RESTRICTED
WORLD TRADE G/STR/M/2
16January 1996
ORGANIZATION(96-0138)
Working Party onState Trading Enterprises
MINUTES OFTHE MEETING OFTHE
WORKING PARTY HELD ON
13NOVEMBER 1995
Chairman: Mr.Peter May(Australia)
Page
A. Adoption oftheAgenda 1
B. Review ofthenotifications submitted byMembers in1995 2
pursuant totherequest fornotifications inG/STR/N/1
C. Secretariat background paper ontheoperations ofstatetrading enterprises 7
astheyrelate tointernational trade (G/STR/2)
D. Programme ofwork oftheWorking Party: review oftheadequacy ofthe 9
1960 questionnaire andthecoverage ofstatetrading enterprises notified
under paragraph 1oftheUnderstanding
E. Programme ofwork oftheWorking Party: development ofanillustrative 15
listshowing thekinds ofrelationships between governments andenterprises
andthekinds ofactivities engaged inbythese enterprises
F. Report totheCouncil forTrade inGoods 15
G. Dateofnextmeeting 15
A. Adoption ofagenda
1. TheChairman proposed thatwithrespect toItemA,theagenda inWTO/AIR/195 beamended
toinclude thefollowing fourdocuments which hadbeenreceived toolateforinclusion intheagenda
orcirculation inadvance ofthemeeting: thesecond partofthenotification from Canada
(G/STR/N/1/CAN/Add.1), andnotifications from Korea (G/STR/N/1/KOR), thePhilippines
(G/STR/N/1/PHL), andtheEuropean Communities. Thelatter notification hadnotyetbeenissued
asaWTO document, butwould beG/STR/N/1/EEC). Healsoproposed theinclusion ofacorrection
tothenotification fromtheCzech Republic (G/STR/N/1/CZE/Corr.1). TheWorking Party adopted
theagenda asamended.G/STR/M/2
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B. Review ofthenotifications submitted byMembers in1995 pursuant totherequest for
notifications inG/STR/N/1
2. TheChairman recalled thataccording toparagraph 5oftheUnderstanding ontheInterpretation
ofArticle XVII ofGATT 1994 (hereinafter "theUnderstanding"), theWorking Party wastasked to
review thenotifications andcounter-notifications onstatetrading submitted byMembers, andthatin
thelightofthisreview, theCouncil forTrade inGoods could make recommendations withregard
totheadequacy ofnotifications andtheneedforfurther information. Healsorecalled thattheCouncil
forTrade inGoods, titsmeeting on20February 1995, hadestablished adeadline of30June1995
fornewandfullnotifications byMembers ontheirstatetrading enterprises, andthataformal request
forsuchnotifications hadbeencirculated inG/STR/B/1 of13March 1995.
3. Hereported withsome regret thatcompliance withthisobligation -leaving aside theissue
ofthe30Junedeadline -hadbeenfarfromcomplete. Asof24October 1995(thedateoftheairgram
forthemeeting), atotalof25Members hadsubmitted anotification under Article XVII in1995. A
notification from oneofthelargest trading partners hadbeenreceived onlythree daysearlier, and
inlightofthedelay initssubmission wassurprisingly thinandapparently incomplete. Several other
Members -whose recent GATT Trade Policy Reviews indicated statetrading activities -hadfailed
tomake anynotification. At13November 1995, atotalof28notifications hadbeenreceived, four
ofwhich hadbeensubmitted toolateforcirculation inadvance ofthemeeting. Thissituation was
verydisappointing, particularly inlightoftheneedexpressed atthelastmeeting forgreater transparency
inthetrade conducted bystatetrading enterprises.
4. Heexpressed concern overthissituation, asMinisters atMarrakesh meeting finalizing the
Uruguay Round haddecided thattheareaofstatetrading should begiven more focus thaninthepast
andhadagreed onaplanofaction thatincluded thesetting upoftheWorking Party. There would
begreat difficulty incompleting within areasonable period oftimethework laidoutfortheWorking
Party ifnotifications were notsubmitted. Thesubmissions made indicated considerably different
approaches among Members astowhatwastobenotified, based ondifferent interpretations ofthe
definition contained inparagraph 1oftheUnderstanding.
5. Henoted thatColombia hadsubmitted anotification on30June, butthatduetoanerror in
processing, thedocument hadnotyetbeencirculated andwould bereviewed attheWorking Party's
nextmeeting. Herecalled thattheWTO Understanding provided forthesubmission ofcounter-
notifications where aMember feltthatanotification byanother Member waseither incomplete or
incorrect, andreported thatnosuchcounter-notifications hadbeenreceived bytheSecretariat.
6. Healsorecalled thatatitsfirstmeeting, theWorking Party haddiscussed theproblem ofnon-
notifiers andthepossibility ofrequesting awritten explanation forthefailure tonotify. While this
approach hadnotbeenfeltnecessary, hesaidthatitwould seemappropriate, inlightoftheseriousness
ofthisproblem, toaskthose delegations present which hadnotsubmitted anotification toprovide
some oralexplanation.
7. Therepresentative ofMexico saidthathisauthorities were working onthenotification and
thatthedelay initssubmission hadbeenduetotheadministrative situation ofcertain enterprises.
8. Therepresentative ofHungary saidthatherauthorities wereworking onthenotification which
shehoped would besubmitted intimeforreview atthenextmeeting.
9. Therepresentative ofSwitzerland saidthatsince hiscountry hadnotbecome aWTO Member
prior to1July1995, ithadnotbeenabletomeetthedeadline of30June. Thenotification wasbeing
prepared andwould besubmitted within afewdays.G/STR/M/2
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10. Therepresentative ofIndia saidthatbecause oftheincreasing trend towards privatization of
statetrading enterprises inhiscountry, hisauthorities hadnotyetbeenabletocomplete thenotification
butwould dososhortly.
