RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/THA/11
21 May 2002
(02-2775)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies by THAILAND to Questions Posed by PERU1
The following communication, dated 7 May 2002, has been received from the Permanent
Mission of Thailand.
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Peru submitted the following questions and comments in respect of the requests under
Article 27.4 of the Agreement on Subsidies and Countervailing Measures.  Thailand’s responses to
the questions posed by Peru are as follows.
1. Does Thailand consider that its economic, financial and development needs justify an
extension of the transition period  for eliminating export subsidies?
Reply
The Thai economy, after years of economic slow down as a consequence of the Asian Financial
Crisis in 1997, has just partially recovered as measured  by several indicators.  This being the case, the
immediate termination of these subsidy programmes at the end of this year will unavoidably and
adversely affect the ailing Thai economy and also hamper its economic recovery effort.  The terminationis expected to cause the following results.  First, the termination of the BoI’s subsidy programme at the
end of 2002 would cause the dive stment of confidence in government development plans and
endeavours as a result of the government’s failure  to perform its obligations under the Investment
Promotion Act of 1997.
2  Second, the termination of the EXIM Bank’s Export Market Diversification
Promotion Programme would impede the attempt to find new export markets as substitutes for thedeclining ones in order to stabilize the income fl ows from exports returns.  Finally, the complete
termination of the IEAT’s export subsidy programme would be unfeasible due to the lengthy and time-
consuming process of law amendment.
                                                     
1 G/SCM/Q3/THA/8.
2 The Board of Investment has completely abolished its export requirement scheme, as specified under
Section 36(4) of the Investment Promotion Act of 1977, amended in 1991 since August 2000.G/SCM/Q3/THA/11
Page 2
2. Article 27.4 stipulates that any developing country Member shall phase out its export
subsidies preferably in a progressive manner.  Although certain developing countries have been
granted a grace period during which they may cont inue to apply such subsidies, has any progress
been made in phasing out these measures since the beginning of the period in 1995, in pursuance
of one of the central principles of the multilat eral trading system, i.e. freer and more competitive
trade free of distortions?
Reply
Thailand has been in the process of phasing out its export subsidies since the date of entry into
force of the WTO Agreement in 1995.  As stated in  its Requests Pursuant to Article 27.4 of the SCM
Agreement (G/SCM/N/74/THA), some of the major export subsidy programmes will be terminated by
31 December 2002.  In fact, currently two principal export subsidy programmes, namely Packing Credit
Facility and Direct Packing Credit Facility, are unof ficially terminated since the EXIM Bank has no
longer lent capital to an exporter with export conditions under these two programmes.  The Board of
Investment (BoI) has, in addition, abolished its export requirement scheme, as specified under
Section 36(4) of the Investment Promotion Ac t of 1977, amended in 1991 since August 2000.  This
means that there has been no special privilege granted to any operator under BoI’s export subsidy
programme since August 2000.
3. Does Thailand have a plan for phasing out the prohibited subsidies for which the
extension is being requested.  Please provide details in this respect.
Thailand does have plans for phasing out the three prohibited subsidy programmes for which
the extension is being requested.  Details are as follows:
(1) Investment Promotion Incentives (BoI)
There are 1,392 projects with export requireme nts under the Board of Investment’s subsidy
programme, which were approved before August 2000.3  The longest grace period approved before
August 2000 is 13 years.  Therefore, considering the number of projects under the programme and the
original grace periods endorsed, the Board of Investme nt expects to completely eliminate this subsidy
programme within 13 years (in 2013).
(2) Export Market Diversification Promotion Programme (EXIM)
The Export and Import Bank of Thailand (EXI M) expects the phase-out process to be
completed by 31 December 2003, or one year afte r the last authorized period.  The Ministry of
Commerce who finance this subsidy programme thr ough the EXIM Bank has decreased the annual fund
from 150 million baht in 2000 to 50 million baht (1.1 m illion US dollars) in 2001 as a step towards the
termination of this programme.
