Minutes of the regular Meeting
held on 26 april 2016
Chair: Mr mitsuhiro fukuyama (JAPAN)
1. The Committee on Subsidies and
Countervailing Measures ("Committee") held a regular meeting on 26
April 2016, convened in WTO/AIR/SCM/9 dated 15 April 2016.
2. The Committee adopted the following
agenda:
1 National legislation - Review of
notifications of new or amended legislation or regulations not previously
reviewed by the committee (including supplemental notifications of existing
provisions not previously reviewed). 2
1.1 Australia
(G/ADP/N/1/AUS/2/Suppl.16-G/SCM/N/1/AUS/2/Suppl.14 and
G/ADP/N/1/AUS/2/Suppl.15-G/SCM/N/1/AUS/2/Suppl.13) 3
1.2 Bahrain, Kingdom of
(G/ADP/N/1/BHR/3/Suppl.1-G/SCM/N/1/BHR/2/Suppl.1-G/SG/N/1/BHR/3/Suppl.1) 3
1.3 Oman (G/ADP/N/1/OMN/3-G/SCM/N/1/OMN/3-G/SG/N/1/OMN/3
and G/ADP/N/1/OMN/3/Suppl.1-G/SCM/N/1/OMN/3/Suppl.1-G/SG/N/1/OMN/3/Suppl.1) 3
1.4 Saudi Arabia, Kingdom of
(G/ADP/N/1/SAU/2/Suppl.1-G/SCM/N/1/SAU/2/Suppl.1-G/SG/N/1/SAU/2/Suppl.1) 3
1.5 United Arab Emirates
(G/ADP/N/1/ARE/2-G/SCM/N/1/ARE/2-G/SG/N/1/ARE/2) 3
1.6 Dominican Republic (G/ADP/N/1/DOM/3/Suppl.2-G/SCM/N/1/DOM/2/Suppl.2-G/SG/N/1/DOM/2/Suppl.2) 3
1.7 India
(G/ADP/N/1/IND/2/Suppl.5-G/SCM/N/1/IND/2/Suppl.5,
G/ADP/N/1/IND/2/Suppl.6-G/SCM/N/1/IND/2/Suppl.6, and G/ADP/N/1/IND/2/Suppl.7-G/SCM/N/1/IND/2/Suppl.7) 4
1.8 Kyrgyz Republic
(G/ADP/N/1/KGZ/2-G/SCM/N/1/KGZ/2-G/SG/N/1/KGZ/2) 4
1.9 Lesotho (G/SCM/N/1/LSO/1) 4
1.10 Pakistan
(G/ADP/N/1/PAK/3-G/SCM/N/1/PAK/3) 4
1.11 Seychelles
(G/ADP/N/1/SYC/1-G/SCM/N/1/SYC/1-G/SG/N/1/SYC/1) 4
1.12 Cameroon
(G/ADP/N/1/CMR/1/Suppl.1-G/SCM/N/1/CMR/1/Suppl.1-G/SG/N/1/CMR/1/Suppl.1) 5
2
Semi-annual reports of countervailing duty actions (Article 25.11) -
G/SCM/N/298 AND G/SCM/N/298/Suppl.1. 5
3
PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS: NOTIFICATIONS (ARTICLE
25.11) 9
4
ARTICLE 27.4 EXTENSIONS OF THE TRANSITION PERIOD FOR THE ELIMINATION OF EXPORT
SUBSIDIES. 11
5
IMPROVING THE TIMELINESS AND COMPLETENESS OF NOTIFICATIONS AND OTHER
INFORMATION FLOWS ON TRADE MEASURES UNDER THE SCM AGREEMENT. 12
6 Constant dollar
methodology for graduation from scm annex vii(b). 16
7 PERMANENT GROUP OF
EXPERTS – election of an expert. 17
8 Implementation of the
scm agreement: creation of a working group on the implmentation of countervailing
measures – item requested by brazil. 17
9 non-notification of
China of alleged subsidies contained in the 2011, 2014 and 2015 requests by the
United States under article 25.10 of the scm agreement – item requested by the
United States. 21
10 non-notification by
China of alleged subsidies contained in the 2016 request by the United States
under article 25.10 of the scm agreement – item requested by the United States. 25
11 elimination of export
subsidies for textiles and apparel by India pursuant to article 27.5 of the scm
agreement – item requested by the united states. 28
12 Government support
for the canadian aircraft industry – item requested by the United States. 29
13 enhancing fisheries
subsidies transparency – item requested by the United States 29
14 Other business. 33
14.1 CV Measures by the EU on Ductile Cast
Iron Tubes and Pipes from India – Item requested by India 33
14.2 Japanese Government Support for the
Development of Regional Aircraft– Item requested by Brazil 34
14.3 CVD Investigations by the US on
Hot-Rolled and Cold-Rolled Steel Products from Brazil – Item requested by
Brazil 35
15 date of next regular
meeting.. 37
16 election of officers. 37
3. The Chair noted that, in
accordance with the Committee's procedures (G/SCM/W/293/Rev.1), the new
legislative notifications on the agenda were those that had been circulated in
all three languages not less than six weeks before the meeting. The deadline
for written questions on these notifications had been 4 April 2016.
4. Oral questions could be asked at
the meeting, and any Member wishing to receive a written answer to any such
question would have to submit its question in writing to the Member concerned
and to the Secretariat not later than 16 May 2016. Written answers were due not
later than 6 June 2016.
5. The primary review of the
notifications would be held in the Committee on Anti-Dumping Practices, where
all horizontal issues in addition to anti-dumping issues would be addressed.
Members thus were requested to limit their questions in this Committee to those
specifically related to countervailing measures.
6.
Written questions and answers with respect to these notifications can be
found in:
·
G/SCM/Q1/AUS/19 - questions from the United
States
·
G/SCM/Q1/AUS/20 – replies to the United States
7. The Committee took note of
the notifications, questions, and answers.
8. Although these notifications submitted by four of the Gulf Cooperation Council (GCC) Member
States appeared
separately on the agenda, the Committee decided to review them all together as
they were all about the GCC Common Law on Anti-Dumping,
Countervailing and Safeguard Measures.
9. Written questions with respect to
these notifications can be found in:
·
G/SCM/Q1/BHR/9 - questions from
the United States
·
G/SCM/Q1/OMN/1 - questions from
the United States
·
G/SCM/Q1/SAU/3 - questions from
the United States
10. The Kingdom of Saudi Arabia, as the Chair of the GCC in 2016,
took the floor on behalf of four of the GCC notifying member States, namely
Bahrain, Kingdom of; Oman; Saudi Arabia, Kingdom of and the United Arab
Emirates and noted that they would provide oral replies in the Committee on Anti-dumping
Practices.
11. The Committee took note of
the notifications, questions, and statements made.
12. Written questions and answers with
respect to this notification can be found in:
·
G/ADP/Q1/DOM/7-G/SCM/Q1/DOM/7-G/SG/Q1/DOM/7 – questions from the United
States
· G/ADP/Q1/DOM/8-G/SCM/Q1/DOM/8-G/SG/Q1/DOM/8
– replies to questions from the United States[1]
13. The United States noted that
it would raise its questions in the Committee on Anti-Dumping Practices.
14. The Committee took note of
the notification, questions, and statements made.
15. No questions were raised in respect
of this notification.
16. The Committee took note of
the notification.
17. Written questions and answers with
respect to this notification can be found in:
·
G/SCM/Q1/KGZ/5 - questions from the United
States
·
G/SCM/Q1/KGZ/6 – replies to questions from the
United States[2]
18. The United States noted that
it would raise its questions in the Committee on Anti-Dumping Practices.
19. The Committee took note of
the notification, questions and statement made.
20. No questions were raised in respect
of this notification.
21. The Committee took note of
the notification.
22. Written questions and answers with
respect to this notification can be found in:
·
G/SCM/Q1/PAK/9
- questions from the United States
·
G/SCM/Q1/PAK/10 and G/SCM/Q1/PAK/10/Corr.1 –
replies to questions from the United States[3]
23. Pakistan noted that this notification was
about its new legislation on anti-dumping and countervailing measures passed by
the Pakistan Parliament in September 2015. Both the Anti- Dumping Act of 2015
and Countervailing Duties Act of 2015 provide an enhanced legal framework for
investigation and determination of dumping and injury.
24. Among major reforms in these acts
were the adoption of provisions on anti-circumvention measures and the
opportunity to appeal before the appellate tribunal. The changes and amendments
had made Pakistan's regulations more rule-based and in line with international
best practices. The reform of the National Tariff Commission also was part of
the agenda of Pakistan's institutional reforms.
25. The Committee took note of
the notification, questions and statement made.
26. No questions were raised in respect
of this notification.
27. The Committee took note of
the notification.
28.
Written questions with respect to this notification can be found in:
·
G/ADP/Q1/CMR/3-G/SCM/Q1/CMR/3-G/SG/Q1/CMR/3 – questions from the United
States
29. To date, no written answers have
been submitted.[4]
30. The Chair, recalling the
Committee's agreed procedures, informed Members that for new legislative
notifications to be placed on the agenda of the October 2016 meeting, they
would have to be circulated in all three languages by 12 September 2016.
31. Kazakhstan, Kuwait, and the United
States had submitted new legislative notifications which would be on the agenda
for review at the October 2016 meeting. Written questions concerning
notifications to be reviewed should be submitted to the notifying Member and to
the Secretariat by 3 October 2016.
32. Any Member wishing to place a
previously-reviewed legislative notification on the agenda of the Committee's
October 2016 regular meeting should submit to the Member concerned and to the
Secretariat written questions concerning that notification not later than 12
September 2016. The Member receiving such questions should submit its written
answers not later than 10 October 2016.
33. The Secretariat would circulate the
usual triple-symbolled document containing these and the other pertinent
deadlines shortly after this meeting.[5]
34. Some Members had yet to submit any
notification concerning legislations. The Chair underlined the importance of
these notifications in terms of transparency, and recalled that for many
Members all that would be required was a single nil notification. For any
Members that conducted countervailing duty investigations but had not yet
notified their legislation, it was all the more important for the Committee to
have the opportunity to review and ask questions about that legislation.
Therefore, the Chair urged all Members that had not yet made a legislative
notification to do so as promptly as possible.
35. The Chair referred to the document
G/SCM/N/18/Add.41 which contained the latest revision of the list of
authorities competent to initiate and conduct investigations within the meaning
of Article 25.12 of the SCM Agreement, and invited all Members with such an
authority to submit the required notification pursuant to Article 25.12 of the
SCM Agreement, or to review and update as necessary their previously-submitted
notifications.
36. The Committee took note of
the Chair's statement.
37. The Chair recalled that
document G/SCM/N/298 and G/SCM/N/298/Suppl.1 had invited all Members to submit,
not later than 15 February 2016, their semi-annual reports under
Article 25.11 of the SCM Agreement of countervailing duty actions taken in
the period 1 July – 31 December 2015. Document G/SCM/N/298/Add.1
provided the current status of Members' reporting for that period.
Paragraph 1 of the document listed those Members reporting countervailing
duty actions during the period. Paragraph 2 listed the Members that had
notified having taken no countervailing duty action during the period.
Paragraph 5 of the document listed the 36 Members that had submitted a one-time
notification that they had no investigating authority, had taken no
countervailing actions to date, and did not anticipate taking any such actions
in the foreseeable future.
38. The one-time notifications served a
useful transparency function, as they assisted non-active Members to meet their
notification requirements in a streamlined way. Any eligible Member that had
not already done so thus was urged to submit a one-time notification. The
Secretariat was ready to assist any Member in this regard.
39. Unfortunately, the very large
number of Members listed in paragraphs 3 and 4 of the document had not
submitted a semi-annual report for July - December 2015. They were urged to do
so as soon as possible.
40. No comments or questions were
raised concerning the semi-annual reports of Australia, Brazil, Canada, Egypt,
European Union, India, Kazakhstan, Mexico, Peru, or Turkey.
41. With respect to the semi-annual
report of China, the United States raised
questions regarding the countervailing duty investigation against dry
distillery grains (DDGS) which was a by-product of the production of ethanol,
regarding two tax programmes that were included in the investigation, as well
as the upstream subsidy allegation.
42. The United States noted that in the
course of consultations prior to the initiation of the investigation, it had
informed China that the two programmes in question had been terminated, and
provided China with a translated copy of the statute that had terminated the
programmes. Nonetheless, these programmes had been included in the
investigation. The United States requested China to explain why it had not
taken into account the termination of these programmes as evidenced by the
statutory documentation.
43. Regarding the upstream subsidy
allegation, the petition had alleged that the ethanol producers had received
certain subsidies that had benefited DDGS as well. The petition also had
alleged that certain primary agricultural products such as corn were
subsidized. The United States, however, was of the view that no evidence had
been submitted that the subsidy had been provided to the corn farmers or that
the benefit in the primary agricultural product had been passed through to the
ethanol or DDGS producer. The United States questioned whether there had been
any particular reason that convinced the investigating authority to include the
primary agricultural programmes in the investigation.
44. The United States stated that the
allegation that a subsidy to corn farmers had passed through to DDGS and
ethanol producers was essentially based on a simple assertion, and requested
China to explain whether there was other argumentation or evidence in this
regard.
45. China stated that prior to the investigation it had
conducted consultations with the United States on 29 December 2015, and
that the investigation had been initiated on 12 January 2016. As the
case was still ongoing China's comments were preliminary. China and the United
States had already exchanged views, and China would carry out the investigation
strictly in line with its trade remedy laws and regulations, as well as the WTO
rules, in an objective manner. China also would keep a high level of
transparency in this case.
46. China believed that with
cooperation of the interested parties, the investigating authority would make a
fair and transparent determination after careful investigation. It would
forward any written questions to its capital and provide a detailed reply.
47. The United States reiterated
that these were important and interesting issues and asked what the responding
country could provide at the consultation stage to convince the investigating
authority that the programme had been terminated or not used. It was difficult
to make a decision with little evidence, but if there was an argument that a
programme had been terminated and a statute showing the termination, this was
good evidence not to include the programme in the investigation. With respect
to upstream subsidies, the United States noted that these were very difficult
issues, especially in respect of the pass through of subsidy benefits between
unrelated parties. These issues deserved extremely careful consideration.
48. China reiterated that the investigation would be
conducted in a fair and transparent way, as required by the WTO rules, and the
practices usually adopted by many Members.