11. TheChairmanrecalledthatparagraph5oftheUnderstandinginstructedthattheWorkingParty's
review ofthenotifications should bemade withaviewtodetermining theadequacy ofthenotifications
andtheneedforfurther information. Inlightofthis,andinorder togivesome structure tothereview
andtomaximize itsutility inthecontext ofthereview oftheadequacy ofthe1960 questionnaire, he
proposed thattheWorking Party focus onthefollowing twomainelements: (1)whether thenotification
responded adequately totheinformation requested inthequestionnaire; and(2)whether more
information wasneeded inorder topermit -inthelanguage ofparagraph 2oftheUnderstanding -"a
clearappreciation ofthemanner ofoperation oftheenterprises notified andtheeffect oftheiroperations
oninternational trade". Theassessment thatparticipants would trytomake attheendofthereview
ofeachnotification would bewhether, inlightofthequestionnaire, itcould besaidthatthenotification
wasadequate (i.e.whether itcovered alloftheelements inthequestionnaire) andwhether more
information wasneeded.
(i) Australia (G/STR/N/1/AUS)
12. Therepresentative oftheUnited States saidthatinhisdelegation 'sview, those countries which
hadnotified hadmade agood faitheffort toprovide theinformation sought inthequestionnaire.
However, some notifications were clearly better thanothers. Australia 'swasparticularly good, as
itprovided detailed information inaformat which might beconsidered asapossible model. The
United States would havespecific comments under lateragenda items concerning where itthought
allnotifications weredeficient andwhere added precision wasnecessary inthereporting requirements
inorder toensure thatuseful information wasprovided. Heasked whythefollowing entities hadnot
beennotified inAustralia 'ssubmission: theAustralian Barley Board, theWestAustralia Grains Pool,
Grainco, andGraincorp. Inaddition, hisdelegation, hisdelegation would liketoseemore specific
information onexport pricing.
13. Therepresentative oftheEuropean Communities saidthathisdelegation wasnotready tomake
comments onthenotifications andreserved therighttorevert toanyofthem atthenextmeeting.
14. Therepresentative ofJapan asked whytheAustralian Barley Board hadnotbeennotified.
15. Therepresentative ofAustralia saidthatshewould forward thequestions tohergovernment 's
experts forresponse.
(ii) Canada (G/STR/N/1/CAN andAdd.1)
16. Therepresentative oftheUnited States saidthatthenotification wasverythorough and
represented anhonest attempt tocomply withthenotification requirements. However, thiswasanother
example ofthefactthatevenwhen countries complied fullywiththerequirements, theydidnotalways
provide alloftheinformation hisdelegation would finduseful. Hewould takeuptheinadequacies
oftheexisting notification requirements later.
17. Therepresentative ofNewZealand saidthatthere wasadivergence between whatwerelisted
asthestatutory objectives oftheCanadian Dairy Commission andwhatwere listed asitsactivities.
There wereclearly pricefixing andsupport objectives ofthisorganization, yetthestatutory objectives
werelisted onlyasmaintaining afairreturn forlabour andinvestment andproviding efficient Canadian
producers theopportunity ofobtaining thatfairreturn. Heasked whether there were other stated
objectives thatwere notlisted.G/STR/M/2
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18. Therepresentative ofCanada saidthatheunderstood NewZealand 'squestion tobewhether
there wereanysubordinate policy statements thatfleshed outthestatutory purposes andthathadled
totheparticular structure ofsupport notified. Hewould referthequestion tohisauthorities.
(iii) Cyprus (G/STR/N/1/CYP)
19. Therepresentative ofNew Zealand saidthatthedescription oftheCyprus Milk Industry
Organization wasnotasfullashisdelegation would like.
20. Therepresentative ofCyprus saidthathisdelegation would respond tothequestion atalater
stage.
(iv) Czech Republic (G/STR/N/1/CZE andCorr.1)
21. Therepresentative oftheUnited States noted thattheorganizations notified werenotengaged
directly ininternational trade, andcommended theCzech Republic onthethoroughness ofthe
notification. IntheUSviewthenetshould becastwidely, andorganizations thatcould haveaneffect
ondomestic production andtradewithin amarket, butwerenotengaged ininternational trade, should
benotified.
(v) European Communities
22. Therepresentative ofCanada saidthathisauthorities hadnothadtimetocomplete their
examination ofsome ofthenotifications andwanted toconfirm thatanyMember could return with
questions atalatertimeeither through awritten procedure oratthenextmeeting.
23. Therepresentative oftheUnited States asked whytheintervention agencies thatoperated under
theCommon Agricultural Policy, which didengage inexporting andtheadministration ofdomestic
subsidy programmes,. hadnotbeenlisted inthenotification.
24. Therepresentative oftheEuropean Communities saidthatherdelegation would come back
tothisquestion later.
(vi) Indonesia (G/STR/N/1/IDN)
25. Therepresentative oftheUnited States noted thatthenotification covering theBadan Urusan
Logistik (BULOG) stated that"thequantity ofimported foodproducts which BULOG purchases is
determined withreference totheannual gapbetween domestic production andtheneeds ofdomestic
consumption". Hisauthorities hadconcerns thatthefunctioning ofBULOG might notbeconsistent
withcertain WTO disciplines, suchasArticle 4.2oftheAgreement onAgriculture, Article XIofGATT
andpossibly others. IntheUSview, allnotifications would beimproved byafurther elaboration of
howtheenterprise engaged intradeandwhatthecriteria werefordetermining when tradewould occur.
