RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/M/18
12 February 1999
(99-0570)
Committee on Subsidies
and Countervailing Measures
MINUTES OF THE REGULAR MEETING
HELD ON 2 NOVEMBER 1998
Chairman: Mr. Carlos Antonio da Rocha Paranhos (Brazil)
1. The Committee on Subsidies and Countervailing Measures ("the Committee") held its
Regular Meeting on 2 November 1998.
2. The Committee adopted the following agenda:
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A. OBSERVERS – INTERNATIONAL INTERGOVERNMENTAL ORGANIZATIONS 3
B. NATIONAL LEGISLATION
(i) Review of notifications of new or amended legislation
or regulations not previously reviewed by the Committee 3
(a) Chad (G/SCM/N/1/TCD/1)
(b) Costa Rica (G/ADP/N/1/CR1/1/S uppl.1- G/SCM/N/ 1/CRI/1/Suppl.1)
(c) Ecuador (G/ADP/N /1/ECU/1/Suppl.1-G/SCM/ N/1/ECU/1/Suppl.1)
(d) Haiti (G/SCM/N/1/HTI/1)
(e) Korea (G/SCM/N/1/KOR/3)(f) Macau (G/SCM/N/1/MAC/1)
(g) Panama (G/ADP/N/1/PAN/1-G/SCM/N/1/PAN/1)
(h) Poland (G/ADP/N/1/POL/2-G/SCM/N/1/POL/2)
(i) Qatar ((G/ADP/N/1/QAT/1-G/SCM/N/1/QAT/1)
(j) United States (G/ADP/N/1/USA/1/Suppl.3-
G/SCM/N/1/USA/1/Suppl.3)
(ii) Continuing review of prev iously reviewed notifications 3
(a) Brazil (G/ADP/Q1/BRA/8-G/SCM/Q1/BRA/8)
(G/ADP/Q1/BRA/9-G/SCM/Q1/BRA/9)
(b) Peru (G/ADP/Q1/PE R/10-G/SCM/Q1/PER/10)
(G/ADP/Q1/PER/12-G/SCM/Q1/PER/12)
(c) United States (G/ADP/Q1/USA/7-G/SCM/Q1/USA/7)
(G/ADP/Q1/USA/10-G/SCM/Q1/USA/10)G/SCM/M/18
Page 2
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C. SUBSIDIES – 1995 NEW AND FULL NOTIFICATIONS (G/SCM/N/3/…) 4
(a) Macau (G/SCM/N/3/MAC-G/SCM/N/16/MAC-G/SCM/N/25/MAC)
(b) Zimbabwe (G/SCM/N/3/ZWE-G/SCM/N/16/ZWE-G/SCM/N/25/ZWE)
D. SUBSIDIES – 1996 UPDATING NOTIFICATIONS (G/SCM/N/16/…) 4
(a) Macau (G/SCM/N/3/MAC-G/SCM/N/16/MAC-G/SCM/N/25/MAC)
(b) Turkey (G/SCM/N/16/TUR-G/SCM/N/25/TUR)
(c) Zimbabwe (G/SCM/N/3/ZWE-G/SCM/N/16/ZWE-G/SCM/N/25/ZWE)
E. SUBSIDIES – 1997 UPDATING NOTIFICATIONS (G/SCM/N/25/…) 5
(a) Macau (G/SCM/N/3/MAC-G/SCM/N/16/MAC-G/SCM/N/25/MAC)
(b) Turkey (G/SCM/N/16/TUR-G/SCM/N/25/TUR)
(c) United States (G/SCM/N/25/USA)(d) Zimbabwe (G/SCM/N/3/ZWE-G/SCM/N/16/ZWE-G/SCM/N/25/ZWE)
F. ARBITRATION UNDER ARTICLE 8.5 – INDICATIVE LIST OF ARBITRATORS 5G. REVIEW OF THE OPERATION OF ARTICLES 6.1, 8, AND 9 6H. SEMI-ANNUAL REPORTS OF COUNTERVAILING DUTY ACTIONS 6I. REPORTS OF PRELIMINARY AND FINAL COUNTERVAILING ACTIONS 7
J. STATUS OF MEMBERS IN ANNEX VII OF THE AGREEMENT 7
K. PERU – IMPLEMENTATION OF ARTICLE 14 7L. OTHER BUSINESS 8
(i) US countervailing duty petition on imports of live cattle from Canada
M. ANNUAL REPORT TO THE COUNCIL FOR TRADE IN GOODS 9N. DATE OF NEXT REGULAR MEETING 9G/SCM/M/18
Page 3
A. OBSERVERS – INTERNATIONAL INTERGOVERNMENTAL ORGANIZATIONS
3. The Chairman recalled that, with respect to the ACP Group's request for regular observer
status, the Committee had decided at its last regular meeting to defer consideration of this request
pending resolution of a horizontal process underway at the Council level.  The Committee had furtherdecided to invite the ACP Group to attend its meetings on an ad hoc basis pending completion of that
process.  The Chairman conveyed that the horizontal process at the Council level had not yet been
completed and, accordingly, proposed that the Committee maintain its previous decisions.
