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Committee on Subsidies and Countervailing Measures - Minutes of the Regular Meeting Held on 26 April 2016
日期:2016/08/05
作者:Committee on Subsidies and Countervailing Measures
文件編號:G/SCM/M/97
附件下載:GSCMM97.doc
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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

 

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)

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.

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)

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. 

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)

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)

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)

1.5  United Arab Emirates (G/ADP/N/1/ARE/2-G/SCM/N/1/ARE/2-G/SG/N/1/ARE/2)

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.

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)

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.

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)

15.   No questions were raised in respect of this notification.

16.   The Committee took note of the notification.

1.8  Kyrgyz Republic (G/ADP/N/1/KGZ/2-G/SCM/N/1/KGZ/2-G/SG/N/1/KGZ/2)

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.

1.9  Lesotho (G/SCM/N/1/LSO/1)

20.   No questions were raised in respect of this notification.

21.   The Committee took note of the notification.

1.10  Pakistan (G/ADP/N/1/PAK/3-G/SCM/N/1/PAK/3)

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.

1.11  Seychelles (G/ADP/N/1/SYC/1-G/SCM/N/1/SYC/1-G/SG/N/1/SYC/1)

26.   No questions were raised in respect of this notification.

27.   The Committee took note of the notification.

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)

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.

2  Semi-annual reports of countervailing duty actions (Article 25.11) - G/SCM/N/298 AND G/SCM/N/298/Suppl.1

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.

3  PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS: NOTIFICATIONS (ARTICLE 25.11)

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.

4  ARTICLE 27.4 EXTENSIONS OF THE TRANSITION PERIOD FOR THE ELIMINATION OF EXPORT SUBSIDIES

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.

5  IMPROVING THE TIMELINESS AND COMPLETENESS OF NOTIFICATIONS AND OTHER INFORMATION FLOWS ON TRADE MEASURES UNDER THE SCM AGREEMENT

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.

6  Constant dollar methodology for graduation from scm annex vii(b)

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.

7  PERMANENT GROUP OF EXPERTS – election of an expert

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.

8  Implementation of the scm agreement: creation of a working group on the implmentation of countervailing measures – item requested by brazil

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.

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

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.

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

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.

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

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.

12  Government support for the canadian aircraft industry – item requested by the United States

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.

13  enhancing fisheries subsidies transparency – item requested by the United States

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.

14  Other business

14.1  CV Measures by the EU on Ductile Cast Iron Tubes and Pipes from India – Item requested by India

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.

14.2  Japanese Government Support for the Development of Regional Aircraft– Item requested by Brazil

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.

14.3  CVD Investigations by the US on Hot-Rolled and Cold-Rolled Steel Products from Brazil – Item requested by Brazil

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.

15  date of next regular meeting

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.

16  election of officers

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

[6] G/SCM/Q5/PER/2.

[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.