26. TheChairman saidthattransparency wasessential andthattheWorking Party would develop
aprocess ofattaining increased transparency. However, hewasreluctant tohavetheWorking Party
engage inadiscussion oftheconsistency ofastatetrading enterprise withanyprovisions other than
Article XVII.
27. Therepresentative oftheUnited States saidthathisdelegation wanted topoint outadeficiency
inreporting practices, asthere wasinsufficient information inIndonesia 'snotification todetermine
whether ornotBULOG 'soperations wereinconsistent withanyWTO provision. Hisunderstanding
ofArticle XVII andtheUnderstanding wasthatitrequired statetrading enterprises tocarry outtheirG/STR/M/2
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functions inawaythatwasfullyconsistent withotherGATT disciplines. Where measures werenotified
thatwere clearly inconsistent withaMember 'sobligations, itwould bewasting anopportunity if
comment were notmade. Theobjective ofthereview exercise, andtheWorking Party itself, was
tobeabletodetermine whether theactivities ofstatetrading enterprises were consistent withthe
respective Member 'sobligations.
28. Therepresentative ofIndonesia saidthathisauthorities would prepare awritten answer tothe
question.
(vii) Korea (G/STR/N/1/KOR)
29. Therepresentative oftheUnited States saidthathisdelegation understood thattheCheju Citrus
Grower 'sAgricultural Cooperative wasdesignated asthesoleimporter oforanges intoKorea under
thetariff quota. Asthiswasnotreflected inthenotification, heasked forclarification.
30. TherepresentativeofNewZealandsaidthathisdelegationunderstoodthattheNationalLivestock
Cooperatives Federation, which waslisted inthenotification ashaving responsibility onlyfornatural
honey, wasalsoresponsible fordairy products, andasked forclarification.
31. Therepresentative ofAustralia asked whyKorea hadnotnotified theKorea Dairy Industry
Association andOSROK, which wasconcerned withriceimports.
32. Therepresentative ofKorea saidthatthesequestions related totechnical points inthenotification
which hecould notanswer atthepresent meeting.
(viii) Malaysia (G/STR/N/1/MYS)
33. Therepresentative oftheUnited States saidthatthenotification covering Bernas suggested
thatimports occurred onlywhen domestic production wasinsufficient tomeetprojected annual demand.
Asthisraised questions about consistency withGATT provisions, further elaboration oftheimport
regime under Bernas would beuseful. Henoted thattheoilandgasentity incontrol ofdomestic
production andtrade (Petronas) hadnotbeenincluded inthenotification andasked foranexplanation
ofthis.
34. Therepresentative ofJapan asked whether Bernas, afteritwasprivatized, would continue to
dealwiththenon-commercial activities identified inthenotification.
35. Therepresentative ofMalaysia saidthatBernas, when fullyprivatized, would stillundertake
someofthesenon-commercialactivities.RegardingPetronas,hesaidthathisauthoritiesdidnotconsider
thatitfellwithin thedefinition ofstatetrading enterprise. Regarding Bernas 'operations, hisdelegation
believed thatithadprovided therequired information, butwould revert tothisquestion withmore
detailed information ifnecessary.
(ix) Thailand (G/STR/N/1/THA)
36. Therepresentative oftheUnited States saidthatthenotification regarding potatoes andtea
could befurther elaborated. Henoted thatthePublic Warehouse Organization (PWO) wastasked with
ensuring thatlocalproduction ofpotatoes would notcreate anover-supply situation inthecountry,
andthatimported products wereusedonlyforplanting andnotforconsumption. Regarding theimport
monopoly fortea,oneofthemain functions stated wastoensure thatlocalcontent ofimported tea
products wasmaintained. Astheconsistency ofthese measures withWTO provisions might bein
question, further information would beuseful.G/STR/M/2
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37. Therepresentative ofJapan asked what thecriteria were forthechoice ofpotatoes andtea
asproducts tobedealtwithbythePWO, andwhether theproduct coverage ofthisenterprise might
bebroadened infuture.
38. Therepresentative ofThailand saidthatherauthorities hadalready notified theoperation of
thetariff quota onpotatoes totheAgriculture Committee (AG/N/THA/2). With respect totea,her
delegation would provide awritten answer. Shesaidthatsofar,thePWO dealtwithonlytwoproducts
andthatthere wasnointention tobroaden thiscoverage.
(x) Turkey
39. TherepresentativeoftheUnitedStatesaskedwhythefollowingentities,whichtheUSunderstood
enjoyed special orexclusive rights orprivileges inthemeaning oftheUnderstanding, hadnotbeen
included inthenotification; Turkiye Taskomuri Kurumu, which hadamonopoly onhardcoal; and
Turkiye Kumur Isletmeleri, which wasengaged intheproduction andtrade oflignite.
40. Therepresentative ofTurkey saidthatherdelegation would submit awritten response tothe
question.
(xi) United States (G/STR/N/1/USA)
41. Therepresentative ofJapan asked whether thecoverage oftheCommodity Credit Cooperation
(CCC) wassetoutinTable 1onpages 6and7ofthenotification.
42. Therepresentative oftheUnited States saidthatthelistinTable 1appeared tobecorrect, but
thathisauthorities would examine ittoensure thatitwascomprehensive.
43. Therepresentative ofNewZealand asked whether there wereforms offinancing oftheCCC
otherthanthetermination ofinterest onCCC borrowings fortheunreimbursed realized losses recorded
onthebooks oftheCCC.
