WORLD TRADE
ORGANIZATIONTN/RL/W/89
1 May 2003
(03-2321)
Negotiating Group on Rules Original:  English
COMMENTS BY AUSTRALIA ON THE UNITED STATES’ PAPER ON
SUBSIDIES DISCIPLINES REQUIRING CLARIFICATION AND IMPROVEMENT
(DOCUMENT TN/RL/W/78)
The following communication, dated 30 April 2003, has been received from the Permanent
Mission of Australia.
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Australia thanks the United States for its extensive paper on subsidy disciplines and agrees
that a number of issues merit further consideration.  Australia would appreciate clarification on some
aspects of the paper to assist in Members’ consideration and provides some preliminary reaction to a
number of issues raised within the paper.
Prohibited Subsidies
The United States proposes that there be progressive deepening of subsidy disciplines through
the expansion of the existing category of prohibited subsidies.  It notes that the practices captured
under the now-lapsed “dark amber” provisions of SCM Article 6.1 should be included in such a
category.  Australia notes that no agreement was reached within the Subsidies Committee on the
Informal Group of Experts work on the calculation of the so-called deeming level provided underArticle 6.1 (and its corresponding Annex IV).
• How would the United States define “large” domestic subsidies?  For example, is the
United States proposing that an ad valorem subsidization of over 5 per cent would constitute“large” and therefore be prohibited?
• How would this be calculated, given as noted above, there was no agreement on this issue as a
result of the work by the Informal Group of Experts?
• Does the United States consider that Article 6.1 relates to the type of subsidy or covers the level
of subsidization?
• Does the United States consider that a one-time measure would be captured by this expanded
category?  Would its incorporation in this category be determined by the size of the measure?
(Australia notes that SCM Article 6.1(c) does not relate to “one-time measures which are non-
recurrent and cannot be repeated …”.)
Australia would be interested in how the reme dy would be strengthened as the United States
suggests for prohibited subsidies.  The remedy of a countervailing duty measure reflects that thesubsidy has adverse effects or, in other words, there is a presumption that adverse effects must be
shown.TN/RL/W/89
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• Is the United States suggesting that, for the purpo ses of a countervailing duty action involving a
prohibited subsidy, injury and causal link would be presumed?
• Could the United States elaborate on how it woul d otherwise address the distinction between the
categories?
Serious Prejudice
Australia notes the efforts by the Informal  Group of Experts to examine SCM Annex IV,
including footnote 62, relating to the calculation of the total ad valorem subsidization, as the
United States notes in its paper under the heading “Codification of Analytical and Quantification
Methodologies”.  The United States notes that the remedy is “to remove the adverse effects”.
• Does the United States consider that this has retrospective application?
• What does the United States consider that “withdrawal of the subsidy” means?
Indirect Subsidies
• How would the United States consider that an entity which has been corporatized (i.e. no longer
government-owned, controlled or directed) and which operates in a purely commercial fashion
fall under SCM Article 1.1(a)(1)(iv)?
Australia agrees that SCM Article 14 gives guidan ce in relation to government loans, but the
threshold issue is the second limb of the definition of a subsidy finding, namely, whether it is “by a
government”.
• Could the United States provide an example of countervailing duty action involving government
intervention in bankruptcy proceedings and explain how this was an issue of governmentownership/control?
Provision of Equity Capital
• Given the lack of recourse to SCM Article 8.3, how would a prior notification of any intended
provision of equity capital work in practice?
The United States notes that the provisions of SCM Article 14(a) need to be clarified and
improved and that the standard “inconsistent with the usual investment practice (including for the
provision of risk capital) of private investors…” is open to a number of interpretations.
• Could the United States elaborate on the types of tests or standards that could be used to
determine benefit?
• Would it consider a “but for” test to be relevant, for example?
Royalty-Based Financing
• Does the Unites States consider that the very involvement by government in royalty-based
financing schemes would entail a subsidy within  the meaning of the SCM, notwithstanding that
such involvement was based on commercial practice?TN/RL/W/89
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Codification of Analytical and Quantification Methodologies
Australia agrees that it would be useful for the work of the Informal Group of Experts to be a
basis for discussions.  An exchange of views between Members on measurement-related concepts
could be a useful starting point leading to the possibility of consensus of common acceptablepractices.
Subsidy Notification
Australia agrees that the approaches adopted by the Committee in May 2001 should be more
fully reflected in the SCM.
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