49. With respect to the semi-annual
report of the Russian Federation, Ukraine
expressed its concern over countervailing duty investigation initiated by the
Eurasian Economic Commission on 26 December 2015 on ferrous silicon manganese
originating in Ukraine and exported to the territory of the Eurasian Economic
Union. The investigation had been initiated on the basis of an application
which had not been submitted by or on behalf of the domestic industry as
required by Article 11.1 of the Agreement on Subsidies and Countervailing
Measures. Ukraine requested the members of the Eurasian Economic Union -
Armenia, Kazakhstan, Kyrgyz Republic and the Russian Federation - to terminate
the investigation without application of any definitive countervailing measures
pursuant to the provisions of Article 11.9 of the SCM Agreement.
50. The Russian Federation
indicated that the investigation was ongoing and that all interested parties
had the right to provide comments in the course of the investigation. The
investigation had been initiated completely in accordance with the internal
legislation of the Eurasian Economic Union and in full conformity with WTO
obligations of the Russian Federation. The questions and concerns of Ukraine
would be fully addressed in the final report of the result of the
investigation.
51. Regarding the semi-annual report of
Ukraine, the Russian Federation
expressed its disappointment due to the imposition of the final measure against
passenger cars originating in the Russian Federation. The Russian Federation
reiterated that the application of Ukrainian producers had not included
sufficient evidence and the information submitted by the Russian exporters
regarding the existence of the alleged subsidies and benefits had not been
taken into consideration. In addition, Ukraine had failed to hold consultations
as required by Article 13 of the SCM Agreement because it had not provided
access to non-confidential evidence used for the initiation of the investigation.
Finally, it had become a bad tradition for the Ukraine in its trade defence
investigations not to disclose or adequately explain the methods used to
calculate the duties as well as not to provide any explanations regarding
relevant injury factors.
52. Unfortunately, the investigation
had been conducted in violation of Articles 11.2, 11.3, 12.7, 13.4, 14 and 15
of the SCM Agreement. The Russian Federation urged Ukraine to reconsider the
measure and to bring it in conformity with the WTO rules.
53. Ukraine indicated that the investigating authority
had made positive determination on the existence of subsidies, material injury
and the causal link between the subsidized imports and the material injury. The
Russian Federation had been invited to consultations before the initiation of
the investigation. Ukraine had been provided the opportunity to continue to the
consultations which had been held on 27 November 2014 and 24 October 2015 in
accordance with Article 13 of the SCM Agreement.
54. During the investigation, Ukraine
had provided the opportunity to all interested parties to present evidence,
participate in public hearings and provide written comments on the
investigation. The main findings and conclusions of the investigating authority
had been sent to all interested parties including the competent authorities of
the Russian Federation. Thus, Ukraine had acted in compliance with the
provisions of Article VI of GATT 1994 and the SCM Agreement.
55. With respect to the semi-annual
report of the United States, the Russian Federation
stated that the United States had imposed a provisional measure against the
imports of cold-rolled steel products originating in Russia on 22 December
2015. The major part of the duty had been to countervail a subsidy in the form
of provision of natural gas for less than adequate remuneration. The Russian
Federation indicated that the United States' conclusions were erroneous and
raised systemic concerns because the United States' approach was based on three
essential, but frequently flawed determinations on financial contribution,
benefit, and specificity.
56. Regarding the financial
contribution, the Russian Federation indicated that provision of natural gas by
the public joint stock company, GAZPROM, could not constitute a financial
contribution by a government or a public body, by its nature. GAZPROM was one
of the natural gas producers functioning under the respective corporate law and
operating as a profit seeking enterprise. As it was a natural monopoly of
general infrastructure of gas transportation, it was subject to additional
state control in order to ensure that the company did not abuse its market
position. According to the WTO jurisprudence, however, in order to be a public
body, an entity should be vested with government authority. The United States
deemed GAZPROM vested with such an authority because of the partial state
ownership which did not demonstrate that the government was exercising a
meaningful control over its business, let alone giving an authority to provide
financial contribution on behalf of the government. Thus, the United States had
failed to establish the existence of financial contribution properly in
accordance with Article 1 of the SCM Agreement.
57. With respect to calculation of an
alleged benefit, the Russian Federation stated that the United States had
indicated at the previous meeting that its practice of benefit calculation had
been brought in consistency with the Appellate Body decisions. In reality, the
United States had completely ignored the viable Russian market benchmarks in
determining the adequacy of remuneration for natural gas in Russia.
58. These were prices for natural gas
supplied by companies in their unregulated segments and prices established on
the Russian commodity exchange which were profitable for sellers. Having
rejected viable in-country benchmarks, the United States had elaborated its own
world market price benchmark based on prices from the European and Asian
markets. World market prices for natural gas did not take into account the
differences in natural gas endowments between states and particularities of
different supply systems. In addition,
Russia reminded the AB's finding which seemed to be forgotten by the United
States: "Countervailing measures must not be used to offset differences in
comparative advantages between the countries". Due to the use of out of
country benchmarks, the provisional measures, contrary to the Appellate Body's
findings, were offsetting differences in competitive advantage between Russia
with its large natural gas surplus and numerous other markets with sizeable
natural gas deficits. Russia believed that United States' actions were in
breach of Article 14(d) of the SCM Agreement in which the adequacy of
remuneration was prescribed in relation to prevailing market conditions in the
country of goods provided or purchased.
59. Regarding the specificity, the
United States had not considered the Russian gas market as a whole. Two major
groups of consumers, namely household and power supply and heating, had been
totally excluded from the analysis and the shares of gas consumption by
metallurgical, agro-chemical and cement industries had been aggregated and
compared with only one category, "other consumers". In reality, the
share of metallurgical sector in the total volume of gas consumption in Russia
had been only four% in the period of investigation. Considering this figure as
pre-dominant was irrational. Russia stated that the use of this methodology had
been result-oriented and inconsistent with Article 2.1(c) of the SCM Agreement.
60. Russia reiterated that the
regulation of prices was a natural and indispensable instrument of state
economic policy. Normally, it was used in order to manage resources effectively
to prevent monopolies from abusing market situations, create conditions for stable
supply of goods and services, etc. Nevertheless, as it had been stated at the
previous meeting, the United States' practices in countervailing investigations
created an unbearable lose-lose situation; where on the one hand the absence of
price regulation did not allow the country to overcome market failures
effectively, on the other hand the existence of such regulation created
presumption that the exported goods were subsidized. The Russian Federation
thus urged the United States to conclude the investigation in a WTO-consistent
manner.
61. China shared the Russian Federation's concerns
about the investigation practices of the United States. The United States'
findings on the provision of inputs for less than adequate remuneration were
inconsistent with the WTO rules. The US authority simply defined a company with
state ownership as a public body or a private company as a public body
controlled by the government because of the existence of partisan organization
in the company, or the personal political background of the company executives.
China also noted that the US authority often applied external benchmarks when
calculating the benefit of subsidies, which exaggerated the margin of
subsidies. Despite the tremendous efforts and the legal arguments made by China
and Chinese companies during the investigations, the US authority often used
adverse facts available. China reiterated that trade remedy investigations had
not to be used as instruments of protectionism and urged the United States to
act strictly in line with the WTO rules and to refrain from the abuse of
discretion.
62. India joined the Russian Federation and stated that
it had systemic concern on the matter. It noted that price regulation was a
very important instrument of economic policy and should not be considered as
financial contribution by the government. Such policies should not be
considered as having any cause and effect link for the purpose of the SCM
Agreement and accordingly, the product exported should not be countervailed
solely on the basis of existence of price regulation. The mere fact that the
price was regulated did not mean that there was an element of subsidy involved
and it was a specific subsidy. While investigating exports of steel products
from India, the US authority had considered granting iron ore mine leases by
the government as provision of iron ore free and incorrectly applied the
methodology of less than adequate remuneration. India had reiterated that not
each and every action of a government could be considered as countervailable
subsidy unless the cause and effect on the account of the government was
clearly established by investigators and such a practice was inconsistent with
the SCM Agreement.
63. The Kingdom of Saudi Arabia
joined the views expressed by China and India.
64. The United States stated
that it conducted all countervailing duty investigations in an open and
transparent manner in accordance with US law and its international obligations,
and took into account the views of all interested parties.
65. Regarding the concerns raised on
public body determinations, the evidence in those cases had strongly supported
the findings and was consistent with findings by the WTO for example in DS379
and DS437. The US also noted that it had modified its practice for determining
whether entities were public bodies to specifically take into account the DS379
decision, and this modification had been fully reflected in the ongoing
proceedings.
66. Regarding the comments on the
United States' selection of market benchmarks to determine the provision of
inputs for less than adequate remuneration, the US noted that this issue was
currently subject to WTO implementation proceedings and as part of that
proceeding the US was working diligently to bring its countervailing duty
measures concerning imports in this case, particularly from China, into
compliance with its WTO obligations.
67. With respect to China's comment
concerning the use of facts available, the United States noted that each
instance where it had resorted to facts available had been fully consistent
with its obligation under Article 12.7 of the Agreement. There were wide ranges
of circumstances that lead to the application of facts available, including the
complete non-cooperation by some company respondents or failure to provide
information specifically requested. Facts available were applied only in those
instances where a party did not cooperate.
68. Regarding Russia's comments on
investigation of cold-rolled steel flat products, the US noted that this
investigation was nearing its conclusion and a final determination would be
issued shortly. The United States would give full consideration to the views of
all interested parties in reaching its final determination. The US also noted
that the information request in countervailing duty investigations could be
extensive and difficult to comply with and the Russian's efforts in this regard
had been exemplary. With respect to Russia's comment on natural gas pricing,
the US indicated that its preliminary determination had been fully consistent
with its WTO obligations. The US authority had properly determined that GAZPROM
was a public body relying more on simple government ownership and thus provided
financial contribution in the form of natural gas. The US authority had also
found that the domestic market had been distorted and that resort to external
benchmark for the benefit analysis had been appropriate. Gas pricing in Russia
was heavily regulated by the government and dominated by government owned
suppliers.
69. The US disagreed with India's
comments that the government could control prices and that they could not be
considered subsidies.
70. The Committee took note of
all semi-annual reports submitted, and all statements made.
71. The Chair reported that
since the Committee's October 2015 regular meeting, notifications under Article
25.11 of preliminary and final countervailing duty actions had been received
from Australia, Canada, the European Union, India, Peru, Ukraine, and the United
States. Those notifications were listed in documents G/SCM/N/296-297 and
300-303.
72. Regarding Peru's notification, Argentina
stated that it had posed written questions in document G/SCM/Q5/PER/1 which
highlighted its concerns over the investigation conducted by the Peruvian
authority. Argentina noted that both the measure imposed and the investigation
it relied on contained serious shortcomings which made both of these
inconsistent with the provisions of the Agreement.
73. Peru stated that it's Minister of Foreign Trade
and Tourism closely followed anti-dumping and countervailing duty
investigations, in Peru and abroad, respecting the autonomy of the
investigating authorities in all cases. Peru's written replies to the questions
posed by Argentina would be submitted on that day.[6]
74. In the course of the investigation,
the Peruvian investigating authority (INDECOPI) had determined the existence of
financial contributions by the Government of Argentina that conferred a benefit
on the production of biodiesel and that were specific, and also had found that
the increase in imports of subsidized biodiesel had had a negative impact on
the prices of the domestic product and on the performance of the Peruvian
domestic industry. INDECOPI had not found other factors that explained or
contributed to the injury experienced by the domestic industry.
75. Regarding the Supply Agreement that
benefitted the Argentinian industry, INDECOPI determined that it constituted a
financial contribution in the form of "purchase of goods" as defined in
Article 1.1(a)(1)(iii) of the SCM Agreement. The purchase of goods was not
carried out directly by the government, but instead indirectly, through private
bodies that the Government of Argentina had entrusted with such functions, as provided
for in Article 1.1(a)(1)(iv) of the Agreement.
76. The Supply Agreement conferred a
benefit to biodiesel producers in Argentina on their internal sales. When
determining the internal price of biodiesel in Argentina and the domestic sales
quota for each producer, the Supply Agreement allowed the producers to obtain
commercial conditions better than they would have obtained in the absence of
this regulation. When selling in the domestic market, the producers gained
access to the subsidy which allowed them later to produce biodiesel that could
be sold in either the domestic or external markets.
77. Therefore, to calculate the amount of the
subsidy, the different price conditions had been considered, as well as the
size of each producer's internal sale quotas pursuant to the Supply Agreement,
and the total volume of biodiesel produced by each producer.
78. The final report described in
detail all of the information and documentation presented by the Argentine
companies that had been used by INDECOPI to determine the amount of subsidies, and
which had been duly verified according to Article 12.5 of the SCM Agreement.
79. Regarding the second measure, the
tax on minimum presumed income, the final report had noted that the provisions
of Law 26.093 constituted a financial contribution in the form of a direct
transfer of funds as defined in Article 1.1(a)(1)(i) of the SCM Agreement.
80. As indicated in the final report,
the provisions of this law granted Argentine biodiesel producers greater
financial resources which enabled them to enjoy greater liquidity and as a
result, improve their financial situation.
81. The amount of the subsidy had been
calculated on the basis of accounting and financial information supplied by the
Argentine companies that had cooperated in the proceeding, as well as
information regarding the implementation of Law 26.093 and the existence of
beneficiaries which had been duly presented by the Government of Argentina. Only
four out of six enterprises that had been asked to provide affidavits of
payment of the minimum presumed income tax had presented them, along with
information allowing for detailed verification of the calculation of the tax
payments, including any additions, deductions and exemptions.
82. Regarding injury, in accordance
with Article 15 of the SCM Agreement, INDECOPI evaluated the
domestic industry's economic indicators over the entire investigation period
(January 2009-June 2014), considered the intervening trends, and paid particular
attention to what happened in the final part of that period. In that regard, it
had been found that
the installed capacity in domestic industry, domestic sales, market share, profits,
and inventories had shown a notable downward trend during the final, most
recent part of the period of investigation. By contrast by the end of the
period of analysis, Argentina had consolidated itself as almost the only
supplier of biodiesel in the domestic market.
83. Finally, INDECOPI had found the
existence of a causal link between the imports of biodiesel from Argentina and
the deterioration of the domestic industry's condition. INDECOPI also had
analysed other factors that might have influenced the trends in the indicators
that reflected injury, as required by Article 15.5 of the SCM Agreement. In
this regard, the importing companies had not presented the evidence necessary
to justify their objections regarding the quality of the product.
84. Argentina stated that the replies would be
analysed in detail by its capital.