44. Therepresentative oftheUnited States saidthathewould havetorevert tothisquestion later.
(xii) Romania (G/STR/N/1/ROM)
45. Therepresentative ofNewZealand saidthatwhile Romania hadmade anilnotification, its
1992Trade Policy Review Report indicated thattherewere1,663 fullyorpartly state-owned companies
which accounted forroughly 70percentofRomanian trade. Hisdelegation wondered whether some
ofthese companies stillenjoyed trade privileges, andnoted thatthedefinition intheUnderstanding
included enterprises withstatutory orconstitutional powers. Thiswasageneric question relating to
state-owned enterprises, especially those incountries intransition toamarket economy.
46. Therepresentative ofCanada saidthathiscountry shared NewZealand 'sconcerns regarding
theapparent rapid turnaround intheRomanian economy, andinvited those countries making anil
response toreconsider thisinlightofthenotifications received todateandtheSecretariat background
paper which together gaveabetter appreciation oftheexpectations oftheWorking Party.
47. Therepresentative ofRomania agreed thatthere might beaneedforre-examination ofthe
notification inthelightoftheSecretariat paper, butsaidthattheremight beadifference ininterpretation
ofwhatconstituted anotifiable statetrading enterprise. Thenotification ofstate-owned enterprises
inthe1992Trade Policy Review Report included allenterprises owned bythegovernment irrespective
ofwhether ornottheyenjoyed anyrights orprivileges.G/STR/M/2
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48. There were nocomments orquestions onthefollowing notifications:
Argentina (G/STR/N/1/ARG)
Costa Rica(G/STR/N/1/CRI)
Hong Kong (G/STR/N/1/HKG)
Japan (G/STR/N/1/JPN)
Macau (G/STR/N/1/MAC)
Mauritius (G/STR/N/1/MUS)
NewZealand (G/STR/N/1/NZL)
Peru(G/STR/N/1/PER)
Philippines (G/STR/N/1/PHL)
Poland (G/STR/N/1/POL)
Singapore (G/STR/N/1/SGP)
Slovak Republic (G/STR/N/1/SVK)
South Africa (G/STR/N/1/ZAF)
Uruguay (G/STR/N/1/URY andAdd.1)
49. TheChairman proposed thatdelegations having raised questions ofsubstance atthepresent
meeting should submit these inwriting totheMember concerned, withacopytotheSecretariat for
circulation, andthatwritten responses tothose questions should besubmitted totheenquiring country
withacopytotheSecretariat. These would thenbeconsidered attheWorking Party'snextmeeting.
Thesame procedure would apply tothenotifications tobereviewed atfuture meetings, withwritten
questions submitted three weeks prior tothedateofthemeeting andwritten responses submitted
subsequent totheoralresponses made atthemeeting.
50. TheWorking Party soagreed.
51. TheChairman made aspecial pleatothose Members which hadnotyetsubmitted anotification
todosoassoonaspossible. Heexpressed surprise thatthere hadnotbeenamore indepth, rigorous
examination ofsome ofthenotifications, given thatstatetrading seemed toelicitconsiderable comment
when raised inother fora, particularly those dealing withtheagricultural sector.
52. Therepresentative oftheUnited States saidthathetoofeltthediscussion under ItemBwas
disappointing. Delegations needed tobegin focusing ontheissues. Hesuggested thatitmight beuseful
tohavemore frequent meetings. Hisdelegation wasinterested inhaving anactive Working Party
andpushing thework ahead.
53. Therepresentative ofArgentina saidthatinhisview, theproblem faced bytheWorking Party
inreviewing thenotifications wasdueinparttothefactthatuntilthepresent, statetrading wasnot
dulymonitored. Also, many statetrading enterprises operated intheagricultural sector, andupuntil
theUruguay Round, disciplines were onlypartly applied tothissector. There nowneeded tobe
agreement onexactly whatwastobenotified andforwhatreason. Hesaidthatinformation inthe
Secretariat paper (G/STR/2) suggested thatenterprises which hadspecial privileges wereoften those
which applied trade restrictions. Thebasic problem wasalackoftransparency.
54. TheWorking Party tooknoteofthestatements.
C. Secretariat background paper ontheoperations ofstatetrading enterprises astheyrelate to
international trade (G/STR/2)
55. TheChairman recalled thatParagraph 5oftheWTO Understanding provided thattheSecretariat
would prepare ageneral background paper fortheWorking Party ontheoperations ofstatetradingG/STR/M/2
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enterprises astheyrelate tointernational trade. AtitsApril meeting, theWorking Party discussed
theissueofthesources tobeusedinpreparing thepaper aswellastheproposed content ofthepaper,
anditwasagreed thatthepaper would besubmitted totheWorking Party intheautumn.
56. TheSecretariat background paper (G/STR/2) hadbeencirculated on26October 1995. He
noted thatinaccordance withthedecision oftheWorking Party inApril, thepaper hadbeenbased
onthestatetrading notifications submitted byMembers by20June1995, andontheGATT Trade
Policy Reviews inexistence atthetimeofthepreparation ofthepaper. Henoted thatasof
30June1995, onlytenMembers hadsubmitted astatetrading notification for1995, seven ofwhich
notified statetrading enterprises. Many ofthetotalof25notifications thathadbeensubmitted prior
to24October, ofwhich only20weresubstantive notifications, hadbeenreceived morethantwomonths
afterthe30Junedeadline. Consequently, theSecretariat background paper didnotcover thelater
notifications. Herecalled thatthepaper wasintended tofacilitate theWorking Party'stasks-toreview
theadequacy ofthe1960questionnaire, andtodevelop anillustrative listofthekinds ofrelationships
between governments andenterprises andthekinds ofactivities engaged inbythese enterprises -and
noted thatthepaper contained asection specifically oneachofthese twoissues.