4. The Committee so decided.
5. Turning to the OECD's request for regular obse rver status, the Chairman recalled that the
Committee had been considering this request for some time in light of issues of reciprocity, and
particularly the question of WTO observer status in the Group of Participants to the Arrangement onOfficially Supported Export Credits and Export Cred it Guarantees.  At the end of the Committee's last
regular meeting, the Chairman had reported that the Participants Group had taken a decision regarding
WTO observer status, and the Committee had decided to grant ad hoc observer status to the OECD on
a preliminary basis under terms paralleling those agreed by the Participants Group for the WTO.
Specifically, the Committee had decided to continue to invite the OECD to attend meetings on an adhoc basis.  With respect to documents, the Comm ittee had decided to grant the OECD full access,
subject to objection by a Member in particular cases.  This decision had been taken on a preliminary
basis, to be confirmed at this meeting following receipt of full details of the decision of the
Participants Group.
6. The Chairman indicated that, on 3 June 1998, the WTO Secretariat had been informed in
writing by the Chairman of the Participants Group that the Group had decided to "invite the WTO
Secretariat, from November this year, to attend meetin gs on an ad hoc basis.  In practical terms, this
means that the Secretariat will be invited to attend discussions in which it has a clear interest;
Additionally, it will be given access to relevant supporting documents."  Following further enquiries
from the WTO Secretariat regarding the decision, the Chairman of the Participants Group confirmedthat, "in practice, the WTO will be invited to all meetings and have access to all documents, except in
cases where a Participant objects."  In light of this information, the Chairman proposed that the
Committee confirm its decisions of April 1998 to (a) invite the OECD to attend meetings on an ad hoc
basis, and (b) grant the OECD full access to documents, subject to objection by a Member in
particular cases.
7. The Committee so decided.
B. NATIONAL LEGISLATION
(i) Review of notifications of new or amended legislation or regulations not previously
reviewed by the Committee (Article 32.6)
(ii) Continuing review of previously  reviewed notifications (Article 32.6)
8. The Committee agreed that, since almost all legislations and related questions on the agenda
had also been on the agenda of the Committee on Anti-Dumping Practices, there was no need to
duplicate that discussion.  However, since one portion of the questions posed by the United States
with respect to the notification of Panama, relating specifically to countervailing measures, had not
been addressed at the meeting of the Committee on Anti-Dumping Practices, those questions wouldbe addressed in this Committee.G/SCM/M/18
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9. The questions regarding Panama's notification can be found in the following document:
G/ADP/Q1/PAN/4-G/SCM/Q1/PAN/4 (Submitted by the United States)
10. The answers provided by Panama to these questions can be found in the following document:
[NO ANSWERS HAVE BEEN PROVIDED BY PANAMA AS YET.]
11. The Chairman reminded Members that any follow-up questions regarding this notification
should be submitted in writing to Panama and to the Secretariat no later than 23 November 1998.
Written answers were to be provided to the United States and to the WTO Secretariat no later than
8 January 1999.
C. SUBSIDIES - 1995 NEW AND FULL NOTIFICATIONS (Article 25.1 of the SCM Agreement
and Article XVI:1 of GATT 1994)
12. The Chairman indicated that there were two 1995 new and full notifications for review by the
Committee, those of Macau and Zimbabwe.
13. No questions were posed regarding the notifications of Macau or Zimbabwe .
14. The representative of the European Communities ("EC") indicated that they had been in
contact with Zimbabwe and some neighbouring countries in order to provide technical assistance with
respect to subsidy matters, including the question of subsidy notifications.  The EC understood that
Zimbabwe might at some point in the future be reco nsidering its approach to certain interpretations of
the SCM Agreement as regards those subsidies that needed to be notified, and the EC looked forward
to continuing its cooperation with Zimbabwe.
15. The Chairman wished to take stock of where the Committee stood in terms of 1995 new and
full notifications.  The review of 1998 new and full notifications was to begin at a special meeting
immediately following this meeting.  The Chairman noted with disappointment that a significant
number of Members had not submitted 1995 new and full notifications, more than three years after
those notifications had been due.  In fact, 49 Members had never submitted a notification.  While
some of these were less active Members, a number of very active Members had also failed to notify.It was the Chairman's hope that Members would do better with respect to 1998 new and full
notifications.
D. SUBSIDIES – 1996 UPDATING NOTIFICATIONS (Article 25.1 of the SCM Agreement and
Article XVI:1 of GATT 1994)
16. The Chairman indicated that three 1996 updating notifications appeared on the agenda.  Two
of these notifications, those of Macau and Zimbabwe, were triple-symbolled documents, which had
already been reviewed under the previous item on the Committee's agenda.  The Chairman wouldassume that, unless informed to the contrary, ther e were no questions regarding these notifications.
The third notification was that of Turkey.