85. India referred to the document G/SCM/N/302 and
raised its systemic concerns regarding the investigation that had been
initiated by the United States in February 2016 on imports of new pneumatic
off-the-road tyres from China, India and Sri Lanka. In the course of
investigation, the USITC had made its preliminary findings in March 2016 in
which it had done cross-cumulation to arrive at the injury margin. Although
only Sri Lanka had been subject to countervailing investigations, imports from
Sri Lanka and India had been cumulatively assessed while calculating
anti-dumping injury on account of India's exports to the US. India noted that
cross-cumulation was inconsistent with the WTO provisions in light of the
ruling in WTO dispute DS436 US - CVD Measures on
Certain Hot Rolled Carbon Flat Steel Products originating from India.
86. In that dispute, the AB had ruled
that the US practice of cross-cumulation of imports for injury analysis was
inconsistent with Article 15 of the Agreement because the imports from
countries subject to CVD investigations, could not be cumulated with the
imports from other countries subject to AD investigations. India requested the
US to explain why the practice of cross-cumulation had been repeated in the
instant case despite the WTO jurisprudence on the matter.
87. Regarding another systemic issue,
India noted that and in the case of corrosion resistant steel products from
India, the USITC had initiated an investigation on the same day as the petition
had been filed, without waiting for the USDOC to examine the accuracy, adequacy
and sufficiency of evidence in the petition and the standing of the domestic
industry. India stated that this did not comply with the SCM Agreement and
called the US to fully align its practices with the Agreement and the relevant
jurisprudence for uniformity, predictability and stability in its policies.
88. With respect to the issue of
cross-cumulation, the United States requested India to submit written
questions. Regarding the initiation of the investigation by the USITC, the US
indicated that there might be a wording issue. The US Department of Commerce
was responsible under US Law for the initiation of a countervailing duty case
and the ITC would not conduct an investigation, until the Department of
Commerce had initiated a case. The US noted that the ITC would start its
information gathering processes as soon as they got the petition because in the
US the preliminary determination on injury was done on the forty-fifth day
which was very quick for preliminary determination.
89. India indicated that it would submit written
questions on cross-cumulation.
90. The Committee took note of
the notifications, questions and answers, and statements made.
91. The Chair recalled that
Members that had been granted extensions under Article 27.4 pursuant to the
procedures in WT/L/691 were required, under paragraph 2(c) of the procedures,
to submit transparency notifications in respect of each year of the final
two-year phase-out period, i.e. calendar years 2014 and 2015. The deadline for
the notification pertaining to 2014 was 30 June 2015. A reminder to this
effect had been circulated in document G/SCM/N/290/INF.
92. To date, Belize, Costa Rica,
Dominica, El Salvador, Guatemala, Jamaica, Jordan, Mauritius, and Saint Vincent
and the Grenadines had submitted these notifications, which had been circulated
in the G/SCM/N/290 series. The Chair reminded the other Members with extensions
to submit their notifications covering calendar year 2014 as soon as possible.
93. Furthermore, given that 2015 was
the final year of the two-year phase-out period pursuant to the previously
mentioned procedures, the Members with extensions needed to have completed the
elimination of their export subsidies by 31 December 2015. They also had to provide a final transparency
notification in respect of calendar year 2015 not later than 30 June 2016. A
reminder concerning that final round of Article 27.4–related notifications had
been circulated in document G/SCM/N/299.
94. The Dominican Republic
explained that it had not submitted a notification for 2014 due to confusion
and noted that the notification had been sent to the Secretariat on 8 April
2016. It would also submit the appropriate notification before 30 June 2016.[7]
95. New Zealand brought attention the 2015
deadline for eliminating export subsidies and to submit formal notifications in
June 2016. It noted that the
elimination of export subsidies was a long running issue and thanks to the
Ministerial Conference in Nairobi Members were looking forward to eventually
drawing this issue to a conclusion across the WTO essentially as this
prohibition applied to agriculture and non-agriculture goods. Transparency was
an important factor both in supporting implementation and full monitoring of
implementation; therefore New Zealand acknowledged the recent reforms that had
been undertaken and notified by Members but also noted that there were still a
number of notifications outstanding. New Zealand invited the relevant Members
to submit their final 2016 notifications in a timely manner so that Members
could be informed about the situation in the next meeting of the Committee.
96. The United States indicated
that this had been a long journey, starting back in 2002, but the extensions
had come to an end. Accordingly, all extension recipients should have
terminated their programmes by the time. The US asked those members, who had
not yet terminated their programmes, to do so as soon as possible. It noted
that under the last extension decision, each extension recipient was expected
to notify the Committee that the export subsidy at issue had indeed been
terminated. In this regard, the US asked those members who had not yet notify
that, to do so as soon as possible.
97. The Committee took note of
the statements made.
98. The Chair recalled that
since the request of the Chairman of the Trade Policy Review Body in spring
2009, the Committee had been discussing, at formal and informal meetings,
"ways to improve the timeliness and completeness of notifications and
other information flows on trade measures". The substance of those
discussions was reflected in the minutes of the previous meetings.
99. The Chair recalled that at
Committee's October meeting a number of Members had indicated their willingness
to continue discussions on ways to improve timeliness and completeness of
notification obligations under the SCM Agreement, with the notification of
subsidies being the most fundamental. In this regard, there were three topics
to cover under this agenda item, the status of Members' notifications of
subsidies, the Australian suggestion to add a new annex to the document on the
status of Member's notifications; and the US proposal regarding a written
process for questions and answers under Articles 25.8 and 25.9 of the SCM
Agreement.
100. Since 2009, the Secretariat had
prepared and updated a background note (G/SCM/W/546/Rev.7 and Corrigendum 1) at
the request of Members, providing a snapshot of the level of compliance with
the various notification obligations under the SCM Agreement since 1995.
101. Unfortunately, compliance with the
obligation to notify subsidies remained low. Ninety-eight Members had not made
their 2015 new and full subsidy notification for which the deadline had been 30
June 2015. Sixty-seven Members still had not made their 2013 new and full
subsidy notification, although the deadline had been nearly three years
earlier. Further, fifty-seven Members still had not made their 2011 notifications,
which had been due more than four years earlier. Many of these Members either
had never notified or had done so only in the distant past. The chronic low
compliance with this fundamental transparency obligation constituted a serious
problem in the proper functioning of the Agreement.
102. The Members that had not yet made
their 2015 notifications were: Angola; Antigua and Barbuda; Argentina; Bahrain,
Kingdom of; Bangladesh; Barbados; Belize; Benin; Bolivia, Plurinational State
of; Botswana; Brazil; Brunei Darussalam; Burkina Faso; Burundi; Cabo Verde;
Cambodia; Cameroon; Central African Republic; Chad; Colombia; Côte d'Ivoire;
Cuba; Democratic Republic of Congo; Djibouti; Dominican Republic; Egypt; Fiji;
Gabon; the Gambia; Georgia; Ghana; Grenada; Guatemala; Guinea; Guinea-Bissau;
Guyana; Haiti; Honduras; Iceland; India; Indonesia; Israel; Kazakhstan; Kenya;
Kuwait, the State of; Kyrgyz Republic; Lao People's Democratic Republic;
Madagascar; Malawi; Malaysia; Maldives; Mali; Mauritania; Moldova, Republic of;
Mongolia; Morocco; Mozambique; Myanmar; Namibia; Nepal; Nicaragua; Niger;
Nigeria; Oman; Pakistan; Panama; Papua New Guinea; Paraguay; Philippines;
Russian Federation; Rwanda; Saint Kitts and Nevis; Saint Lucia; Samoa; Saudi
Arabia, Kingdom of; Senegal; Seychelles; Sierra Leone; Solomon Islands; South
Africa; Sri Lanka; Suriname; Swaziland; Tajikistan; Tanzania; The Former
Yugoslav Republic of Macedonia; Togo; Tonga; Trinidad and Tobago; Tunisia;
Uganda; Uruguay; Vanuatu; Venezuela, Bolivarian Republic of; Viet Nam; Yemen;
Zambia; and Zimbabwe.
103. The Chair invited the Members that
had not yet submitted their 2015 notifications to provide an update to the
Committee on their progress in preparing these notifications.
104. The Russian Federation
stated that it had submitted its new and full subsidy notification covering the
period of 2013-2014 the day before.[8]
105. The Chair urged Members that
had not yet submitted their 2015 notifications to do so, and recalled that the
Secretariat continued to be available for enquiries about compliance with
notification obligations. The Secretariat had assisted many Members in the past
and Members finding themselves unable to comply with their obligations were
encouraged to consult the Secretariat. There was a range of resources that delegations
could draw upon in working to rectify the situation, including the Secretariat
Handbook on Notification Requirements for the SCM Agreement and the two
Geneva-based Internship Programmes coordinated by the Secretariat.
106. The European Union noted that
although it had submitted notifications covering the period up to 2014 for all
its Member States, it had been listed as 2011-2012 for some of the EU Member
States in Annex B of the compendium document.[9]
107. The Chair recalled that at
previous meetings, the Committee had discussed a proposal by Australia to add a
new annex to the compendium document which would list all Secretariat
calculations of export competitiveness pursuant to Article 27.6.
108. Australia recalled its interventions at
previous meetings and reiterated that the Secretariat's Background Note was a
very useful document. What it had previously proposed was to have a more
complete and balanced document which approached the notifications and
obligations equitably. The last sentence of paragraph 19 of the Background
Note, made a comment that no developing Member had made such a notification.
Australia was seeking to include an annex similar to that for Article 25.8 to
reflect whether a Member had requested a computation from the Secretariat.
109. Australia also recalled that it had
previously raised the issue of Annex C about the request for information under
Article 25.8. At the moment, Annex C referred the requesting member, the member
concerned and the notification provided. In fact, the document references were
the request for information from Members none of which had actually responded.
It was difficult to find responses of Members. In this regard, Australia
suggested putting the replies in that document. At the moment there was a
notification provided which suggested that it was the reply document. However,
in fact it was the notification asking for the information. Australia noted
that it had raised this issue at least three years ago and called Members to
share their views on adding a further annex to that document.
110. The United States expressed
its support for the Australian proposal with respect to both export
competitiveness requests and the issue of Annex C.
111. India reiterated that it attached great importance
to transparency and notification obligation for smooth functioning of the
multilateral trading system which was an important component of the SCM
Agreement. It had recently submitted an additional notification on its
fisheries subsidy programme and it was also working on its latest new and full
subsidy notification.
112. With respect to the Australian
proposal India asked Australia to explain the exact nature of its suggestion.
It specifically asked what would be reflected in the new Annex proposed by
Australia. According to India, under Article 27.6, export competitiveness might
be determined either on the basis of a notification by the developing member at
issue, or on the basis of the calculation conducted by the Secretariat at the
request of any Member. The present report prepared by the Secretariat correctly
reflected that no developing member had made any such notification. While there
might have been requests to the Secretariat and the Secretariat might have
calculated export competitiveness pursuant to Article 27.6, these could not be
considered as notification by Members and in India's view, the purpose of the
document was to list out the notification obligations contained in the SCM
Agreement. Regarding its proposal on Annex C, India asked Australia to clarify
whether it was suggesting to replace the last column which listed out the
questions or the request with the responses by Members.
113. Norway noted its concern over the lack
of compliance with notification obligation which was a serious challenge for
the proper functioning of the Committee and reiterated its support for the
Australian proposals.
114. Australia noted that the existing Secretariat
document described a notification and it believed that a request from any WTO
Member for a computation constituted a notification to other Members. Australia
was simply seeking to increase the transparency of how often the provision had
been utilised by Members. The document referred to notification numbers and
Australia stated that it was sometimes difficult to find the relevant
documents. Thus, it would be useful to have an annex to show which Member had
requested a computation and the notification number, similar to the one for
Article 25.8. Australia was not seeking to attach actual computations to the
document. Regarding India's question on Article 25.8, the third column would be
the Member's reply, because the heading at the moment was titled
"Notification Provided". In Australia's view the heading was
ambiguous because it suggested that the notification reference was a reply
which was not the case.
115. China noted that it would share its comments on
that issue when the next agenda item on another proposal on Article 25.8 would
be discussed.
116. India noted that it would take this issue back to
its capital and it was not in a position to agree to it in this meeting.
117. The Chair recalled that at
the Committee's October 2015 regular meeting, a number of Members had indicated
their willingness to continue discussions on the proposal from the
United States (G/SCM/W/557/Rev.1) regarding the treatment of questions and
answers under Articles 25.8 and 25.9 of the SCM Agreement.
118. The United States recalled
that previously it had introduced its formal proposal according to which
written answers to initial written questions under Article 25.8 should be
provided within 60 days and that follow-up questions should be answered in
30 days. The Committee should try to reach consensus on common sense procedures
for responding to questions submitted under Article 25.8. All Members
recognized that there was a problem and the US proposal was neither radical nor
outside the bounds of what any Member should be expected to do when it received
written questions regarding its subsidy regime; namely, to respond in writing
and within a reasonable period of time, regardless of the provision under which
the questions were submitted. Several Members repeatedly had expressed support
for the proposal.
119. The proposal was not different from
the current practice of responding in writing within a reasonable time to
written questions pertaining to regular Article 25 subsidy notifications. The
shared commitment to the principal of transparency should unify Members in
support of advancing that principal in practice, by adopting pragmatic
procedures for the exchange of information as called for under Articles 25.8
and 25.9 of the SCM Agreement. The US remained willing to work with Members to
find a pragmatic solution and believed the underlying rationale of its proposal
– to enhance information flows among Members – was fundamentally sound. The US
noted that it was suggesting another idea –an informal consultation process-
that could be implemented in the context of Article 25.8 questions according to
which the requesting Member could request to meet with the responding Member to
discuss how long it might take to answer the questions raised.
120. The US indicated that it might take
more than one meeting to determine the appropriate length of time. However,
while some requests might legitimately take longer than 60 days to answer,
others might take less. The idea would be that the relevant Members would
decide between themselves as to a reasonable time-frame to provide answers.
121. The US invited Members, in
particular those who had raised the issue of capacity constraints during the
previous meetings, to provide constructive ideas on how the proposal could be
improved. The US remained flexible in finding a pragmatic solution that
satisfied the underlying objective – which the United States assumed to be
shared by all Members – of enhancing the exchange of information.
122. Japan was supportive of enhancing transparency and welcomed
the flexible and practical approach which the United States had suggested. It was looking forward to hearing
other Members' ideas and remained constructively engaged in further discussion.
123. Australia remained supportive of clarifying
procedures within the Committee in terms of the review of notifications. The US
was looking at flexible and alternative pathways to improve transparency and
had proposed an alternative approach of having informal consultations between
parties. Australia remained very supportive and was of the view that
transparency could be achieved in a collaborative environment.
124. Canada thanked the US for developing another
pragmatic approach to enhancing transparency with respect to questions and
answers and the notification process in general. It was looking forward to
further discussions and hearing from other members that might have concerns.