57. Therepresentatives ofCanada, theUnited States, New Zealand, Australia, theEuropean
Communities, Japan, Poland, Argentina andMexico expressed appreciation forthepaper which they
saidwasverymuch inlinewiththeirdelegations 'expectations. Thepaper would provide agoodbasis
fortheWorking Party'sdeliberations andwould considerably assist itsfurther work.
58. Therepresentative ofCanada suggested thatcountries which hadalready submitted anotification
might reconsider them inthelightoftheorientations proposed bytheSecretariat paper.
59. Therepresentative ofNewZealand saidthatthepaper made important distinctions between
various types ofstatetrading enterprises.
60. Therepresentative ofAustralia saidthatthepaper provided insights intotheproblem ofdrawing
conclusions from information contained inthenotifications.
61. Therepresentative ofPoland saidthatthereseemed tobesome degree ofoverlapping between
thecategories ofstatetrading enterprises indicated inthepaper.
62. TherepresentativeofArgentinanotedthatthepaperincludedcommentsconcerningtheactivities
ofstatetrading enterprises innon-market andtransition economies, andsaidthatindeveloping a
particular format fornotifications, thefuture -aswellasthepresent -membership oftheWTO should
betaken intoconsideration.
63. Therepresentative ofMexico suggested thatthepaper needed deeper study before itcould
bediscussed indepth. Hesaidthatsome oftheactivities ofstate trading enterprises listed in
paragraph 102ofthepaper seemed todealmore withdomestic production thanwithtrade, whereas
Article XVII dealtwithenterprises engaged intrade.
64. Therepresentative ofEgypt supported Mexico 'sstatement thatArticle XVII dealtwithstate
trading enterprises engaged intrade rather thanproduction. There wasaneedtoclarify where the
lineshould bedrawn between notifiable andnon-notifiable enterprises. Herdelegation understood
thatanenterprise engaged inmanagement ofdomestic production would nothavetobenotified. She
asked whether itwasappropriate fortheWorking Party toengage inassessing thecompliance ofa
given measure withvarious GATT disciplines, andsaidthatthismight discourage some Members from
submitting notifications. Regarding theUnited States 'question onIndonesia 'snotification, sheaskedG/STR/M/2
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whythedetermination ofimports according tothegapbetween domestic production andconsumption
wasnotjustifiable.
65. TheChairman saidthatinhisview, thefocus oftheWorking Party should beonthetrade
effects oftheenterprises notified. Itwasclearthatwhere therewasamonopoly onproduction orwhere
production wasdirectly controlled bythegovernment, there could beflow-on effects ontrade, and
itwasuptotheMember concerned tomake thejudgement astowhether ornottheenterprise should
benotified. HesaidthattheWorking Party'sprimary business wastotrytoincrease thetransparency
ofstatetrading byimproving thereporting ofstatetrading enterprises, andthatinhisviewthistarget
would notbereached byfocusing ontheconsistency ofmeasures notified withvarious WTO disciplines.
66. Therepresentative oftheUnited States agreed thattheprinciple objective oftheWorking Party
wastoincrease transparency, butsaidthatindiscussing theneed forincreased transparency, his
delegation would make reference tospecific notifications andwould raisepoints onnotification issues
based onthose submissions.
67. TheWorking Party tooknoteofthestatements made.
D. Programme ofwork oftheWorking Party: review oftheadequacy ofthe1960questionnaire
andthecoverage ofstatetrading enterprises notified under paragraph 1oftheUnderstanding
68. TheChairman recalled thatatitsmeeting inApril 1995, theWorking Party haddiscussed the
timetable foritswork andhadagreed tobegin itsreview oftheadequacy ofthe1960 questionnaire
atitsautumn meeting. Ithadalsobeensuggested thatdelegations wishing togetwork underway sooner
might engage inaninformal process ofreview ofthequestionnaire andsubmit theirviews inwriting
totheSecretariat. Nosuchpapers hadbeenreceived.
69. With thestatetrading notifications thathadbeenmade since March 1995, there wasnowa
body -ifincomplete -ofinformation which would provide abasis forthereview oftheadequacy of
thequestionnaire andthecoverage ofstatetrading enterprises notified under paragraph 1oftheWTO
Understanding. Hesaidthatthereview ofthenotifications justheldhadshown thatinsome cases,
theinformation provided wasnotsufficient topermit anassessment ofthestatetrading enterprises
notified, evenwhere thenotification could beconsidered tobeanadequate response tothequestionnaire.
Hesuggested thatparticipants takeuptheelements inthequestionnaire onebyone,keeping inmind
theresults ofthatreview. Henoted thattheSecretariat background paper contained asection onthe
1960 questionnaire which might assist theWorking Party initsconsiderations ofthismatter.
70. Therepresentative ofMexico saidthatanimportant conclusion oftheSecretariat inthesection
ofthepaper dealing withthequestionnaire wasthatinsome cases theproblem laynotwithany
shortcomings intheformat, butrather withthefailure torespond tothequestions.
71. TheChairman saidthatthere werediffering views regarding thequestionnaire. Onewasthat
countries didnotanswer thequestions, andanother wasthatthequestionnaire didnotgofarenough.
TheWorking Party would havetodetermine whether thequestionnaire mettheperceived requirements
oftransparency orwhether further information wasneeded.G/STR/M/2
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72. TheWorking Party tookuptheindividual elements ofthequestionnaire asfollows:
I. Enumeration ofstatetrading enterprises
- Does your country maintain enterprises covered bytheprovisions of
Article XVII?
- Ifso,listtheproducts orgroups ofproducts forwhich astateenterprise is
maintained orforwhich anenterprise hasexclusive orspecial privileges .
