RESTRICTED
WORLD TRADE G/SCM/W/3
19April 1995
ORGANIZATION(95-0961)
Committee onSubsidies andCountervailing Measures
DISCUSSION ISSUES FOR THE WORKING PARTY 'S
REVIEW OFTHE QUESTIONNAIRE ONSUBSIDIES
Note bytheChairman
Article 25.3oftheAgreement onSubsidies andCountervailing Measures states that,"without
prejudice tothecontents andformofthequestionnaire onsubsidies, Members shallensure thattheir
notifications contain thefollowing information:
(i) form ofasubsidy (i.e.grant, loan, taxconcession, etc.);
(ii) subsidy perunitor,incases where thisisnotpossible, thetotalamount ortheannual
amount budgeted forthatsubsidy (indicating, ifpossible, theaverage subsidy perunit
intheprevious year);
(iii) policy objective and/or purpose ofasubsidy;
(iv) duration ofasubsidy and/or anyother time-limits attached toit;
(v) statistical datapermitting anassessment ofthetrade effects ofasubsidy."
With regard tothesubsidies questionnaire itself, footnote 54oftheAgreement onSubsidies
andCountervailing Measures directs thatthisWorking Party beestablished, forthepurpose ofreviewing
thecontents andform ofthequestionnaire contained inBISD 9S/193-194.
Inthecontext ofthereview ofthequestionnaire, InotethattheCONTRACTING PARTIES
toGATT 1947 atvarious times inthepasthaveprovided guidance aimed atfacilitating responses to
thequestionnaire. Theportion ofthenotethatfollows reproduces certain pastguidance, which may
beuseful totheWorking Party asitbegins itswork.
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I. Arrangements forReporting inAccordance withArticle XVI
Decision of2March 1950
(BISD, Vol.II,page19)
Whereas theprovisions ofArticle XVIoftheGeneral Agreement onTariffs andTrade provide
thatifanycontracting party grants ormaintains anysubsidy, including anyform ofincome orprice
support, which operates directly orindirectly toincrease exports ofanyproduct from, ortoreduce
imports ofanyproduct into,itsterritory, itshallnotify theCONTRACTING PARTIES inwriting
oftheextent andnature ofthesubsidization, oftheestimated effect ofthesubsidization onthequantityG/SCM/W/3
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oftheaffected product orproducts imported intoorexported fromitsterritory andofthecircumstances
making thesubsidization necessary; and
Whereas certain contracting parties areapplying subsidization measures asdescribed in
Article XVIbuthavenotasyetsubmitted thenotification required under thatArticle,
TheCONTRACTING PARTIES
Agree:
1. That such notification willbesubmitted, inaccordance with theprovisions of
Article XVI, totheCONTRACTING PARTIES notlaterthat1August 1950, andthat
anynewmeasure ofsubsidization ormodifications willbesimilarly notified afterthat
dateassoonaspossible aftertheyareinstituted; and
2. ThattheSecretariat shalltransmit toeachcontracting party allnotifications received.
II. Notification ofSubsidies
(BISD, Ninth Supplement, pages 193-194)
Reports should bemade inwriting forindividual commodities andunder theheadings listed
below. Asuggestion ofthetypeofinformation which might beincluded under eachheading isshown
within brackets:
I. Nature andextent ofthesubsidy1
(a) Background andauthority
(Thereason forthesubsidy andthelegislation under which itisgranted.)
(b) Incidence
(Whether paidtoproducers, toexporters, orinsome other way; whether a
fixed amount perunit,orfluctuating; ifthelatter, howdetermined.)
(c) Amount ofsubsidy
(Total costestimated orbudgeted or,when thisisnotfeasible, costinpreceding
year.)
(d) Estimated amount perunit2
1Information onthefoursections under paragraph 1should begiven separately under eachspecific
commodity heading.
2Incases where countries arenotinaposition toindicate thesubsidy perunitbecause themeasure
ofthesubsidy isrelated tofluctuating prices orisbased notontheproduct butonsome other criterion
(e.g.acreage) theyshould (1)notify thesum, ifany,which isbudgeted forthepurpose, and(2)give
detailed figures fortheoperation ofthemeasure intheprevious year, indicating thetotalamount, the
quantity oftheproduct, andtheaverage subsidy perunit.G/SCM/W/3
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II. Effect ofsubsidy3
(a) Estimated quantitative trade effects ofthesubsidy; andthereason whyitis
considered thatthesubsidy willhavethese effects.
(b) Statistics ofproduction, consumption, imports andexports:
(i) forthethree most recent years forwhich statistics areavailable;
(ii) foraprevious representative year, which, where possible and
meaningful, should bethelatest period preceding theintroduction of
thesubsidy orpreceding thelastmajor change inthesubsidy.
Recommendations ofthePanel onSubsidies, adopted
bytheCONTRACTING PARTIES on24May1960
(BISD, Ninth Supplement, pages 188-194)
I. Guidelines onnotifications (Excerpts)
II. Subsidies notifiable under Article XVI(Excerpts from paragraphs 10-13)
A. Intheopinion ofthePanel, itisnotsufficient toconsider increased exports orreduced imports
onlyinanhistorical sense. Inthisconnection thePanel hadinmind thefollowing interpretation of
theCONTRACTING PARTIES (BISD, Volume II,page44),paragraph 29(a)):
"The phrase, 'increased exports 'inline3ofArticle XVIoftheGeneral Agreement
wasintended toinclude theconcept ofmaintaining exports atalevelhigher thanwould
otherwise existintheabsence ofthesubsidy, asmade clearinline3ofArticle 25of
theHavana Charter";
Mutatis mutandis thisinterpretation must apply totheeffect onimports. Thecriterion istherefore
whatwould happen intheabsence ofasubsidy. ThePanel consider itfairtoassume thatasubsidy
which provides anincentive toincreased production will,intheabsence ofoffsetting measures, e.g.,
aconsumption subsidy, either increase exports orreduce imports.