125. The European Union remained
supportive and was looking forward to further discussions.
126. The Russian Federation
reiterated that the US proposal could increase administrative burden on members
with complex state structures and large economies as well as least developed
Members. At the same time, it noted that compliance with transparency
obligations under the SCM Agreement was a crucial element for the effective
functioning of the WTO and it was looking forward to discussing new alternative
approach suggested by the US.
127. Chinese Taipei welcomed this practical and
feasible way to enhance transparency and was looking forward to discussing this
idea further.
128. Norway reiterated its support for the US proposal
which seemed directly relevant to improving timeliness and completeness of
notifications. Norway remained open and flexible to explore the possibility of
such a mechanism, including the new idea presented by the US.
129. New Zealand expressed its support for the US
proposal and noting the flexible approach of the US, invited members with
concerns to share their suggestions to resolve them.
130. China recalled its position on this issue at the
previous meetings and noted that in addition to capability it was also about
the legal balance established during the negotiations on the relevant articles
of the SCM Agreement. China's view was that the requirements in the US proposal
for written answers and setting compulsory deadlines were inconsistent with the
requirements of the SCM Agreement. With respect to the Australian proposal,
China noted that the title of Annex C was clear that it was about the requests
from Members. It asked how the annex could be changed as proposed by Australia
while there had no written Q&A procedures agreed by all members.
131. India appreciated the US for its
flexibility and noted that its view on this proposal had remained unchanged
because of three points one of which had been expressed by China by saying that
Members could not upset the negotiated balance between Article 25.8 and Article
25.9 by including the word "written". The requirement of a written
answer with a negotiated deadline would definitely upset the balance of the
text. Secondly, any kind of time limit had to be examined from the point of
view of practicability. It would be adding burden to countries, developing and
least developed countries in particular, whose authorities were already stretched.
Such timelines might not actually yield the results which the proposal was
seeking. Thirdly, India noted that the proposal stated that all pending
questions would automatically remain on the agenda until a written reply was
provided. This was worrisome because who would determine whether or not a
question had been appropriately answered? A situation might arise that those
questions remain on the agenda forever. Finally, India indicated that it was
going to take this proposal to its capital to see how it could sort it out.
132. Brazil noted that it attached great
importance to transparency. It
understood from the US proposal that the informal consultations between the
parties would be to agree on some kind of a deadline for the answers to be circulated
in written format. According to Brazil, that did not address the fact that had
been mentioned by China and India. The authorities in developing countries
faced overloaded work. Therefore if Members continued to seek a deadline,
finding a common ground might not be possible. Brazil also recalled India's
comment and asked who would judge whether the issue had been properly addressed
or not.
133. The United States noted that although
there were a lot of comments about the deadlines that were being imposed, and unfairness
of the deadlines, these were the exact same deadlines that Members had when
writing questions and providing answers under the normal subsidy notification
review procedures. With respect to China's comments, the US was trying to be as
flexible as it could and showed some deference to developing country members
who might need more time. Regarding the comments on keeping the unanswered
Article 25.8 questions on the agenda and the comments on deciding whether the
questions had been answered, the US had pointed out that this was done every
year and every meeting by the Secretariat. If a member did not answer the
questions posed with respect to its subsidy notification, those questions
remained on the agenda. The US noted that it was asking for the same treatment
for Article 25.8 questions and recalled that Article 25.8 was the text in the
Agreement, it was not informal rules that governed the Committee or the
Secretariat.
134. With respect to the deadlines, the
US indicated that it was trying to be as flexible as possible to have a
negotiated deadline. Answers should be provided in less than 60 days while some
questions might need more than 60 days.
135. The Chair stated that it
appeared that Members wished to continue discussions on these issues at the
next regular meeting of the Committee.
136. The Committee took note of
all of the statements made.
137. The Chair recalled that,
pursuant to the Doha Ministerial Decision on Implementation-Related Issues and
Concerns (document WT/MIN(01)/17, paragraph 10.1), Annex VII(b) to the SCM
Agreement listed Members until their GNP per capita reached US$1,000 in
constant 1990 dollars for three consecutive years. As of 1 January 2003, the
methodology set forth in G/SCM/38, Appendix 2 had applied for making those
calculations. In accordance with that Decision, since then the Secretariat had
circulated annual notes in document series G/SCM/110 updating the GNP per
capita figures for the Members listed in Annex VII(b) based on that
methodology. The most recent version, Addendum 11, had been circulated in 2014.
The Secretariat would circulate updated calculations during the summer, when
the necessary World Bank data became available.[10]
138. The Committee took note of
the Chair's statement.
139. The Chair recalled that the
term of office of Mr Zhang Yuqing as a member of the Permanent Group of Experts
was expiring and that at the present meeting the Committee should elect a new
member to replace him.
140. The Secretariat had received five
nominations to fill this vacancy, all by the announced deadline: Mr Jaemin LEE
from Korea, Ms Tsai-yu LIN from Chinese Taipei, Ms Luz Elena REYES DE LA TORRE
from Mexico, Mr Pascuale SAROLI from Canada, and Ms Lanye ZHU from China. The
Chair had conducted a process of consultations to hear the views and
preferences of Members and had also received a number of written expressions of
view. A very large number of Members, spanning the entire Membership in terms
of geography and level of development, had expressed views in this matter.
141. The Chair indicated that Members'
expressions of preference had been clear. Of the five candidates, one – Ms Luz
Elena Reyes de la Torre – had received the most support by a considerable margin.
He recalled that he had explained the procedures he had followed and shared the
results of the consultations with the Membership in a transparency session held
on 4 April 2016. On that date, he had circulated a fax to Members
summarizing the process and the outcome of his consultations. In that fax, he
had asked any Member that had not been able to join a consensus around the
candidate who had received the most expressions of support,
Ms Luz Elena Reyes de la Torre, to so inform him in writing via the
Secretariat by 11 April 2016. He also had noted that Members not expressing any
view would be considered to agree to join the proposed consensus.
142. He recalled his fax dated 13 April
2016 through which he had shared with the Membership that no delegation had
contacted him. Accordingly, it appeared that there was a consensus to elect Ms
Reyes de la Torre to the PGE. The Chair thus proposed that the Committee elect
Ms Reyes de la Torre to the Permanent Group of Experts, for
a term of office to expire in spring 2021.
143. The Committee elected Ms
Reyes de la Torre to the Permanent Group of Experts.
144. The Republic of Korea
expressed its appreciation for the support extended to Mr Jaemin Lee and
thanked the Chair and the Secretariat for their efforts during the consultation
process.
145. Mexico thanked the Chair as he had carried a very
difficult process in a very transparent way.
146. The United States expressed
its appreciation to the Chair for his work in seeking and developing a
consensus. It was very pleased that Members had been able to avoid the
stalemates of the past which spoke well of the membership and of the
institution as a whole.
147. Brazil stated that it was trying to address one
straightforward question – what could be done to improve the work of the
Committee and contribute to the better implementation of the
SCM Agreement. Brazil invited all Members to reflect their views on the creation
of a Group on Implementation under the Committee which could contribute to the
substantive work of the Committee and in the end to the better functioning of
the multilateral trade system. The existing activities of the Committee were
very useful for all Members in order to increase their knowledge about national
legislations and about specific investigations and certain CVD measures that
affected Members. All Members had the opportunity to review specific
notifications filed to the Committee, present questions and listen to the
justifications supporting the decisions of Members in pursuing a certain
measure. When Members were not able to agree, they had the possibility to take
the discussion to dispute settlement system which should be the last resort to
deal with differences in the interpretation of the Agreement. However, the
scenarios were different at the time being; almost half of the 507 disputes in
the WTO were related to the trade remedies agreements, including AD, SCM and
Safeguards, which only revealed the difficulty of investigating authorities all
over the world faced to interpret the multilateral disciplines.
148. The work in the Committee could
definitely contribute to avoid the spate of litigation and there might be room
for some improvement. Trade defence investigations were complex and demanded a
high degree of commitment and dedication. It was a fact that technical
discussions among the experts facilitated mutual understanding. Many Members
had already met with members of Brazilian authority in different occasions in
previous years to exchange views on a variety of technical topics related to
investigations. While these technical exchanges allowed Brazil to make other
Members understand how it proceeded in the investigations, they also had given
Brazil an opportunity to better understand how it implemented many of the
disciplines of Safeguards, Anti-Dumping and the SCM Agreements. Those
activities had decisively contributed to the quality of work by firstly
allowing Brazil to explore new approaches to technical problems that it had to
face, and secondly by providing an understanding on how each member proceeded
in its own investigations. This put Brazil in a better position to defend the
interest of its exporters involved in investigations abroad.
149. Creating such a forum of technical
exchange was not related to one specific investigation but it was based on a
horizontal topic selected in advance by consensus which would provide a chance
to learn from each other and in the end might allow Members to find a common
approach for their problems. The Membership had already accumulated some
experience with this kind of activity within the Group on Implementation in
Anti-Dumping in which Brazil had been a strong advocate for substantive
discussion and technical exchange. It could help members to better implement
the Agreement.
150. Brazil had presented this issue to
the appreciation of the Committee. Creating a Group on Implementation on
subsidies and countervailing measures would benefit all of the Membership.
Members could work on the same mandate and rules of procedure they had for the
Group on Implementation in Anti-Dumping and establish that group.
151. Costa Rica was supportive and indicated that
Brazil's proposal was interesting given the positive experiences Members had
had with respect to the Implementation of the Working Group in Anti-Dumping.
That could be useful to reproduce a group under the SCM Agreement in order to
give members a better understanding of it.
152. Referring to the similar mechanism
in the Anti-Dumping Committee Paraguay supported the proposal which
would be an opportunity to solve issues related to procedures and
notifications. It would also serve to overcome some difficulties faced by
Members, particularly developing countries. Paraguay also indicated that it
would look at the issue in more depth.
153. Colombia echoed its support for Brazil's
proposal indicating that there were good reasons to support it.
154. Egypt expressed its support for the proposal and
stated that as it had not got experience in this area and setting up this
working group could be useful for all Members.
155. Mexico supported the proposal which would serve to
increase transparency and provide opportunity for discussion between Members,
allowing discussions on different circumstances and complex situations which
arose out of the proceedings. That kind of initiative was always going to be
welcomed in order to help Members to resolve differences. Mexico reiterated its
support for the proposal and wished to know more about the scope of the
proposed group.
156. The Russian Federation
expressed its support for the proposal. According to Russia, following the
efforts of the Negotiating Group on Rules and at the tenth Ministerial
Conference in Nairobi the work on all transparency related issues pertaining to
the Anti-Dumping and SCM Agreement should be continued by the relevant
Committees. From this perspective, it
was high-time for the establishment of a Working Group on Implementation of the
SCM Agreement, similar to that existing for the Anti-Dumping issues. The
Working Group's core objective should be clarification and specification of the
provisions of the SCM Agreement, pertaining to countervailing measures in
particular. It should create neither additional obligations nor opportunities
to deviate from the existing ones. As in the case of the initiative to create a
similar mechanism for implementation of the Agreement on Safeguards,
preparation of recommendations for subsequent consideration and adoption by the
Committee on Subsides and Countervailing Measures should be the main task of
this Working Group. Its work should be concentrated to the issues of common
interest in particular where consensus could be achievable and where discussion
would be deemed helpful. Russia believed that the group would easily identify
the areas where Members could agree on and hoped for the early start of the
Group's work.
157. China recalled its intervention on Brazil's
proposal for establishing a Working Group on Implementation under the
Safeguards Committee. Bearing in mind the importance of the mandate on Rules
Negotiations it would be beneficial for all Members to enhance their regular
work in the Rules Committees. China thus supported the proposal for
establishing a Working Group on Implementation under this Committee, which
would provide more opportunities for exchange of experience on laws and
practice of CVD investigations. It would be helpful in establishing consensus
among Members on how to clarify and improve the rules of trade remedies as
required by their mandate.
158. Chile supported the proposal and looked forward to
discussing the details of it.
159. The Republic of Korea
thanked Brazil for its proposal and efforts to enhance transparency and looked
forward to further discussions on it.
160. Canada supported further consideration of the
proposal, as those types of information exchanges were useful for promoting
greater transparency and understanding of others' respective systems. Given the
complexity of those proceedings it was helpful to share respective
interpretation of the Agreement and best practices. The recently reinvigorated
Working Group on Implementation in the Anti-Dumping context would inform
Members' discussion of how and in what way the Membership should expand the
Working Group on Implementation to the other Committees. At the meeting of the
Safeguards Committee there had been a suggestion that a formal proposal would
be helpful to further discussions on the issue which Canada would encourage.
161. Chinese Taipei welcomed efforts to reinvigorate
the Committee's regular work in line with Paragraph 29 of Nairobi Ministerial
Declaration to enhance transparency and looked forward to further discussions.
162. Norway indicated that in principle it supported
reinvigorating and strengthening the regular work of the Committee, in line
with the agreement of the Ministers in the 10th Ministerial
Conference. It welcomed any proposals to this end. Of course a working group
should be established only if its existence was justified and it could
contribute positively and indeed actively to the Committee work. With regard to
countervailing duties, this might be the case. Norway also noted that
countervailing measures were not the most frequently used trade remedy. For
this reason, Norway was still considering whether a working group with the
suggested mandate might play such an active role. Norway indicated that it
would reflect a bit further on the proposal, in light of Brazil's presentation
and other Members' reaction. It was open and flexible and looking forward to
continuing the discussions.
163. Peru looked favourably upon the idea of setting up
this kind of working group because more could be done by looking at the
practices undertaken by national authorities. It looked forward to further
details in order to make progress on this issue.
164. According to Japan, exchange
of knowledge on CVD implementation was important for all Members. Japan
suggested that Members could discuss other issues raised in the Committee such
as transparency within the proposed group. It was looking forward to further discussions
on the scope of this group.
165. Australia noted that it attached great
importance to transparency. It was prepared to discuss this proposal further,
but there were a couple of points which were also raised by some of the other
Members. Australia drew attention that this was a trade-remedy instrument that
fewer Members utilized; therefore a better clarity on the scope of the working
group was needed. There were similar procedures between countervailing duty
investigations and anti-dumping investigations. Although they were two
different agreements, there were some similarities. Thus a working group on
implementation on countervailing duty practices might be somewhat duplicative
in terms of what was going on in the Anti-Dumping Committee. For that reason
Australia asked Brazil to provide further clarification on that issue.
Australia said that Members’ experience of the re-focused Working Group on
Implementation in the Anti-Dumping Committee, which was going very well, could
inform Members in the context of similar mechanism in the SCM Committee.