73. Therepresentative oftheUnited States saidthatinhisdelegation 'sview, thenetshould be
castaswidely aspossible withrespect tocoverage ofthenotifications, andevenstatetrading enterprises
thatdidnotengage intrade should benotified, astheCzech Republic haddone initsnotification.
Thiswasbecause domestic subsidy ordomestic production control programmes could haveaneffect,
albeit indirect, onimports andexports. Such enterprises should becovered bythenotification
requirement.
74. Therepresentative ofCanada suggested thattheformat forresponses tothequestionnaire should
beclarified, andthatresponses should beprovided entity byentity rather thangrouping answers relating
toseveral enterprises under onequestion, assome Members haddone.
75. Therepresentative ofNewZealand, referring tothedefinition intheUnderstanding andto
theissue ofstate-owned enterprises which enjoyed certain benefits butnoexclusive rights, saidthat
theWorking Party should trytodevelop somefurther clarity regarding precisely whatenterprises should
benotified.
76. Therepresentative ofRomania suggested thattheterm"state trading enterprise" rather than
simply "enterprise" should beusedinthefirstquestion. TheWorking Party might alsoconsider whether
some parts ofthequestionnaire were notalready covered inother notification obligations.
77. Therepresentative ofCuba supported thestatements byMexico andEgypt thattheobligation
tonotify should notbeextended beyond what wasstated inArticle XVII, andthatitwasuptothe
Member todecide whattonotify under thatArticle. Inhisdelegation 'sview, itwould beanerror
toextend theinterpretation ofwhatwastobenotified toinclude enterprises managing production.
78. Therepresentative ofJapan noted thatthequestionnaire didnotinclude anyreference tothe
working definition ofwhatwastobenotified, nordiditrequest theHarmonized System classification
oftheproducts covered. Bothelements were important andshould beincluded.
79. Therepresentative ofMexico saidthatthedefinition ofstatetrading enterprise wascontained
intheUnderstanding anddidnothavetoberepeated inthequestionnaire. Anyreference inthe
questionnaire totheterm "state trading enterprise" hadtobelimited toArticle XVII andthe
Understanding. There hadbeenanegotiation andthishadresulted intheUnderstanding, andinhis
delegation 'sview, theworking definition didnotneedtobeextended.
80. Therepresentative ofArgentina saidthathisdelegation favoured specifying further whatshould
benotified. Inorder tobeclear, thedefinition should beaswideandfar-reaching aspossible. Argentina
agreed withthose whothought thatstate-owned enterprises should benotified eveniftheydidnothave
exclusive rights, asshould private enterprises iftheydidhavesuchrights. Hesaidthere might be
aneedtospecify whether enterprises atasub-national levelshould benotified.G/STR/M/2
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81. TheChairman saidthathisunderstanding wasthatunder theWTO, sub-national entities were
covered bythenotification requirement.
82. Therepresentative ofHungary saidthatinherdelegation 'sview theoperation, rather than
theownership, oftheenterprise determined whether itwasastatetrading enterprise.
83. Therepresentative ofNewZealand agreed withthestatement byHungary. TheWorking Party
could lookcarefully atlinksbetween governments andtheenterprises theyowned todetermine whether
theoperations ofthose enterprises might havesome impact ontrade. Astate-owned enterprise that
controlled most oftheproduction ofatraded product would haveaneffect ontrade. Forexample,
anelectricity monopoly might haveanimpact ontrade ifelectricity wastraded.
84. Therepresentative ofPoland supported thestatements byHungary andNewZealand thatthe
criterion ofstateownership didnotprejudge theclassification ofanenterprise under Article XVII.
Inthisregard, theSecretariat paper seemed toconfuse thetwocategories offoreign tradeorganizations -
which werestate-owned -andstatetrading enterprises. InPoland 'sview, therewasnolinkage between
thetwo.
85. Therepresentative oftheUnited States saidthatthere hadbeenconsiderable pastdiscussion
ofthedefinition ofstatetrading enterprise. Thiswasadifficult issue, andthere wasanopportunity
now,inthecontextofdiscussingthequestionnaire,toclarifyandaugmentthatdefinition.Paragraph102
oftheSecretariat paper contained averyuseful listoftheactivities engaged inbystatetrading
enterprises. Inhisview, thislistcould beincorporated inanydraftrevised questionnaire thatthe
Working Party might develop, sothatMembers would haveabetter ideaofwhattypes ofstatetrading
enterprises theywere expected tonotify.
II Reason andpurpose forintroducing andmaintaining theenterprise
- Stateforeachproduct thereason andpurpose forintroducing andmaintaining
theenterprise (itshould beindicated, forexample, whether thepurpose orthe
effect oftheenterprise istoprevent prices toconsumers fromexceeding certain
maximum limits, ortoprotect domestic producers bythecontrol ofimports
and/or thepurchase ofdomestic supplies atabove world price levels, orto
facilitate export sales, ortomake itpossible toestablish oradminister a
stabilization arrangement).
Adescription ofthelegal provisions should beincluded insofar asthishas
notbeensubmitted inearlier notifications.
86. Therepresentative ofCanada agreed withtheassessment intheSecretariat paper thatthe
questions concerning thelegalorregulatory provisions establishing thestatetrading enterprise could
bestrengthened andthattheyshould bemore inevidence inthestructure ofthequestionnaire, either
asaseparate query intheirownright oratthebeginning ofSection IIIaspartofthebackground.
InCanada 'sview, these provisions should berepeated ineachnotification, astheydidchange over
time. Thedefinition contained intheUnderstanding should alsoberepeated inthequestionnaire.