B. ThePanel discussed thecircumstances under which asystem which fixesdomestic prices to
producers atabove theworld pricelevelmight beconsidered asubsidy inthemeaning ofArticle XVI.
Itwasgenerally agreed thatasystem under which agovernment, bydirect orindirect methods, maintains
3ThePanel considered thattheCONTRACTING PARTIES, indrawing upthisSection hadhad
itinmindthatcountries should givesome indication ofthequantitative effects ofsubsidy arrangements,
i.e.theeffects onactual volume ofimports andexports ....ThePanel therefore recommends that
allcontracting parties should include inanysubsequent notification statistical datacovering a
representativeperiodofdomesticproduction,consumption,importsandexportsoftheproductconcerned.
These figures should cover thelastthree years; and,when possible andmeaningful, aprevious
representative period (tobenotified onlyonceforthatproduct) preceding theentry intoeffect ofthe
measure orpreceding thelatest major change inthatmeasure. Itisrealized thatstatistical datawould
notanswer allquestions but,asindicated earlier inthisparagraph, theywould provide themostuseful
practical guidance tocontracting parties intheirattempts toestimate theeffects ofasubsidy. ThePanel
alsorecommends thatcontracting parties should saywhattheyconsider tobethetrade effects ofany
subsidies andtoexplain whytheythink thesubsidies willhavethese effects.G/SCM/W/3
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suchaprice bypurchases andresale atalossisasubsidy. Suchpurchases would needonlytocover
partoftheproduction toinvolve asubsidy and,indetermining lossonresale, suchexpenses asholding
stocks should betaken intoaccount ....ThePanel recognized thatthere might beother variations
ofprice stabilization where theexistence ornon-existence ofasubsidy would bemore difficult to
determine. Thisshould bejudged byexamination ofthecircumstances ofeachcase. ThePanel feels
that,inorder topermit suchanexamination, theCONTRACTING PARTIES should consider asking
contracting parties tonotify allcases ofprice support, regardless oftheprecise methods used.
C. ThePanel examined thequestion whether subsidies financed byanon-governmental levywere
notifiable under Article XVI. TheGATT doesnotconcern itself withsuchaction byprivate persons
acting independently oftheirgovernments except insofar asitallows importing countries totakeaction
under other provisions oftheAgreement. Ingeneral therewasnoobligation tonotify schemes inwhich
agroup ofproducers voluntarily taxed themselves inorder tosubsidize exports ofaproduct. The
Panel feltthatinviewofthemany forms which action ofthiskindcould take,itwould notbepossible
todraw aclearlinebetween types ofaction which wereandthose which werenotnotifiable. Onthe
otherhand, therewasnodoubt thattherewasanobligation tonotify allschemes oflevy/subsidy affecting
imports ofexports inwhich thegovernment tookaparteither bymaking payments intothecommon
fundorbyentrusting toaprivate bodythefunctions oftaxation andsubsidization withtheresult that
thepractice would innorealsense differ fromthose normally followed bygovernments. Inviewof
these considerations thePanel feelsthatthequestion ofnotifying levy/subsidy arrangements depends
uponthesource ofthefunds andtheextent ofgovernment action, ifany,intheircollection. Therefore,
rather thanattempt toformulate aprecisely worded recommendation designed tocover allcontingencies,
thePanel feelsthattheCONTRACTING PARTIES should askgovernments tonotify alllevy/subsidy
schemes affecting imports orexports which aredependent fortheirenforcement onsome form of
government action.
D. Inthecourse ofitsexamination ofnotifications, thePanel noted atitsfirstmeeting thatsome
contracting parties hadinterpreted approval bytheInternational Monetary Fund ofmultiple exchange
arrangements asabsolving them from theobligation tonotify sucharrangements under Article XVI.
ThePanel wished torecord itsviewthatinterpretative note1toSection BofArticle XVIwasintended
nottopreclude theusebyacountry ofmultiple exchange rages which wereapproved bytheInternational
MonetaryFund,butthattherewasaclearobligationtonotifytotheCONTRACTINGPARTIESmultiple
exchange rateswhich havetheeffect ofasubsidy.
E. InorderthattheCONTRACTINGPARTIESshouldhavethemostcompleteinformationpossible
thePanel recommends thatgovernments which consider thattherearenomeasures orschemes intheir
countries requiring notification under Article XVIshould soinform theExecutive Secretary inwriting.
III. RoleofArticle XVI:1
Report adopted on21November 1961, paragraph 19
(BISD, Tenth Supplement, page206)
"TheroleofArticleXVIinprovidingtheCONTRACTINGPARTIESwithaccurateinformation
about thenature andextent ofsubsidies inindividual countries hasbeenpartly frustrated bythefailure
ofsome contracting parties tonotify thesubsidies theymaintain. Totheextent thatthisisbased on
thereluctance ofcontracting parties toexpose themselves tocharges ofnon-conformity withthe
Agreement, itreflects amisinterpretation ofArticle XVI. Moreover, acontracting partycanberequired
toconsult concerning asubsidy, whether ornotithasbeennotified. There seems, therefore, tobe
noadvantage toacontracting party inrefraining from notifying itssubsidies; onthecontrary,
notifications maydispel undue suspicions concerning those subsidies notpreviously notified."