Australia was pleased to continue to consider Brazil's proposal but needed to
think clearly on whether this was a burden that would fall on a few Members,
given the recourse to the CVD mechanism and how it would operate vis-à-vis the
work in the Anti-Dumping Committee. Australia looked forward to discussing with
Brazil and other Members the precise details of the proposal.
166. The European Union indicated
that it was ready to discuss issues that would contribute to the better
functioning of the SCM Agreement and the work of the Committee. However the EU
also bore in mind that the main and more urgent problem that this group was
facing was not the CVD practices of Members but the more disturbing problem on
the lack of transparency through full notification of schemes by Members and
therefore it would be ready to discuss on that basis.
167. Morocco found the proposal useful as it would provide
more information for Members, developing ones in particular, given the
complexity of such procedures.
168. Turkey expressed its support to the proposal and
hoped that establishing a working group on implementation would enhance the
opportunity to exchange of experiences between experienced and less experienced
countries in CVD investigations. It also noted that it was looking forward for
further details.
169. Indonesia supported the proposal and stated
that the creation of the working group would be for the benefit of all Members
and increase transparency. It noted that it was waiting for the detailed
proposal.
170. The Dominican Republic
joined others who had supported the proposal. It indicated that it would be
beneficial to exchange experiences on countervailing measures and was waiting
for more details.
171. The United States noted that
the key question was "what could members do to contribute to the work of
the Committee" as asked by Brazil and it would support anything along
those lines. However, it was not what the agenda item said. The US associated
itself with the comments of Australia who had noted that the burden of this
group, as proposed, might fall on the few of Members that were doing
countervailing duty investigations much more than others. It also associated
itself with the comments of the EU, who had stated that the bigger problem with
respect to the SCM Agreement was not the countervailing duty investigations but
the poor subsidy notification record.
172. Referring to reactions of other
members, New Zealand noted that there was clearly an appetite in this
proposal which warranted further consideration. Because there had certainly
been some valid questions raised, for example on scope, it would encourage
Brazil to provide some more details around its proposal and respond to some of
those questions.
173. India had carefully noted the points made by the Brazilian
delegation regarding this proposal and it would convey it to its capital. India
understood that the idea was to set up a working group on the lines of what
Members already had in the area. Details in written form explaining the
proposal would be helpful and facilitate the consideration by its capital. As a
preliminary comment, India indicated that it was open to considering the idea
of setting up a similar kind of institutional mechanism as in the Anti-Dumping
Committee to discuss implementation-related issues regarding the SCM Committee.
All Members would agree that there were many similarities between these two
trade remedy instruments and sharing of experiences between the more
experienced and the less experienced members could be useful for all members.
India looked forward to hearing the views of other Members and participating in
further discussion.
174. Brazil noted that this was not a formal proposal. It
had wanted to test the idea with Members to see whether the Membership would at
least agree that there were ways to improve the substantive work of the
Committee. Some Members had identified other problems that were not the aim of
Brazil's proposal. The idea was to gather investigating authorities to exchange
views on some specific technical problems. It was about a better implementation
of the Agreement, trying at least to avoid questions that might be raised with
respect to specific investigations which was exactly what Members did in the
Committee, but also trying to avoid the path of litigation. Brazil recognized
that there were other issues that deserved attention but its proposal was not
an answer for all the problems that Members were facing in the Committee.
Brazil noted the high level of support for its proposal, and requested to
convene an informal session under the Committee to discuss the issue further so
that it would be easier to come back to that issue in October's meeting with
some conclusions. Brazil expressed its willingness to draft some sort of
mandate for the group, which would be the same with the one in Safeguard
Committee, to replicate the mandate for the Group of Implementation in the
Anti-Dumping Committee.
175. The United States stated
that it would only agree to move forward informally if the scope issues could
also be addressed as discussed.
176. Brazil requested the United States to elaborate what
it meant by "scope issues" and what points the US expected to be
included in that informal session.
177. The United States stated
that the European Union had been straightforward on that topic. The European
Union reiterated that it was committed to work on improving the working of
both the SCM Agreement and the work of the Committee, but noted that the more
immediate problem would be the lack of transparency on subsidy schemes of
Members. It referred to the document that the Secretariat had updated under the
item "Improving the Timelines and the Completeness of Notifications"
and drew attention to a dramatic increase in the number of Members who were not
notifying between 2013 and 2015. According to the EU this was a more urgent
matter at hand to help the work of the Committee and the functioning of the
Agreement.
178. Brazil confirmed that the point raised by the
European Union was an important issue which Members had been discussing for a
long time in the Committee. Brazil was open to discuss the issue of timeliness
and completeness of notifications; therefore it had no problems to see whether
it could be addressed in that informal session. Brazil reiterated that its
proposal was mainly directed for those Members that had investigating
authorities. It noted that some Members had raised the issue of burden for
them, but similar to the Anti-Dumping Committee it would not be mandatory to
share experience in this group. Brazil indicated that it was open to address or
discuss further the proposal on timeliness and completeness in informal
sessions and asked the Chair to convene one in the future.
179. The Chair noted that it
appeared that a number of Members were ready to explore Brazil's proposal to
create a CVD Implementation Group, and also, there were Members which had
questions and suggestions including scope of the working group. In the light of
this reaction, the Chair suggested to leave this issue to the next Chair to
determine any next steps, including the option of organizing an informal
consultation.
180. The Committee took note of
the statements made.
181. The United States recalled
that China had submitted only three subsidy notifications in its 15 years
of WTO Membership all of which had been submitted well beyond the deadlines for
the periods covered, and had been grossly incomplete. Despite previous
assurances to include sub-central measures China had yet to notify a single
subsidy administered by a local or provincial government. China's subsidy
notifications suffered not only from significant under-reporting, but also from
substantial over-reporting of programmes that could hardly be considered
"subsidies" under the SCM Agreement, such as social-welfare
programmes designed to alleviate poverty or promote employment and subsidies
for HIV medications. This inflated the already limited number of programmes
reported. Following years of frustration during which the US and other Members
had raised concerns and after fair warning, in October 2011 the US had pursued
the "counter-notification" procedure of Article 25.10, listing approximately
200 central and sub-central government subsidy measures and requesting China
promptly to notify those programmes or to explain why they should not be
notified. For transparency purposes, the US had included translated copies of
every underlying legal measure although it was not required under
Article 25.10.
182. Although the US had made many of
these points before, it was important to repeat a number of key observations
regarding the subsidy measures included in its 2011 Article 25.10 request.
183. First, over half of the programmes
mentioned therein were at sub-central level, supporting the long-standing US
position that sub-central programmes were critically important in China, as
actual implementation of central government industrial subsidy policies was
often, if not normally, the responsibility of the sub-central governments. It
also appeared that sub-central governments had a degree of freedom to implement
some programmes according to local conditions. This could complicate the nature
of any central government "programme", as sub-central governments
might provide slightly different subsidies while implementing the central
government "programme". The ongoing research by and actions of the US
continued to demonstrate unequivocally the critical role played by sub-central
governments in the implementation of subsidy policies in China. A subsidy
notification from China that did not include sub-central programmes was simply
not a full notification.
184. Second, the Committee previously
had discussed the importance of China's five-year plans. China had responded
that five-year plans and other industry plans did not establish subsidy
programmes. Whether or not this was true in a narrow, technical sense, it was
nevertheless clear that China's industrial plans were the blueprints pursuant
to which actual subsidy programmes were designed and implemented. This was
relatively clear, in particular, when examining the fishery measures that the
US had recently counter-notified.
185. Third, certain Chinese subsidy
programmes were in place for a short period, such as two years, and then were
replaced by other measures. This underscored the importance of China notifying
its subsidy programmes on a regular and timely basis. If this did not occur,
many programmes would have come and gone without any notification provided
during the time that the programme had actually been in effect. The result was little, if any, meaningful
transparency, contrary to the intention of Article 25. This could be seen with respect to the
notification that China provided in the fall of last year, where it covered
programmes in the twelfth five-year plan, but not the twelfth five-year was
over and new programmes would likely be implemented under the new thirteenth
five-year plan.
186. Fourth, insisting on a complete and
timely notification of China's specific subsidy programmes had meaningful
implications beyond the necessary transparency obligations. The subsidy
measures identified in the submission appeared to include some prohibited
export and import-substitution subsidies.
187. Fifth, the fact that the US
compiled and analysed all of the information included in its 2011, 2014, 2015
and 2016 Article 25.10 submissions – all from publicly available Chinese
government sources – cast doubt on China's repeated claims that it lacked the
ability to collect and report the same information, especially after more than
15 years of WTO Membership. China was the world's largest exporter and it was
verging on becoming the world's largest economy; claims of capacity constraints
were difficult to take seriously. In previous meetings, China had provided some
information orally and had stated that numerous programmes from the US first
counter-notification had already been notified. Although the information China
had provided was a helpful, initial response to the US counter-notification, it
fell far short of what was required. Even if the US had accepted all of China's
arguments that a certain programme had been previously notified, which it did
not, there remained many uncontested measures that China had failed to address
in any manner and another 44 measures had been added. Such technical issues
were better solved bilaterally. Unfortunately, while China's past interventions
had portrayed a sense of outrage and indignation, China seemed to be quite
reluctant to defend its arguments in a bilateral meeting.
188. All of the US counter-notifications
after 2011, in 2014, 2015 and 2016 had followed the same pattern. The US had
first submitted questions under Article 25.8, often identifying specifically
the underlying legal measure at issue. It waited for months and sometimes years
for answers that never came although under Article 25.9, a Member had to
respond "as quickly as possible and in a comprehensive manner". The
US had resorted to the Article 25.10 counter-notification mechanism only after
waiting for a response to its Article 25.8 questions for more than two years.
189. The US' previous
counter-notifications had covered important sectors for Members; particularly
noteworthy in the existing environment was steel. China was the largest steel
producer and exporter in the world. It had recognized that over-capacity was a
severe problem in the steel sector and that all too often, zombie companies,
could not go out of business, because they were too important to the local
economy and were consequently kept alive by local government support. China's
own steel association had made this very point and still, China had yet to
notify a single steel subsidy measure. And yet, it was clear, not only from
China's steel trade association, but also from previous steel-related legal
measures, that the government of China was very much involved in China's steel
industry. For example, the central government's steel industry adjustment and
revitalization plan of 2009 stated that "special funds were available for
the investment in capital construction within the central budget, and known for
supporting the technical reconstruction of steel enterprises (…) technological
R&D and technology introduction to push forward the technological process
of the steel industry."
190. Despite the specificity of the
above-referenced measures, China often indicated that such planning documents
did not establish support programmes. But even the steel companies themselves
divulged that they had received significant subsidies from the government. The
US had provided a room document in the back that was a simple listing of
subsidies found in the public documents of one of the largest steel companies
in China.
191. The US would admit that each and
every one of these support measures may not meet the technical definition of a
specific subsidy under the Agreement, but surely, many of them did, although
none had been notified. It appeared from the lack of a single steel-specific
subsidy programme that China's position was that it did not subsidize its steel
industry. Finally, as it was seen in the news in previous week, China's bank
regulators, had recently instructed banks in China, to relax financing
constraints and increase direct funding to the steel industry. While the
technical nature of any ultimate benefit to the steel industry might be unclear
at this point, it appeared as if the steel industry would benefit, if not from
the better terms on its borrowings, from better access to bank financing.
192. The US noted that China as the
world's largest exporter and as a leader in this institution had a
responsibility to abide by its obligations. The US recognized that it was every
WTO Member's right to decide the degree of government intervention in its
economy. Every Member also had agreed that its subsidies were subject to the
WTO rules and to the transparency obligations that were central to the proper
functioning of the Committee. It had been unfortunate that the US had
repeatedly had to resort to the counter-notification mechanism which it did so
reluctantly. But China's latest subsidy notification demonstrated that hundreds
of measures were not being notified. The US reiterated its willingness to meet
bilaterally to discuss the specifics of the measures in its 2011, 2014, 2015
and 2016 Article 25.10 submissions.
193. The US urged China to abide fully
by its subsidy notification obligations under the SCM Agreement, and stood
ready to work with China to take concrete steps to move rapidly toward a
subsidy notification that would present the full picture of its subsidy regime
in a clear and transparent manner.
194. China believed that the purpose of
counter-notification under Article 25.10 of the SCM Agreement should be to
promote timely performance of the Members' obligation to submit their subsidy
notifications. Though the US submissions had often ignored what China had
already notified. As China had clarified at the previous meetings, it had tried
its best to make clarifications in response at the regular meetings in recent
years, while preparing its latest notification.
195. More importantly, China had
submitted its subsidy notification at the Central Government level up to 2014
in October 2015. These efforts should have been able to address most of the US
concerns in its submissions. As for the items at sub-central government level
mentioned in the submission, some of them had already been clarified by China's
intervention at the Committee's previous regular meetings and the rest could be
addressed, by and large, by China's notification on subsidies at the
sub-central government level which was going to be submitted soon. US could
have its own opinion on the measures notified by other Members, be it
over-reporting, or under-reporting; however as it had already been reiterated and
repeated several times by China, it was up to notifying Member, to decide which
policies to include in its own notification based on its understanding of the
SCM Agreement. The notification obligation was transparency oriented and had no
legal weight as to actual identification or measurement of a subsidy, or its
status. This exact sentence could be found on the cover of the US notification
of subsidies submitted to the WTO as well. Since Chinese authorities had no
further feedback on the US submissions under this agenda item, at this moment
China did not have any further update to share with the US.
196. Regarding the lack of notification
for the sub-central government level notifications, China referred to its
statement made at the special meeting of the Committee and reiterated that it
was in the final stage of the domestic procedure in completing and submitting
this notification to the WTO. On the second point raised by the US about the
relationship between the policies at central and local level, China disagreed
with the argument that the local authorities implemented or formulated specific
policies at the direction of the Central Government. China stated that it would
welcome any evidence the US had and it might be more appropriate to discuss
this issue at another forum.
197. China referred to the statement
made by the US in which it stated: "although China claimed that some or
several of the items included in the US submissions were already notified by
China (…)" and noted that it was not what China "had claimed",
it was what China had submitted either in its latest or previous notifications.
It was true that China had submitted only three notifications but this did not
impair the fact that it had submitted full notification for all 15 years. In
addition China would submit the sub-central government notification soon and
invited all Members to pay close attention to this notification.
198. China reiterated its call for the
US to carefully study its notification and check whether it was true that the
identified item had been already notified. This could save the US from
counter-notifying the already notified items and prevent China to conduct
unnecessary repeated verifications and clarifications which had been preventing
China's efforts to submit its notification in a quicker fashion.