Regarding Poland 'sstatement, hesaidthatownership wasnotirrelevant tothequestion ofestablishing
ormaintaining astatetrading enterprise. However, heagreed thattheoperations werethedistinguishing
factor, andthusthelegal andregulatory basis fortheoperations were important indrawing that
information out.
87. Therepresentative oftheUnited States agreed withCanada thatthere should beanincreased
emphasis onthenotification requirements withrespect tolegal structure. Members should beasG/STR/M/2
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expansive aspossible onthelegalstructure underpinning statetrading enterprises. Regarding Canada 's
suggestion, hesaidthatitmight besufficient forcountries tonotify theselegalstructures ingreatdetail
once,andthenindicateanychangesinlatersubmissions.Inaddition,thereshouldbeaclearexplanation,
inthenotification ofthetypeofstatetrading enterprise inquestion, which should beclearly related
tothepurpose oftheenterprise, theparticular rights andprivileges enjoyed byitandtherelationship
between thegovernment andtheenterprise. Inanyexercise torevise thequestionnaire, attention should
bepaidtoways ofcategorizing statetrading enterprises, perhaps along thelinesofparagraph 12of
theSecretariat paper.
88. Therepresentative ofEgypt agreed withthestatement inparagraph 82oftheSecretariat paper
thattherequest forinformation onlegal provisions lostemphasis duetothefactthatitfollowed at
theendofthequestion on"reason andpurpose", andsuggested thatthisrequest beseparate andmore
detailed sothatMembers could understand clearly whatinformation wastobesupplied.
89. Therepresentative ofNewZealand saidthathiscountry hadunderstood thattheinformation
required wassimply astatement oftheactorregulations ofParliament which governed theoperations
oftheenterprise, rather thananelaborate listofalltheprovisions within those actsrelating tothe
enterprise.
90. Therepresentative oftheUnited States saidthathisdelegation 'spreference wasforafairly
complete listoftheseprovisions atleastonce. Insome cases thislisting might bequiteshort, butwhere
there wasmore thanonerelevant provision, thecomplete setoflawsandregulations, andsome
explanation ofthem, should befurnished.
91. Therepresentative ofCuba saidthatinhisdelegation 'sview, onlyforeign trade enterprises
would havetobenotified. Thenotifying country hadtouseitsowncriteria todetermine whatshould
benotified, andthereshould benogeneral criteria thatallenterprises having alegallinkwiththestate
should benotified.
III. Description ofthefunctioning ofthestatetrading enterprises
- Describe, itembyitem, thefunctioning ofsuch enterprises andstate in
particular:
- Whether theenterprise deals withexports orwithimports, orboth.
- Whether private traders areallowed toimport orexport and,ifso,
onwhatconditions. Whether thereisfreecompetition between private
traders andthestatetrading enterprise.
- Thecriteria usedfordetermining thequantities tobeexported and
imported.
- Howexport prices aredetermined. Howthemark-up onimported
products isdetermined. Howexport prices andthere-sale prices of
imports compare withdomestic prices.
- Whether long-term contracts arenegotiated bythestate trading
enterprise. Whether statetrading methods areusedtofulfilcontractual
obligations entered intobythegovernment.G/STR/M/2
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92. TherepresentativeofCanadasuggestedthatthesub-elementsofthequestionshouldbenumbered
andthatcountries should beasked, where theyregarded aquestion asnotapplicable, tosoindicate.
ResponsestothequestionnaireindicatedsomeconfusionbetweensectionsIIandIII.SectionIIaddressed
thequestion of"why" andsection IIIthequestion of"how". Where therewasoverlap intheresponses,
thiscould bedealtwithbycross-referencing.
93. Therepresentative oftheUnited States saidthatitwasunder sections IIIandIVofthe
questionnaire thatinformation wasprovided thatwasessential totheevaluation ofwhether theenterprise
wasoperating inamanner consistent withthecountry 'sGATT obligations. TheUSwould liketo
seeafuller description ofstatetrading enterprises, anditcould bemade clearer inthissection what
wasexpected ofnotifying Members. Paragraph 102oftheSecretariat paper should helpMembers
tofilloutsome ofthese questions. Hesaidthatveryfewnotifications seemed toinclude anyreference
toimport licensing procedures thatmight beadministered bystatetrading enterprises. While thismight
bebecause these hadbeennotified elsewhere, theWorking Party should consider requiring Members
toatleastcross-reference, intheirArticle XVII notifications, therelevant notifications totheImport
Licensing Committee and/or Agriculture Committee. Hisdelegation wasalsointerested inseeing more
informationondomesticpurchaseandsalesactivitiesofstatetradingenterpriseswhenthesewererelevant
totheirtrading activities.
94. Hesaidthattheredidnotseemtobesufficient information inrecent notifications onthespecial
privileges ofstatetrading enterprises, andsuggested thatthereneeded tobeaquestion onexactly what
kindsofspecialprivilegestheenterpriseenjoyed.Itshouldbestated,forexample,whethertheenterprise
inquestion wasamonopoly orasingle-desk seller orafinancier ofexport programmes, orwhether
itenjoyed special taxbreaks orforeign exchange privileges. Henoted thatthequestionnaire required
countries toexplain therelationship between theenterprise andprivate traders, andsaidthatitneeded
tobemade clearinthequestionnaire thatcountries should statewhatrestrictions, ifany,weremade
ontheability ofprivate firms topurchase, sellordistribute theproduct indomestic orexport markets.
Thisrelationship wasbecoming anincreasingly important issue inatleastoneaccession exercise.
