AUSTRALIA - SUBSIDIES PROVIDED TO PRODUCERS

                                  AND EXPORTERS OF AUTOMOTIVE LEATHER

                             Request for the Establishment of a Panel by the United States

        The following communication, dated 9 January 1998, from the Permanent Mission of the United States to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.

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        The Government of Australia has provided subsidies to Australian producers and exporters of automotive leather, including subsidies provided to Howe Leather.  The United States understands that these subsidies include the provision by the Government of Australia to Howe Leather of an A$25 million loan on preferential and non-commercial terms and grants amounting potentially to another A$30 million.

        The United States considers that these measures violate the obligations of the Government of Australia under Article 3 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement).  The United States believes that, in light of their terms and the circumstances under which they have been provided, the subsidies provided to Howe Leather constitute subsidies "contingent, ... in fact, upon export performance" within the meaning of Article 3.1(a) and footnote 4 of the SCM Agreement.  As such, these subsidies are inconsistent with Article 3.2 of the SCM Agreement.