199. With respect to the point raised by
the US on steel, China stated that it was not a common practice for the
Committee to have a room document - if it could be called as such- like the one
submitted by the US, because the source of information provided was not clear.
Neither a web link nor any other source had been cited. It was strange for any
Member to anonymously circulate ungrounded materials irrelevant to the meeting
agenda. China suggested that the best approach was to focus on the notifications
under the review of the Committee and have meaningful communications among
Members. Regarding the over-capacity in steel industry, China noted that it was
not a problem unique to China; it was a global problem and that was the reason
for convening a high-level meeting in Brussels previously. This Committee was
not the correct forum to talk about this specific problem.
200. China invited once again the US to
focus on the latest version of its notification and earnestly study it and ask
the relevant questions. China had already handed its written response to the US
although the questions raised had been received after the deadline. China
indicated that this demonstrated how sincere and how truthful China had been in
honouring its transparency obligations under the SCM Agreement. China welcomed
any further questions from the US on its notified programmes which showed its
willingness to provide as much information as possible so as to facilitate
better understanding of its notification.
201. The United States noted that
China was urging the US to carefully study its previous subsidy notifications
which the US had done. The US had done that very carefully and methodically and
was ready to sit down with China to review its process. China was not ready to
sit down with the US and this indicated something. The one could add up all of
the programmes that China had referred to in its interventions over the last
couple of years, but there would still be dozens of programmes that it had not
said anything about. According to the US, it was uncontested that those
measures should have been notified.
202. With respect to whether or not
there was direction from the central government to the sub-central governments,
the US would point China to any number of its consultation requests that the US
had filed in the previous three or four years. It was relatively clear that
central government programmes were developed in conjunction with sub-central
governments and sub-central governments were directed to implement or provide
their own source of funding.
203. Regarding China's comments on the
room document, the US stated that although it was not sure whether there were
procedures or not, it had identified the document as its own, not anonymous.
The document very clearly indicated that the information was from publicly
available documents of the steel company that was referred. The US noted that
it would keep on asking China where the steel programmes were, and the silence
was deafening at this point. In addition, it was hard to believe that China had
not provided a single subsidy to its steel industry. The US confirmed that it
was up to the notifying member to decide the programmes to notify but it
recalled that there were rules under the Agreement in that regard.
204. China reiterated that within the Committee
practice, it had provided clarifications or explanations to the US regarding
its submissions about the relationship between the central and the so-called
local policy. It was the US' choice not to listen and to insist on the sort of
relationship of direction between these two. China did not know what else it
could do to help the US to understand that point.
205. Regarding the US' claim on China's
silence with respect to the steel programmes, China had clarified that it had
not had a preferential tax treatment directly granted to iron and steel
enterprises nor it had had a preferential tax treatment specifically for the
purchase of domestically produced equipment by iron and steel enterprises.
China had also pointed out that many of the items in the US submission had been
plans, opinions and catalogues which had been documents of guiding nature only
and did not involve specific subsidy policies. It was not true that no
clarification or responses had been provided. China highly honoured and
respected the rules of the SCM Agreement. It was for that reason that, after so
many years' tremendous effort it had managed to submit its latest version of
the central-government level policy notification in October 2015, even
earlier than the United States.
206. The United States noted that
there was nothing nefarious about having coordination between central and local
governments. The United States Federal Government and local governments
cooperated often in delivering assistance programmes. It stated that it would
bring documents on Chinese legal measures for the next meeting to review.
207. Regarding the steel question, the
US reiterated that it seemed like China had not provided a single subsidy to
its steel industry and asked Members to think about that and look at the room
document.
208. China clarified that there was cooperation between
the central government and the local governments; but the central government
did not give directions to the local governments.
209. The Committee took note of
the statements made.
210. The United States noted that
in China's most recent TPR, in May 2014, the Secretariat had reported that it
had uncovered information on 30 support programmes for China's fisheries
sector. The Secretariat's Report had noted that China had not notified any of
these programmes to this Committee and further that China could not confirm
that any of the programmes were even in effect. In the course of the trade
policy review process, many Members had asked questions about these programmes.
China had not provided any substantive response to these questions stating that
it needed more time to identify and verify information regarding these support
programmes.
211. Beginning with the support
programmes uncovered by the Secretariat in China's TPR report, the US had
performed further research and uncovered information on additional support
programmes appearing to benefit China's fisheries sector. In 2015, it had
submitted questions to China under Article 25.8 with respect to the support
measures found by the Secretariat in addition to programmes that the US had
uncovered independently.
212. The US still had not heard from China
with respect to its Article 25.8 questions on fisheries subsidy programmes. The
dire state of the world's fisheries had led to calls for greater disciplines on
fisheries subsidies that contributed to overfishing and overcapacity, beyond
the obligations of all Members to notify their subsidy programmes under Article
25 of the SCM Agreement. While reaching an agreement on such disciplines had
been difficult, countries had recognised that an initial step should be greater
transparency with respect to the existing fisheries subsidy programmes. For
example, in August 2014, at the 4th APEC Ocean Related Ministerial
Meeting, APEC Ministers had agreed to the Xiamen Declaration. Paragraph 21 of
this Declaration stated: "In light of the Rio+20 outcome document, particularly
paragraph 173, we encourage APEC members to further improve the transparency
and reporting of existing fisheries subsidies programmes through the WTO, and
to eliminate subsidies that contribute to overcapacity and over-fishing, and to
refrain from introducing new such subsidies, without prejudice to the WTO Doha
negotiations." China had never yet notified a single wild capture fishery
programme in its 15 years of WTO membership.
213. Given the lack of any meaningful
response from China to its Article 25.8 questions, in April 2015 the US
had filed its fourth Article 25.10 submission counter-notifying over 40
fisheries subsidy measures in China. Overall, the US had counter-notified
nearly 400 subsidy measures in China. The US noted that this Article 25.10
submission was based entirely on the programmes previously identified in its
Article 25.8 request to China which had been submitted in 2015 and never
answered by China. Although it was not required by the Agreement, the US had
translated nearly 300 pages of all relevant measures that China was obligated
to notify pursuant to its protocol of accession commitments. The US had
resorted to the Article 25.10 counter-notification mechanism only after a year
had passed without any meaningful response from China, or any timeframe as to
when a response might be forthcoming.
214. The number, variety and substantial
nature of programmes in the US submission on China's fishery support programmes
was quite noteworthy. The list included a multitude of programmes for fishing
vessel acquisition and renovation; a 100% corporate income tax exemption for
pelagic fishing enterprises; grants for new fishing equipment; subsidies for
insurance; subsidized loans for processing facilities; fuel subsidies;
preferential provision of water, electricity and land; grants to explore new
offshore fishing grounds; grants for establishing famous brands; and special
funds for strategic emerging industries in the marine economy.
215. Perhaps most important were the
support programmes China had in place for its distant water fleets. The
particulars of these programmes appeared to be implemented mostly by the
provinces. Members should read these measures for themselves and reach their
own conclusions, but the US was of the view that it would be instructive to
highlight three measures in particular. The first legal measure was Annex VIII
on page 60 of the US submission in which the province stated that, it would,
"implement the hundreds of thousands of fishing vessels upgrading and
reconstruction project, by 2020, it would complete the upgrading and
reconstruction of 100 distant water fishing vessels, reconstructing 1000
domestic fishing vessels for equipment modernization and reconstructing 10,000
wooden fishing vessels with fibre glass material."
216. The second legal measure could be
found in Annex V on page 39 of the US submission, in which the relevant
province stated, "by the end of the Twelfth Five-Year period, the province
was planning to have 400 distant water fishing vessels with the fishing output
at 280,000 tonnes, the output value of 2.5 billion yuan and to accelerate the
expansion of the distant water fishery."
217. The third legal measure was in
Annex XIII on pages 90-92 in which the relevant province stated that it would
"strive to increase the scale of distant water fishing vessels in the
entire province to 700 vessels, by 2017, with distant water capture production
of 600,000 tonnes and output value of 8 billion yuan, as well as cultivating 10
leading enterprises in the distant water fishing industry with output value of
more than 100 million yuan and establishing 15 domestic and international
distant water fishing industrial bases." Although perhaps not involving
subsidy measures but perhaps indicative of its intention to scale-up
significantly, later in the same measure, the province stated it would
"strengthen the basic skills and officer training for crew members in the
distant water fishing industry: with the support of the Xiamen Ocean Vocational
College, provincial marine technology schools and other top-level training
institutions for crew-members in the fishing industry, 1000 officers in the
distant water fishing industry and 3000 crew members in the distant water
fishery would be trained annually."
218. According to the US, it appeared
China was, or rather had been, aggressively expanding its distant water fishing
fleet despite the fragile state of the global fisheries. The most subsidy types
could be provided to a Member's fishing industry, but all Members had an
obligation to notify their programmes and pursuant to the Xiamen Declaration
and other international initiatives, countries were seeking to increase the
level of transparency of their fisheries subsidies programmes and to refrain
from introducing new subsides or from extending or enhancing the existing
subsidies.
219. The US noted that all of the big
producers such as the US, the EU, Japan, Korea, Australia, Brazil, and India
had fishery subsidies, and that they all notified them. The SCM Agreement
allowed Members to provide nearly every type of subsidy and for whatever
reason, fish products had not been a common source of trade friction. The US
did not understand the reason for China's failure in notifying a single wild
capture programme in 2001, following its accession to the WTO, or in its first
two notifications, or following the US' second counter-notification which had
included several fishery support measures, or following its TPR report, or
following the Xiamen Declaration, or following receiving Article 25.8
questions, or in its most recent subsidy notification. Given the rapid
depletion of the world's fisheries, the US again requested China to join those
seeking a solution, which could start with Members putting all of their
programmes on the table for all Members to see.
220. China indicated that it had received the US
submission shortly before the meeting and was still verifying its contents.
Following a rough look, however, it had found that some programmes that China
had already notified had been once again listed in that document. For example,
Item No. 35 in the submission, Announcement on Issues Concerning Preferential
Enterprise Income Tax for Agriculture, Forestry, Animal Husbandry and Fishery
Projects (SAT Circular No. 48 of 2010) had been listed as Programme No. 42 in
China's latest notification of subsidy at central government level.
221. Item No. 42, 2014 – Guidance of the
Ministry of Agriculture on the Implementation of Subsidies for Purchasing
Agricultural Equipment (Nong Ban Cai No.6 of 2014, dated
12 February 2014) had been included in China's latest subsidy
notification as Programme No. 47.
222. China noted that the importance of
studying carefully a Member's notifications and raise relevant questions could
not be overemphasized. China recalled that in October 2015 meeting, the US had
said that there had been only three programmes related to fisheries. But it had
just said that China had not notified a single programme of fisheries over the
previous 15 years. In order to avoid this kind of voluntary judgment, China
invited the US to study carefully the notifications submitted by a Member
seriously, thus avoiding itself the trouble of counter-notifying what had been
already notified by others and alleviate the burden of unnecessary repeated
verifications by others. China believed that the energy and time of all Members
should and could be spent better on the notifications under the review of the
Committee. China noted that it would still provide feedback, to the specific US
submission in due course according to its verification results.
223. Regarding Programme No. 35, the United
States asked China whether it knew that in its previous notification it
specifically had said that the benefit at issue had been a 100% tax exemption
for fishermen.
224. China indicated that during the course of the last
session of China's TPR in July 2014, it had provided a detailed answer to the
question asked by the US and asked the US to refer to that response.
225. The United States noted that
the reason for bringing up the tax exemption programme was that notification of
China had not explained the fact that it also provided a 100% tax exemption for
certain fishermen. Hence, the important thing was the level of details.
According to Article 25.3, the content of the notifications should be
specifically specific to enable other Members to evaluate the trade effects and
to understand the operation of notified subsidy programmes. More details were
needed in China's notification to know the full range of potential benefits
which were being provided under a particular programme.
226. The second example was the
strategic emerging industries programme that China had notified. The US had
counter-notified many measures under this programme last year. It had been a
very wide ranging programme in which provincial measures and measures covering
various sectors had been cited. China had notified the strategic industry
programme but it had been a very bare-bones notification. If it had not been
known that there had been provincial and sectoral variance on this particular
programme, the full nature and operation of the programme would not have been
known. The US might have counter-notified a programme or a measure due to such
kind of lack of detail in China's notification. The question of how much detail
should go into a notification was a fair question; however, when a member had
many measures that were providing different types of benefits to different
sectors, all of that should be clear. Simply pointing to a single measure that
set out the overarching policy did not give other members a clear sense on the
operation of the programme.
227. China noted that it had not submitted its
notification for the US. China had done that in order to observe its WTO
obligations; this was required by the SCM Agreement. If the US had expected
that all or most of the items, that it deemed to be notified were included, it
had to be disappointed. Regarding the details of the notification, China
indicated that it had been strictly live-up to the format of the notification
improvising all the items required. China agreed that the level of details
could be discussed because not always much detail could be found at the other
Members' notification including that submitted by the US. These technical
issues could be well-discussed surrounding the notifications submitted by
Members. China had reiterated its readiness to discuss and interact around its
notified programmes, and to provide as much information as possible, as
requested by Members. To this end, the obligations under Article 25.1 and
Article 25.8 should be differentiated.
228. The United States noted that
it looked forward to further discussion of the fishery measures that were
included in its Article 25.10 submission.
229. The Committee took note of
the statements made.
230. The United States recalled
the Secretariat's calculations on export competitiveness of Indian textile and
apparel products according to which India had reached export competitiveness no
later than 2007. Therefore, India had an obligation – at least since 2007 – to
gradually phase out export subsidies provided to numerous products in the
textile and apparel sector. The eight year phase-out period had ended, meaning
that all export subsidies to India's textile sector should have already been
terminated. India had recently released Foreign Trade Policy for 2015-2020
recognized the need to terminate certain programmes. Unfortunately, it did not
establish any procedural framework as to how this would be done and it appeared
to target 2018 as the operative date for termination. More disturbingly, recent
press releases indicated that the government had extended another programme
which provided preferential interest rates – the interest subsidy scheme for
exporters. In addition, under the new foreign trade policy, the Merchandise
Exports from India Scheme (MEIS) export incentives had been extended to units
located in Special Economic Zones (SEZ) as additional benefits. The MEIS
provided exporters an import duty credit based on the value of their exports
and possibly had a domestic content angle by providing a "higher
reward" for exports with "high domestic content and value
addition". Textile and apparel was among the sectors covered by the
programme and the United States was one of the targeted export markets.
According to recent press releases from the Government of India there were also
some very substantial benefits going to India's textiles and garment sector
under the SEZ programme. India seemed to have taken a step backward in meeting
its obligations under the SCM Agreement.