Inaddition, itwasessential thatthecountry listthecriteria usedtodetermine thequantities tobe
imported andexported, asthiswasacrucial element intheinterface between thestatetrading enterprise
andthecountry 'sGATT obligations, especially ontheimporting side. Without suchinformation, it
could notbeknown whether thedecision toimport wasbased onsome administrative criteria related
tonon-market considerations, orbased onmarket considerations. Thiswasthecruxofthematter,
asthestatetrading enterprise hadanobligation tobaseitstrading decisions onmarket considerations.
Thequestionnaire didnotprovide sufficient guidelines regarding thecriteria thatwere ofinterest in
thisarea.
95. TheUnited States wasespecially interested ingetting moreinformation onpricing, particularly
withrespect tostatetrading enterprises engaged inexporting, andhadrecommended intheAgriculture
Committee thatcountries berequired toprovide certain specific price data, suchasaverage annual
acquisition prices, average annual export prices and,onrequest, pricing andother related information
onspecific export transactions. Hisdelegation would provide specific proposals onthepricing
information needed inorder tofulfiltherequirements ofthequestionnaire onexport prices andresale
prices ofimports. Itwould beuseful tohavemore information onhowmark-ups onimport prices
were determined, asthiswastheessential component indetermining theresale price.
96. Therepresentative ofNewZealand saidthathisdelegation supported some ofthepoints made
bytheUnited States regarding improving thequality ofsome oftheresponses tothequestionnaire.
However, regarding thecommercial considerations thatdrove thedecisions ofcertain enterprises, his
delegation would havetoobject totheideaofrequiring enterprises toprovide pricing data,since some
statetrading enterprises operated onapurely commercial basis andwere notlinked togovernment.
Anyrequirements forsuchpricing information should bespecifically aimed atthose enterprises withG/STR/M/2
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linkstogovernment where theremight beelements ofadministrative pricing andgovernment assistance
orsubsidies.
IV. Statistical information
- Furnish statistics (where possible byquantity andvalue) ofimports, exports
andnational production ontheproducts notified, onthefollowing lines:
(a) thefigures should cover thelastthree available years;
(b) thefigures forthethree groups (imports, exports andnational
production) should begiven, where possible, inacomparable form;
(c) thefigures should bebroken down soastoshow:
(i) trade bytheenterprise;
(ii) other trade.
97. Therepresentative ofJapan referred toparagraph 88oftheSecretariat paper andsaidthatthe
statistical information provided should dulyrespond totherequirements inthequestionnaire. While
Japan recognized thatsome information might becommercially confidential andshould notberequired
inthenotification, aMember might usethisasapretext forcircumventing thestatistical information
requirement. Hisdelegation proposed thatthedirectly interested Member might request therelevant
information bilaterally from thenotifying Member, oralternatively request thatmember toengage
inbilateral consultations.
98. Therepresentative oftheUnited States saidthere wasaneedtostandardize theformat for
statistical information inorder tofacilitate review ofthenotifications. There wasalsoaneedtomatch
thetypeofstatistical information required withthedescription ofthefunctioning ofthestatetrading
enterprise under section IIIofthequestionnaire. Hisdelegation would make awritten proposal on
bothofthese suggestions.
V. Reason whynoforeign trade hastaken place (ifthisisthecase) inproducts affected
- Incases where noforeign trade hastaken place intheproducts affected, state
thereasons.
99. There were nocomments.
VI. Additional information
Provide anyadditional information thatmaybeappropriate.
100. There were nocomments.
101. TheChairman saidthattheWorking Party hadhadauseful firstdiscussion oftheadequacy
ofthequestionnaire. Henoted thatthequestionnaire hadbeeninusesince 1960, andthatthere had
beenconsiderable change during thepast35years inthewaytrade tookplace. Inparticular, there
hadbeenconsiderable privatization inbothdeveloping anddeveloped countries. Heinvited those
delegations wishing todosotosubmit written proposals regarding therevision ofthequestionnaire
forcirculation toMembers andconsideration atthenextmeeting.G/STR/M/2
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102. TheWorking Party tooknoteofthestatements andagreed tocontinue itsreview oftheadequacy
ofthequestionnaire atitsnextmeeting.
E. Programme ofwork oftheWorking Party: development ofanillustrative listshowing the
kinds ofrelationships between governments andenterprises andthekinds ofactivities engaged
inbythese enterprises
103. TheChairman recalled thatatthemeeting inApril, anumber ofdelegations hadexpressed
interest ingetting work underway asquickly aspossible onthedevelopment ofanillustrative listas
mandated intheUnderstanding onArticle XVII. Hesaidthatwhile thepaucity ofnotifications received
todatewould notfacilitate thistask,there seemed tobesufficient rawmaterial tobegin work onsuch
alist.Henoted thattheSecretariat background paper contained asection onthissubject, including
adraftlistthatmight provide forfurther work.
104. Therepresentatives oftheUnited States, NewZealand, andtheEuropean Communities said
thattheSecretariat paper provided agood starting point forthiswork which wasanimportant part
oftheWorking Party'smandate.
105. TheChairman invited delegations wishing todosotosubmit written proposals regarding the
illustrative listforcirculation toMembers andconsideration atthenextmeeting.
106. TheWorking Party tooknoteofthestatements andagreed torevert tothisitematitsnext
meeting.
F. Report totheCouncil forTrade inGoods
107. TheChairman recalled thatparagraph 5oftheUnderstanding onArticle XVII instructed the
Working Party toreport annually totheCouncil forTrade inGoods.
108. TheWorking Party adopted itsreport which wassubsequently circulated indocument G/L/35.
G. Dateofnextmeeting
109. TheChairman proposed thatthenextmeeting beheldinFebruary 1996, andthatthespecific
datebesetatalatertime.