultations bytheUnited States
Thefollowing communication, dated 4May1998, fromthePermanent Mission oftheUnited
States tothePermanent Mission ofAustralia andtotheDispute Settlement Body, iscirculated in
accordance withArticle 4.4oftheDSU.
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Myauthorities haveinstructed metorequest consultations withtheGovernment ofAustralia
(GOA) pursuant toArticle 1and4oftheUnderstanding onRules andProcedures Governing the
Settlement ofDisputes, Article 4.1oftheAgreement onSubsidies andCountervailing Measures (SCM
Agreement), andArticle 30oftheSCM Agreement (totheextent thatitincorporates byreference
Article XXIII:1 oftheGeneral Agreement onTariffs andTrade 1994) regarding prohibited subsidies
provided toanAustralian producer andexporter ofautomotive leather, Howe andCompany Proprietary
Ltd.(oranyofitsaffiliated and/or parent companies).
TheUnited States understands thattheGOA hasprovided subsidies toHowe thatinclude a
A$25 million loan, which wasmade onpreferential andnon-commercial terms, andgrants ofupto
another A$30 million. TheUnited States believes thatthesemeasures appear toviolate theobligations
oftheGOA under Article 3oftheSCM Agreement. TheUnited States believes thatthesubsidies
provided toHowe mayconstitute subsidies "contingent inlaworinfact...uponexport performance"
within themeaning ofArticle 3.1(a) andfootnote 4oftheSCM Agreement.
TheUnitedStatesbasesthisrequestforconsultationsonevidenceindicatingthattheA$25million
loanandgrants ofuptoA$30 million areinfacttiedtoHowe 'sactual oranticipated exportation or
export earnings. Inparticular, thisevidence indicates that:
- thegrants andloanprovide benefits toHowe, acompany withatroubled financial history that
hasreceived GOA export subsidies inthepastandthathasrelied onthese subsidies toexpand
theexportation ofitsproducts;
- thegrants andloanwere provided tocompensate Howe fortheGOA'sdecision toexcise
automotive leather from twodejureexport subsidy programme -theTextiles, Clothing and
Footwear Import Credit Scheme (TCF) andtheExport Facilitation Scheme forAutomotive
Products (EFS);
- thegrants andloanhavethesame purpose andeffect astheTCFandEFSprogramme -that
is,toallow Howe tocontinue toexpand theexportation ofitsproducts;
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- thevastmajority ofHowe Leather 'ssalesareexports, andthisfactwaswellunderstood by
theGOA when itagreed toprovide thegrants andloantoHowe;
- theAustralian market isunable toabsorb Howe 'scurrent production ofautomotive leather
andthuscannot absorb asignificant increase inthatproduction -leaving exports astheonly
wayHowe canutilize itsincreased production capacity andmeet theaggressive production
requirements upon which thegrants and/or loanareconditioned; and
- thegrants andloanprovided toHowe, Australia 'sonlyexporter ofautomotive leather, differ
from other subsidies given bytheGOA andmaywellbeunique.
Thisevidence consists ofnumerous statements andrepresentations made bytheGOA, Howe
andHowe'saffiliatedand/orparentcompaniesthathaveappearedinthemedia,officialGOApublications
andGOA communications withtheUnited States Government. Thisevidence alsoconsists offinancial
statements ofHowe anditsaffiliated and/or parent companies; documents relating tothemarkets for
automotiveleatherandautomobilesinAustralia;andotherrelevantinformationandmaterialsconcerning
Howe, GOA export subsidy programs andtheAustralian market forautomotive leather andautomobiles,
including statements ofexperts onautomotive leather andautomobiles, andstatements ofmembers
oftheautomotive leather andautomobiles industries.
TheUnited States considers thatbenefits accruing toitdirectly orindirectly under theSCM
Agreement arebeing nullified orimpaired asaresult ofthefailure oftheGOA tocarry outitsobligations
under Article 3oftheSCM Agreement.
Welookforward toreceiving yourreply tothisrequest andtofixing aconvenient datefor
consultations.
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