231. In light of the recent Annex VII
calculation updates issued by the Secretariat, which suggested that India was
expected to reach the per capita GNP threshold in 2017, the US urged India as a
first step to eliminate those export subsidies which benefited the textiles and
apparel industries.
232. The US had made clear to India that
it would welcome further dialogue on these issues in the context of their
continued bilateral engagement. Unfortunately, while this issue had been on
various bilateral agendas, the absence of Indian Government officials with
direct knowledge of the programmes had prevented meaningful discussion. The US
noted that it remained open to substantive bilateral discussion of this issue
while its patience wore thin.
233. India recalled its previous interventions on this
issue, and was committed to meeting its obligations under the SCM Agreement in
time. India expressed its commitment to engage constructively in the
clarification of the obligations under Articles 27.5 and 27.6, in particular
the definition of "product", the coverage of tariff lines, where and
when export competitiveness was reached and when the eight year phase-out
period would begin. Accordingly, India considered that since the information on
the export competitiveness was provided in 2010, the eight year phase-out
period would begin from 2018. As mentioned by the US on the MEIS, many of the
schemes were in the nature of remission or refund of duties on inputs used in
exported goods, which were not export subsidies schemes and some of which had
been discontinued. A number of them had been removed from or rationalised in
the Foreign Trade Policy of 2015-2020. Further, while the government had not
set out any procedures regarding domestic content requirement, domestically
manufactured goods were entitled to apply for subsidies, as per the SCM
Agreement. India renewed its commitment to meet bilaterally with the US and
requested the US to keep India in the loop.
234. The Committee took note of
the statements made.
235. The United States noted that
it had long had concerns about Canadian federal and provincial support to the
development of the C Series aircraft. These concerns dated back to 2008 and
many of the US questions about this financing had gone unanswered by Canada.
The US had new concerns about recent reports of possible Canadian Federal and
Quebec Provincial Government funding to support the bombardier C series
jetliner.
236. In October 2015, Bombardier had
announced a memorandum of understating under which the Government of Quebec was
to provide 1 billion dollars to establish a joint venture with Bombardier to
develop the C Series aircraft. In addition, according to various press reports,
Bombardier was also seeking 1 billion dollars from the Government of Canada to
support the development of the C Series. The US urged Canada to agree to
discussions between two governments for the purpose of exchanging views on that
funding and the extent to which there could be assurances, that it would not
distort the market for commercial jetliners or contravene the WTO rules.
237. Canada stated that as a strong supporter of
rules-based trade it was committed to upholding its WTO obligations including
with respect to the SCM Agreement. The Government of Canada took its WTO
obligations into account when considering any potential support. Keeping these
obligations in mind Canada had also endeavoured to support economic growth in a
variety of sectors such as through support for innovation, research and
development. Aerospace was a sector of strong importance to Canada as it was to
other aircraft producing countries. In this regard Canada noted that the
governments of all major aircraft producing countries provided support to their
respective sectors.
238. Canada provided some updates with
respect to the media reports that had been mentioned regarding recent
announcements. With respect to Quebec, it had been reported in media that
Bombardier and Quebec had entered into a Memorandum of Understanding. However,
Canada pointed out that nothing else had been announced and Bombardier had not
received any payments from Quebec. At the federal level, Canada had not made
any commitments to Bombardier and assured that if any support had been offered,
it would have complied with its international obligations. Canada took note of
the US concerns and remained prepared to engage further discussions, in
particular, as requested in a bilateral meeting.
239. The Committee took note of
the statements made.
240. The United States explained
that it had requested this agenda item to discuss and explore ways of improving
and enhancing the transparency of fisheries subsides. It pointed out that
fisheries subsidies could have significant environmental, economic and social
impacts and consequently merit special attention. The world's fisheries
resources continued to decline and were at risk of collapse, with nearly 30% of
all global stocks classified as being overfished by the FAO in 2014. There was
diminishing room for growth in catches through increased fishing effort, with
61% of global stocks classified as being fully fished. Despite the state of
global stocks, governments were continuing to spend billions of dollars on
harmful fisheries subsidies which was a major contributing factor to the
worsening situation. Members needed to develop ambitious and effective
disciplines on fisheries subsidies which appeared to be no small task. Most
immediately, Members needed to focus on what they could move forward at the
moment and what steps they could realistically and practically take in that
direction. As global fisheries were rapidly being depleted, action was needed.
241. In APEC, the United States and New
Zealand had proposed an initiative to increase transparency around APEC economy
fisheries assistance programmes using strong reporting and notification
requirements. In 2015, these economies, along with Australia and Peru, had
circulated a compendium of fisheries assistance programmes in APEC economies.
The compendium included information on nearly 400 fisheries assistance
programmes and was based on surveys of government ministries and publically
available information. To further enhance the work, the US and New Zealand had
proposed a reporting mechanism whereby APEC economies would report information
required under Article 25.3 of the SCM Agreement and to the extent possible,
additional information including the legal authority for the programme,
catch-data by species in the relevant fishery, status of the fish stocks in the
relevant fishery, fleet harvesting capacity in the relevant fishery,
conservation and management measures in place for the relevant fish stock and
total imports and exports per species.
242. The US was hoping that all other
APEC Members would join in this important effort. The US had brought this work
to the attention of the Committee, given its relevance to the Committee's
responsibilities. Many of the concepts that were being discussed in APEC
carried forward ideas that had been raised before and during the Nairobi
Ministerial Conference. Additionally the US believed that the Committee could
play an important role in enhancing the transparency of fisheries subsidies and
it was seeking to discuss and explore actions the Committee could undertake to
help achieve that objective.
243. The US recalled that Article 25 of
the SCM Agreement required Members to notify their specific subsidies.
Unfortunately, all too often Members, including Members with substantial
fishing fleets and subsidy programmes did not notify their programmes. That
issue needed to be addressed generally, but also specifically with respect to
fisheries subsidies programmes. The US invited Members to initiate a dialogue
on steps the Committee could take to enhance the information they provided in
their fisheries subsidies notification, for example by including supplemental
information in the notifications of the sort that had been included in the APEC
proposal. Such information would build on and complement the existing
notification requirements of Article 25 of the SCM Agreement.
244. The US indicated that the goal of
Members should be to ensure that their notifications provided greater
transparency that was unique to fishery subsidies programmes and allowed better
understanding of the operation of the notified programmes. The US was open to
other ideas and believed that it was time to get started on a dialogue that
would put Members in the best possible position to develop and implement a more
substantive and effective set of disciplines, with the goal of positively
affecting the state of global fisheries.
245. The European Union
emphasized the need for Members to comply with transparency obligations of the
SCM Agreement and expressed its support for initiatives for improved
transparency. It thanked the US for the work done in the context of its
counter-notification which had already been addressed under Item 10 regarding
subsidies provided by China in the fisheries sector. Indicating that fish was a
good starting point, it suggested that enhanced transparency was needed across
the board for all sectors and all subsides granted.
246. New Zealand noted that it shared the concerns
raised by the US and others on fisheries subsidies. The Sustainable Development
Goals and specifically the Target 14.6 adopted in September 2015 was a reminder
of the urgency of action around that issue and certainly the SCM Committee
could play a role in responding to that call to action. While the greatest gain
would come from ambitious and effective disciplines on fisheries subsidies,
enhancing transparency would in itself bring benefits. Therefore, transparency
was such a central principle to the work of the WTO. The issue of compliance
with the existing notification obligations was a systemic issue in which
Members had a shared interest. In this sense, New Zealand welcomed further
consideration on what could be done to improve Members' notification
performance in that area. It also welcomed a dialogue on how a notification of
fisheries programmes specifically could be enhanced.
247. New Zealand indicated that the
Committee work could usefully complement Members' negotiation efforts on disciplines
more broadly. It suggested first a discussion around the types and extent of
relevant information that would help Members better understanding the impact of
fishery subsides and the operations of those programmes. Following that,
Members could consider some of the practical implications around reporting such
as feasibility and burden which were important issues for many members. It
noted that the APEC idea referred by the US with respect to fisheries
assistance supporting mechanism was one example that Members could take into
consideration in those discussions. However, the proposals in the lead-up to
and during the MC10 were also other potential sources of ideas.
248. Peru agreed with the final objective of the US
proposal regarding the development of ambitious disciplines in the area of
fisheries subsidies as laid out in the WTO mandate and in the Sustainable
Development Objective 14.6. The work and the good practices in the area of
notifications strengthened transparency. In the particular case of fisheries
subsidies, these constituted a basis for developing disciplines that allowed
for the elimination of fisheries subsidies. In this context, within the
APEC Forum, Peru encouraged the Member economies to support the multilateral
trade system in order to achieve this goal.
249.
Peru estimated that the Tenth Ministerial Conference had
revealed once again that an agreement to eliminate fisheries subsidies was not only important but
necessary. This was due to the trade effect that reduced competitiveness on the
international market, the future availability of marine resources, and the
sustainability of vulnerable sectors that depended on the fishing sector, such
as artisanal fishing.
250. For that reason, Peru encouraged
Members to provide more detailed and more precise information on the programmes
they maintained to assist their domestic fishing sector, and considered that in a future Committee
meeting Members could discuss categories of information suggested by the US,
such as the name of the programme, the legal authority for the programme,
relevant information on catch by species, and total exports and imports by
species, amongst others.
251. Peru recalled that its proposal in
document TN/RL/W/264 dated 21 October 2015 had suggested some of those
categories.
252. Colombia noted that it had always supported
transparency which helped both monitoring the commitments and negotiations. For
that reason, the discussion on that issue had to be held within both the
Committee and the Rules Negotiating Group to see the ways to improve
transparency procedures. Colombia also noted that it would consult the issue
with its capital.
253. China recalled Members that they had taken in-depth
negotiations on transparency on fisheries subsidies at Nairobi and it had
engaged in the discussion in a very constructive way. Unfortunately, Members
had not reached consensus on that issue which showed that there were some
difficulties in fisheries subsidies transparency negotiations. The key to
resolve those difficulties was outside the fisheries negotiations. Members
could re-start the Rules negotiations to resolve all the remaining issues of
rules negotiations and enhance the transparency in fisheries subsidies as well
as other important issues remained at the Rules Negotiations.
254. Norway expressed its concern over the dire state of
the world's fisheries resources and stated that it would continue to seek
effective multilateral disciplines on fisheries subsidies in the WTO as well as
increased transparency. In Nairobi, Norway had joined 27 other Members in a
Ministerial Declaration on fisheries subsidies who had announced that they
would continue to seek appropriate enhanced WTO transparency and reporting to
enable the evaluation of trade and resource effects of fisheries subsidy
programmes. In Norway's view, notifications under the SCM Agreement were
grossly limited and there was a clear need and scope for improvement. The
Committee could play an important role in enhancing transparency of fisheries
subsidies; therefore Norway was pleased to discuss actions that the Committee
could undertake to help achieve this objective. It was open to explore ways to
bring about better compliance and enhance the information that Members provided
in their fisheries subsidies notifications, without prejudice to any positions
might be taken in negotiations on this issue.
255. Uruguay noted that it would be able to support any
transparency measures to improve the situation in this sector. It would pass
the information on to its capital and hoped that it would to get more specific
comments on the issue for future discussions of the Committee.
256. Australia reiterated that it was a strong
supporter of transparency and compliance with notification obligations and had listened carefully to Members' discussion
on the difficulties with compliance with the transparency obligations. Members
would be aware that what the United States had put on the table was
similar to what Australia and the EU had been seeking last year in terms of
improving and enhancing transparency of fisheries subsidies within the
Committee. For that reason, Australia was very pleased to have a proposal to
consider. Within the Committee, Members were discussing subsidies within the
meaning of the definition of the Agreement. Within APEC, however, countries
were looking at programmes; so notionally it had been a broader universe.
Australia agreed with the US that this had been a very valuable exercise within
APEC and indicated that it was pleased to discuss improving transparency
referring to the point raised by the EU that transparency across the board was
very important.
257. Mexico noted its willingness and interest in
discussing this issue.
258. India stated that this had been a part of the
negotiations under the Rules Negotiating Group before Nairobi and a similar
proposal had been tabled by Australia and the EU which had been discussed in
detail in both Geneva and Nairobi. India was looking at transparency-plus
outcomes in fisheries subsidies and not just in fisheries subsidies of the
Rules Negotiating Group but also in other areas discussed in the Group.
259. With respect to notification
requirement, the problem was not the detail of notification but the political
will to notify the programme. Therefore, according to India, adding on to the
details of notification would not improve transparency.
260. India also pointed out that it had
been notifying its fisheries subsidies and encouraged other Members to notify
their fishery subsidies in terms of the requirements which were presently
available under the SCM Agreement. India invited Members to meet the existing
requirements before thinking of enhancing them further. India also drew
attention of Members that the additional information requested in that proposal
which was similar to what US had just mentioned in terms of fisheries affected
by the programme, by the domestic and international fisheries, whether
fisheries were export fisheries, the status of fish stocks in the fishery for
which the subsidy was provided, whether it was overexploited, depleted,
fully-exploited and conservation and management measures associated with
subsidies in place could be very resource intensive and onerous for developing
countries.
261. Argentina noted that its comments were
systemic with regard to this item as well as with regard to agenda Item 10. It
also indicated that transparency in fisheries subsides was important and it
would follow closely any discussions on this subject.
262. Chinese Taipei welcomed the US proposal and
indicated its willingness to join discussions. It also reiterated the EU's
comments and expressed its concern over improving transparency for subsidies
given to all sectors.
263. Brazil remained open for further discussions but
also noted that some Members were still unwilling to discuss this issue in the
Committee and preferred to take that issue at the NGR.
264. Japan noted that enhancing transparency in fishery
subsides would contribute to tackling subsides for fishing that negatively
affected fish stocks and expressed its willingness to play a role in an open and constructive manner.
265. Canada agreed that transparency with respect to the
fish subsides was an important component of the contribution that WTO could
make and it was strong proponent of transparency in general. It echoed the
comments of Australia by saying that this discussion should be linked with the
issue of compliance with existing notification obligations. Canada also
recognized that there were questions of scope regarding programmes versus
subsidies which would need to be addressed.
266. The Committee took note of
the statements made.