(3) Industrial Estate Authority of Thailand (IEAT)
The Industrial Estate Authority of Thailand (IEA T) expects to finish the amendment of the
IEAT Act within approximately ten years, taking into account the lengthy and time-consuming law
amendment process.  More details on the amendmen t process will be notified to the Committee as soon
as the data becomes available.
                                                     
3 The Board of Investment has actually abolished its export requirement scheme, as specific under
Section 36(4) of the Investment Promotion Act of 1977, amended in 1991, since August 2000, not August 2001
as stated in the Requests Pursuant to Article 27.4 of the Agreement on Subsidies and Countervailing Measures
(G/SCM/N/74/THA).G/SCM/Q3/THA/11
Page 3
4. Why does Thailand consider that only one exte nsion is needed for productive activity to
attain all the objectives  under the country's strategic and development plans?
Reply
Export subsidization has long been considered as a means to achieve certain economic, social
and development objectives in Thailand.  Yet, it does not consider that only the extension is needed for
productive activity to accomplish all the objectives contained in the country’s development plans.
Besides, our requests were not exclusively based on the merits of those export subsidy programmes.
Thailand has indeed requested for extension of the three subsidy programmes for three different reasons
as provided as follows:
(1) Investment Promotion Incentives (BoI)
The grounds for this request is to maintain policy coherence and prevent the divestment of
confidence in government developmental plans and endeavours.  The export subsidies given are in fact
beneficial only to those operators who were appr oved before the export requirement scheme was
abolished in August 2000.
(2) Export Market Diversification Promotion Programme (EXIM)
The request is based on the importance of the Programme’s contribution to Thailand’s economy
and development and its planned termination in 2003, wh ich is one year after the last authorized period
as set forth under Article 27.2(b) of the SCM Agreemen t.  Thailand therefore request for an extension of
the Programme until the end of 2003.
(3) Industrial Estate Authority of Thailand (IEAT)
Thailand requests for an extended transition period to complete the amendment of the Industrial
Estate Authority of Thailand Act of 1979 in order to fully bring the measure in to conformity with the
SCM Agreement.
5. Why does Thailand consider that its incenti ves are not trade-distorting for countries
which do not apply trade-distorting measures?
Reply
Export subsidy, per se , is certainly a trade-distorting measure.   Nonetheless, in the context of its
requests for extension, Thailand is not seeking extens ions for the purpose of creating cost-advantage of
Thai exporters over foreign producers or exporters.  Our requests are, in fact, based on the reasons as
provided in the reply for question 4.  Thialnd woul d like to emphasize again that the requests for
extension of the three subsidy programmes is pur ely of technical, economic and development purposes,
without any intent to create unnecessary trade distorti on.  Thailand has indeed remained steadfast to its
WTO obligations in the SCM Agreement.  For inst ance, Thailand has regularly and promptly submitted
the subsidy notifications to the SCM Committee sin ce 1995 as required by Article 25 of the Agreement,
reading:
“Members agree that, without prejudice to provisions of paragraph 1 of Article XVI
of GATT 1994, their notifications of subsidies shall be submitted…”  “Member shall
notify any subsidy as defined in paragraph 1 of Article 1, which is specific within the
meaning of Article 2, granted or maintained within their territories.”  (Custom zones
such as LOS CETICOS in Peru and the IEAT’s industrial zone in Thailand are
subject to the notified alike.)G/SCM/Q3/THA/11
Page 4
Furthermore, the progressive elimination of so me major subsidy programmes such as Packing
Credit and Direct Packing Credit Facilities and the Board of Investment’s abolishment of its export
requirement scheme from its “Investment Promotion Incentives Programme” in August 2000 should
demonstrate our attempt to fulfil the commitments.
6. Article 27.5 and Article 27.6 of the Agreement on Subsidies states that:
"A developing country Member which has re ached export competitiveness in any given
product shall phase out its e xport subsidies for such product (s) over a period of two years.
(…) Export competitiveness in a product exists  if a developing country Member's exports of
that product have reached a share of at least 3.25 per cent in world trade of that product for
two consecutive calendar years".
Has Thailand performed any analysis of competitiveness in products subject to export
subsidies?
Reply
Thailand has not performed any analysis of competitiveness in products subject to export
subsidies.
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