RESTRICTED
WORLD TRADE G/SCM/Q2/CZE/10
6November 1996
ORGANIZATION(96-4694)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies oftheCZECH REPUBLIC1to
Questions posed byARGENTINA2
Thefollowing communication, dated 30October 1996, hasbeenreceived fromthePermanent
Mission oftheCzech Republic.
_______________
Export Promotion Programme
Q1.(a) Initsnotification, theCzech Republic states thatthisprogramme comprises anexport guarantee
scheme forpolitical andcommercial risks, andgives details ofthepremiums charged. Arethese
premiums sufficient tocover thecosts oftheprogramme, asrequired under Annex I,paragraph (j)
oftheAgreement?
Answer
Theobjective oftheprogramme wastoprovide ascheme under which thepremiums charged
would cover long-term operating costsandlosses. Theresults oftheprogramme initsoperations show
thatthepremium earned covers boththeindemnification paidandtherespective operational costs.
Q1.(b) Thenotification alsostates thattheprogramme includes amechanism toequalize interest rates
payable byCzech exporters withforeign rates. According toAnnex I,paragraph (k),oftheSubsidies
Agreement, suchaidisconsidered prohibited except where thecountry isaparty toaninternational
undertaking onofficial export credits orifinpractice amember applies theinterest rates provisions
ofsuchanundertaking. IsthisthecaseoftheCzech Republic?
Answer
Theinterest rateslosses equalization scheme wasnotaimed toundercut theinternational market
ratesbygrantingtheexportcreditsatratesbelowthosewhichactuallyprevailedoninternationalmarkets.
Themain purpose wastomitigate theimpact oftheextremely highinterest ratesfortheborrowing
intheCzech national currency fromthelocalcommercial banks. Thescheme which followed theOECD
Consensus principles wasphased outandreplaced upon theentry intoforce ofanewlegislation on
export promotion in1995. Thekeyobjective ofthenewLawonInsurance andFinancing ofExports
withState Support istoprovide astandard legal andinstitutional framework fortheexport credit
financing, fullycompatible withtheOECD Consensus which isapplied bytheCzech Republic.
1G/SCM/N/3/CZE.
2G/SCM/Q2/CZE/4.G/SCM/Q2/CZE/10
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Q1.(c) Again inthisprogramme theCzech Republic states thatinorder tobeeligible exporters must
usedomestic supplies amounting toatleast60percentofthetotalvalue oftheexport. Does the
Czech Republic consider thisruletobeinkeeping withArticle 3.1(b) oftheAgreement?
Answer
Theprogramme iscovered byanexception totherelevant provisions oftheAgreement on
SubsidiesandCountervailingMeasuresforthosecountrieswhichinpracticeapplytheOECDConsensus.
Q1.(d) AsaMember intheprocess oftransition toamarket economy, doestheCzech Republic plan
toeliminate thisprogramme within thetime-period provided forinArticle 29.2oftheAgreement?
Answer
Theinterest rateslosses equalization scheme hasbeenphased out.Astothenewlegal and
institutional framework, theCzech Republic doesnotintend toeliminate it.Thenewscheme isin
fullconformity withtheWTO Agreement onSubsidies andCountervailing Measures andisguided
bytheinternational agreements andunderstandings inthisarea.
Programme ofSupport forResearch andDevelopment
Q2. Initsnotification ofthisprogramme, theCzech Republic states thatthere isnolimitation in
respect oftheshare ofthesubsidy onthetotalcosts ofaproject. Does thisimply thatitispossible
toexceed thelimits provided forinArticle 8.2(a) oftheAgreement? What arethecosts covered by
thesubsidy programme notified?
Answer
Information contained inthenotification refers to1994 when nolimitation waslaiddown.
Since then, thenewRules governing theprovision offunds toresearch anddevelopment havebeen
adopted bytheGovernment. These rules conform totheprovisions oftheAgreement onSubsidies
andCountervailing Measures, including those contained inArticle 8.2(a) ofthisAgreement.
Q3. Thetableontheactivity oftheMarket Regulation Fund anditseffects doesnotdefine theunits
ofthevalues given. Could theCzech Republic clarify whatthese values referto,aswellastheway
inwhich thebeneficiaries ofaidfromtheFund areselected, whether theFund hascontinued beyond
1994, andwhether there isanallocation byproduct orgroup ofproducts.
Answer
Values contained inthetable ontheactivity oftheState Fund forMarket Regulation in
Agriculture (SFMR) refertothousands oftons.
Allcompanies engaging inproduction ofproducts subject tomarket regulation areeligible.
Their selection ismade onthebasis ofatender. Thetender forSFMR contractual partners hasthe
form ofaselection procedure. Themajor criteria include therequired volume ofproducts for
intervention purchase, export orsale,requested amount ofsubsidy (incaseofsubsidized exports),
leveloftheproposed price, level ofprocessing andstorage costs (incaseofintervention purchases
andsales) andageneral entrepreneurial trade andeconomic reliability oftheapplicant.
In1995, onlytwocommodities, milkandfoodwheat, weresubject tomarket regulation carried
outbytheSFMR. Therespective information willbecontained inthenotification onsubsidies paid
outin1995.G/SCM/Q2/CZE/10
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Forfurther information, please refer totheCzech Republic notification made pursuant to
Article XVII:4(a) oftheGATT 1994 (document G/STR/N/1/CZE anditscorrection) andtoreplies
toquestions submitted bytheUnited States andCanada (documents G/STR/W/10 andG/STR/W/25).
Q4. Thesupport forprivatization andrestructuring leadstoanallocation offunds benefiting various
agricultural products. Could theCzech Republic givedetails onhowthebeneficiaries areselected
andonallocation byproducts?
Answer
Themajor objectives oftheprogramme aretherestructuring oftheagricultural production,
support ofprivate farming, environment andother non-production functions. Theareas towhich the
subsidies areallocated arecontained inthenotification. Payments weremade, forexample, topromote
theconversion ofarable landtograssland ortoforest, tothemaintenance ofseedgenetic potential
andtotheimprovement ofanimal health condition. Itisobvious fromthenotification thatthesubsidies
which could bequalified asproduct-specific werelimited tobee-keeping, reconstruction ofvineyards
andofhopplantations andtobeefcattle farming.
TheFarming andForestry Support andGuarantee Fund wasestablished in1994 tosupport
theagricultural restructuring byfacilitating investment through amixture ofconcessionary loans and
guarantees. TheFund provided support within thefollowing basic programmes: Provoz (Operation)
totemporary support ofoperating costs, Zemedelec(Farmer) tosupport long-term investment andSluby
(Services) tosupport thedevelopment ofservices fortheagricultural production. These programmes
areopentoanyproducer whose agricultural activity represents atleasthalfoftotalincome. There
arealsoother small programmes forspecific purposes suchasRestituent which isdesigned tosettle
restitution andtransformation claims.