267. India indicated that the EU had imposed a
countervailing duty on ductile iron pipe originating from India on 17 March
2016, which caused systemic concerns. India noted that the EU authorities had
gone much beyond the provisions of the SCM Agreement in the course of this
investigation. The first issue was the EU's treatment of iron ore export duty
as a countervailable subsidy, which, according to India, did not seem to be in
accordance with the provisions of the Agreement as well as the EU's own
regulations. The EU had held that iron ore prices in India were distorted due
to the imposition of export tax. According to the EU, all state owned and
privately owned iron ore mining companies in India were entrusted or directed
by the government to carry out tasks of providing iron ore for less than
adequate remuneration resulting in the ensuing benefit to be treated as a
countervailable subsidy. The Commission had selectively relied upon excerpts
from certain reports in support of its finding that there was entrustment.
These reports could not be given the status of a policy document that could be
construed as a positive or affirmative policy objective or statement of the Government
of India to provide resources at less than adequate remuneration.
268. The Commission had also failed to
establish the existence of a financial contribution and benefit as well as
specificity with regard to the alleged provision of iron ore at less than
adequate remuneration. Further, from the manner in which the Commission had
explained its analysis, it was evident that the Commission had attempted to
countervail the effects of an export tax applied by India on iron ore despite
the fact that there was a WTO jurisprudence which specifically rejected the
effects-based approach for the determination of final contribution. The absence
of any affirmative act entrusting or directing private bodies could not imply
that any macro-economic policy could be deemed to be entrustment or direction
and the result of any government policy resulting in a benefit which could be
equated to a financial contribution.
269. The WTO jurisprudence had shown
that in absence of affirmative action, the requisite link between the government
and the conduct of a private body could not be established. The EU had also
ignored the fact that even the reports relied upon by the Commission stated
that the sole purpose of the measures had been to only preserve natural
resources for future use which was a permissible right of any Member of the
WTO. Considering such a measure as a countervailable subsidy had far-reaching
implications as it seriously jeopardized the general regulatory power of
Members.
270. The European Union disagreed
with India and indicated that their findings on targeted export restraints were
in line with the disciplines of the SCM Agreement, its Basic Regulation and
Panel and Appellate Body reports, in particular DS194, DS196 and DS436. The
targeted export restraint had consisted of an export tax on iron ore of 30% and
a dual freight policy whereby higher rates for transport had been applied when
iron ore was exported in comparison with when it was consumed domestically in
India. The effect of the targeted export restraints had been the drastic
reduction of exports and in addition, throughout the entire period of the
existence of export restraint, the Indian domestic price of iron ore had
remained lower than international prices and had decoupled from the increase of
latter since 2008. The Commission had established precisely that this effect
had been actively sought by the Indian Government. As a result, it had
concluded that the targeted export restraint was a countervailable subsidy.
271. The Committee took note of
the statements made.
272. Brazil recalled that it had raised this issue at the
April and October 2015 meetings of the Committee. With considerable difficulty,
Brazil had gathered some information on the Japanese subsidies programmes and
asked for clarifications from the Japanese Government. Considering the replies
so far received all programmes mentioned in previous questions allegedly
complied with the disciplines of the Agreement. Brazil had no grounds to reach
that conclusion as Japan had repeatedly refused to share any information
related to the questions presented by Brazil.
273. Brazil reminded that it had
requested clarification on the official support provided for the Mitsubishi
Regional Jet by any level of the government and any public body in Japan.
Brazil had tried to obtain clarification, on many programmes that were
apparently related to the MRJ Project, such as the subsidy of expense to
investigate the development of next generation airplanes, the industrial
technology R&D, the R&D for advanced technology development with regard
to the rationalizing energy used and even the participation of the Development
Bank of Japan in this project. Brazil had asked for detailed information like
details of the Bank's operation, schedules of imbursements of the subsidies
programmes, interest rates applied and repayment terms yet had received no
responses.
274. With respect to the industrial
technology R&D, Japan had responded that, "the project covered R&D
for developing certain kinds of technology that would be applied across
manufacturing industry, such as railroad, automobiles and aircraft", and
concluded that this project did not have to be notified. Brazil asked Japan to
inform the Committee about de facto
beneficiaries of that programme. It also asked Japan to explain the
beneficiaries of the so-called "subsidy of expense to investigate the
development of next generation airplanes". Brazil pointed out that despite
the allegations presented by Japan, the programme was not specifically directed
to one sector.
275. Brazil also recalled that Japan had
informed in document G/SCM/Q2/JPN/73 that the programme had been terminated in
2011, and asked Japan to provide information on the beneficiaries which had de facto benefited from it.
276. With regard to the second point
related to the Development Bank of Japan, Japan had informed the Committee that
all investment decisions of the bank had been taken in accordance with
"commercial terms". Based on publicly available information, an
amount of 800 million dollars had been provided to the MRJ project through
financial support of the Bank. Brazil reiterated its call to Japan to provide
an explanation about the meaning of commercial terms.
277. Japan noted that it had already answered Brazil's
questions at the previous meetings and reiterated that it attached great
importance to the rules based multilateral trading system at the WTO and it was
taking compliance with international trade rules and obligations of the SCM
Agreement very seriously. Japan had never failed to comply with its obligations
of subsidy notifications since the establishment of the WTO. Japan fully
complied with the SCM Agreement and notified every specific subsidy in its
latest 2015 notification.
278. Brazil invited Japan to refer to the minutes of the
previous meeting and recalled its question on the "commercial terms".
With the few answers received so far, neither Brazil nor any other Member could
assess the compliance of Japan's programmes in question. Brazil stated that if
all subsidy programmes had to pass the scrutiny of their own governments, there
would have been no discussions in the Committee. Brazil reiterated its call to
Japan to provide detailed information on the amount, beneficiaries, interest
rates and repayment terms of the programmes mentioned and on the role of the
Japanese Development Bank in the MRJ Project.
279. Japan stated that it took note of Brazil's comments
and would convey them to its capital.
280. The Committee took note of
the statements made.
281. Brazil noted that the issues that would be raised
under this item were systemic in nature and were not about the particularities
of the cases referred. In July 2015,
producers of the United States had requested the initiation of two subsidy
investigations regarding Brazilian programmes allegedly used by Brazilian
exporters of cold and hot rolled steel. The petitions had not contained
publically available information from Brazilian official websites which
demonstrated that the programmes were neither subsidies nor specific to the
product concerned or to the exporters involved; rather they had quoted from
gossipy websites. The claims in petition could be easily cross-checked through
the official website of Brazilian Department of Commerce or through the work of
the WTO Trade Policy Review Mechanism, or even through the document presented
by the Brazilian Government during the consultation phase. Unfortunately the
Department of Commerce failed to attend the obligation under Article 11.3 of
reviewing the accuracy and adequacy of the evidence provided in the
application.
282. Although the investigation had been
initiated for 32 programmes, preliminary determinations had been made for only
six programmes which showed that the US system had inverted the burden of proof
contained in the SCM Agreement.
283. For instance, the mere indication
by the petitioner on the existence of a drawback system in Brazil had been enough
for the US Department of Commerce to consider Brazil's drawback system as an
export subsidy without pointing out which part of Annex II or Annex III of the
Agreement had been violated.
284. The Government of Brazil had cooperated with
the US investigating authority from the beginning of the investigation and an
abnormal amount of legislation and translation had been demanded from the
Brazilian Government, rather than from the petitioners, regarding those 32
programmes. Direct reference to our official website with Brazilian legislation
had not been accepted as evidence on record, making useless all the Brazilian
Government's efforts to promote transparency and accountability to its
population and to the international community.
285. One of the Brazilian programmes
under scrutiny of the Department of Commerce was IPI which operated under a
value added tax system according to which a tax exemption on final consumption
of the goods were provided in accordance with the OECD International VAT
Guidelines. Although it was known that United States did not have a VAT system,
other countries could not be harmed by the apparent lack of understanding by
the US of such system. Furthermore, a simple search on the website of the
States where the American petitioner situated demonstrated that several of them
either did not charge or charged reduced rates of sales tax on consumption of
capital goods.
286. Therefore, if the exemption of the
collection of sales tax on the capital goods was a subsidy as the Department of
Commerce preliminary determined then the US' new and full notification under
Article 25.2 of the Agreement was inaccurate.
287. Another preliminary determination
was on "extariffario" which was similar to the programmes maintained
by the US from 1982 to 2008 throughout a series of miscellaneous trade acts.
This programme contained preliminary duty suspensions, reduction and expansion
for products that were not produced domestically. Similarly to what happened to
any General System of Preferences, MERCOSUR extariffario mechanism allowed for
a unilateral duty reduction. Nonetheless, extariffario was a horizontal duty
reduction, which not only contributed to the objective of trade liberalization
of this organization, abide by MFN treatment, but also liberalized mainly the
trade of industrial goods. According to
the preliminary determinations, however, the duty reduction was a
countervailable subsidy under the GATT Article XVI.
288. Brazil reiterated its concern and
noted that such an interpretation might jeopardize the international trade
liberalization.
289. The United States indicated
that Brazil's statement on the burden of proof was inaccurate and contrary to
its understating of the initiation standard under Article 11 of the Agreement.
The US also disagreed with the claim that the petitions had relied on gossipy
websites and that information had been available from public sources indicating
that many of the alleged programmes had not been subsidies or not available to
steel producers. The US noted that the investigating authorities were not
required to conduct the type of investigation at the initiation stage that was
required to determine if a countervailable subsidy existed. A number of WTO
Panels had made that point clear. Moreover, investigating authorities had no
way of knowing whether a properly alleged subsidy programme was not actually
used at the time of initiation, nor could that information be considered
reasonably available to the petitioners.
290. The US Department of Commerce had
conducted a thorough examination of the information in the petition to confirm
that there had been sufficient evidence in the form of laws, regulations, news
articles, company financial statements or other evidence to support initiation
for each programme. Therefore the initiation had been fully consistent with
Article 11 of the SCM Agreement.
291. The US also noted that in the
preliminary determination the Commerce had found only one alleged subsidy
programme not to exist and one to be not countervailable. All the other
programmes that had been found to confer countervailable subsidies or benefits
had been found to either be not used or to confer very small or non-measurable
benefits.
292. With respect to the drawback
regime, there had not been a mere mention of such a scheme in the petition as
Brazil claimed. Rather there had been citations to specific laws and
regulations which had been reflected in Brazil's 2013 TPR report. Contrary to
Brazil's claim, the Commerce's finding on the countervailability of the duty
drawback scheme had cited specific provisions in the Commerce's regulations and
the US law which reflected the provisions of the SCM Agreement including
Annexes I, II and III.
293. The US also disagreed with Brazil's
contention that citation to official government websites was sufficient when
responding to requests for pertinent legal instruments governing subsidy
programmes. It was normal practice for investigating authorities to request
original and translated versions of the information which was certainly the
case in every investigation on US exports in which the United States Government
was respondent.
294. With respect to the IPI tax
programme, Brazil's comments regarding the absence of a reduction in sales tax
in US States in which the US petitioners were located, were irrelevant and the
evidence submitted by the petitioner regarding the IPI tax programme had been
sufficient for initiation. Besides, Brazil had not responded to the Commerce's
request for information concerning this programme. Instead, in its initial
questionnaire response, Brazil had stated that the information had not been yet
available and it would be provided later. In a subsequent supplemental
questionnaire response, Brazil had stated that in its opinion this was not an
actual programme and there was no need to respond to any questions. Brazil had
not provided any information to support this assertion such as how the IPI was
administered or how rates were established and changed. As such, Brazil's
opinion had been inadequate evidence on which the Commerce could reach a
preliminary determination. Because the respondent companies had also been
unresponsive, stating the reduction in IPI rates was not a programme and
failing to provide information necessary to calculate a benefit, the Commerce
had relied on the facts available.
295. Regarding Brazil's comments
concerning the extariffario, the US noted that the fact that the US maintained
a similar programme was not relevant to the evaluation of an alleged subsidy.
In addition, notwithstanding Brazil's comments that the programme was a
horizontal duty reduction, Brazil had provided information demonstrating that
three sectors, steel making and metal industries and the information technology
sector, were predominant users of the programme by value of goods imported.
This supported the finding that scheme was specific to those sectors.
296. Brazil noted that it disagreed with some comments of
the US and indicated that it would continue bilateral discussions. Brazil also
stated that those systemic procedures applied by the US in investigations were
burdensome for developing countries.
297. The Committee took note of
the statements made.
298. The Committee decided to
hold its next regular meeting during the week of 24 October 2016,
with the exact date to be confirmed in due course. As usual, that meeting would
be immediately preceded by a special meeting for review of subsidy
notifications.
299. On the election of the Chairperson
and the Vice-Chairperson of the Committee pursuant to Rule 12 of the Rules of
Procedures for the Committee meetings, the Chair explained that as the
consultation at the Council for Trade in Goods ("CTG") level
regarding the selection of the new Chairperson of this Committee as well as of
other Committees under the CTG was still under way, the Committee would not be
in a position to elect a new Chair at the end of its April meeting. He
suggested that the Secretariat send a fax once the CTG had completed its work,
indicating the Chair identified by the CTG. The new Chair would be deemed
to be elected by the Committee absent any objection. This approach, which
had been followed by the Participants on the Expansion of Trade in Information
Technology Products and the Market Access Committees, would obviate the need
for an additional meeting of the Committee.[11]
On the Vice-Chairperson, he proposed to postpone the election of the new
Vice-Chairperson until the new Chair was appointed.[12]
300. The meeting was closed.
__________
[1] Circulated on 22 April 2016.
[2] Circulated on 11 May 2016, following the meeting.
[3] Circulated on 26 April 2016 and 23 May 2016, respectively.
[4] In accordance with the Committee's procedures in G/SCM/W/293/Rev.1,
any legislative notification in respect of which written answers to written
questions have not been provided by the relevant deadline will be placed on the
agenda of the Committee's subsequent regular meeting.
[5] G/ADP/W/494-G/SCM/W/566-G/SG/W/235
and G/ADP/W/494/Corr.1-G/SCM/W/566/Corr.1-G/SG/W/235/Corr.1
[7] G/SCM/N/284/DOM and G/SCM/N/290.
[8] G/SCM/N/284/RUS was circulated on 11 May 2016.
[9] Annex B was updated in document G/SCM/W/546/Rev.7/Corr.2 dated 19
May 2016.
[10] G/SCM/110/Add.13 was circulated on 19 May 2016.
[11] On 11 May 2016 a fax was sent conveying to the membership the
designation of Mr Jin-dong KIM (Korea) by the
CTG as the Chair of the Committee. No objection was received and the Chair was
deemed to be elected by the Committee.
[12] On 1 July 2016, Mr Jin-dong Kim, the Chair of the Committee, sent a
fax to the membership conveying the nomination of Mr Bruno Raphaël HÄSSIG
(Switzerland) as the
new Vice-Chair of the Committee. No objection was
received and the Vice-Chair was deemed to be elected by the Committee.