17. The questions regarding Turkey's notification can be found in the following document:
G/SCM/Q2/TUR/7 (Submitted by Poland)
18. The answers provided by Turkey can be found in the following document:
G/SCM/Q2/TUR/8 (To questions submitted by Poland)G/SCM/M/18
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E. SUBSIDIES - 1997 UPDATING NOTIFICATIONS (Article 25.1 of the SCM Agreement and
Article XVI:1 of GATT 1994)
19. The Chairman indicated that four 1997 updating notifications appeared on the agenda.
However, three of these, those of Macau, Turkey, and Zimbabwe, were triple-symbolled documents,
which had already been reviewed under the pr evious two items on the Committee's agenda. The
Chairman would assume that, unless informed to th e contrary, there were no questions regarding these
notifications.  The fourth notification was that of the United States.
20. No questions were posed with respect to the notification of the United States.
21. The representative of the European Communities indicated that his delegation had been
looking at the status of 1996 and 1997 updating notifications, and found it extremely disappointing
that a number of rather active Members, in particular a number of Members that were quite active in
the countervailing duty area, had submitted neither a 1996 nor a 1997 updating notification.  The EChad put in a great deal of work to meet its notification obligations and to provide information, which
would be of use to other Members of the Committee.  This transparency could not all be one-way, and
there was an imbalance of transparency in the Committee at present.  The EC was of the opinion that
the performance of certain Members had to improve with respect to 1998 new and full notifications.
22. The Chairman concurred with the remarks made by the representative of the EC and
emphasized the importance of meeting notification obligations.
23. The representative of Norway shared the views of the European Communities, the
United States and the Chairman.  In particular, Members taking countervailing actions needed to meet
their notification obligations.
F. ARBITRATION UNDER ARTICLE 8.5 – INDICATIVE LIST OF ARBITRATORS24. The Chairman indicated that paragraph 13 of the Procedures for Arbitration under Article 8.5
of the Agreement provided for the Secretariat to maintain an indicative list of qualified persons from
which arbitrators may be selected.  The list was to be based on nominations put forward by
delegations and approved by the Committee.  The Chairman had invited nominations in document
G/SCM/20 dated 17 September 1998.  The invitation had stated that nominations received by7 October 1998 would be included in a list for consideration at this meeting.  The list of nominations
received by that date – amounting to six nominations by Colombia, Japan, and Poland – had been
circulated in document G/SCM/21.  After 7 Oc tober 1998, eleven additional nominations had been
received from Korea and circulated in document G/SCM/21/Add.1.  Most recently, a nomination had
been received from the EC.  As noted in these documents, curricula vitae for the nominees were
available for review by interested delegations at  the WTO Secretariat.  As clearly indicated in
G/SCM/21/Add.1, additional nominations could be submitted to the Committee at any time.  Suchadditional nominations would be circulated to the Committee upon receipt and considered at the next
regular meeting of the Committee.  Accordingly, unless a delegation had any general comments, the
Chairman proposed that the Committee consider the nominations in question one by one.
25. The representative of the United States stated that his delegation did not necessarily object to
any of the individual nominations.  However, the Committee had spent considerable time drawing up
the Procedures for Arbitration, and the Procedures made reference to persons having relevant legal,
economic, financial, or technical expertise, in particular with respect to the provisions of Article 8,
where there were a number of highly technical requirements.  It would be helpful if in the future the
nominees' curricula vitae spoke directly to those particular requirements.  Most of the curricula vitae
had done so, but some were sparser than others.G/SCM/M/18
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26. The representative of the EC indicated that his delegation had not been in a position to meet
the deadline of 7 October 1998, and understood that its nomination could thus not be considered at
this meeting.  The same would have to apply to other nominations made after 7 October 1998.  The
EC had no objection to the nominations by Colombia, Japan, and Poland, but wished to reserve its
position vis-à-vis  the nominations by Korea, which had been made after the deadline.  The EC needed
further time to study the candidates' curricula vitae.
27. The representative of Korea explained that the delay was due to an elaborate national
selection process.  All of Korea's nominees met the technical, economic, or legal requirements
perfectly.  In the event of any questions regarding individual qualifications, all Members should be
treated alike.
28. The representative of the Philippines sought  clarification as to the rules regarding
consideration of nominations.
29. The Chairman indicated that paragraph 13 of the Procedures for Arbitration provided that
nominations for the indicative list were to be "approved by the Committee".  The curricula vitae of all
nominees were available for review at the WTO Secretariat.  The Chairman noted that the issue was
the deadline of 7 October 1998.  Some Members were not in a position to approve nominations made
after the deadline, i.e., those contained in G/SCM/21/Add.1.  The Chairman proposed that theCommittee therefore adopt the nominations containe d in G/SCM/21 and revert to those contained in
G/SCM/21/Add.1 and any additional nominations at its next regular meeting.
30. The Committee so decided.
G. REVIEW OF THE OPERATION OF ARTICLES 6.1, 8, AND 9
31. The Chairman reminded Members that it was incumbent on the Committee under Article 31
of the Agreement to review the operation of Articles 6.1, 8, and 9, which applied for a period of five
years from 1 January 1995, with a view to determining whether to further extend their application. At
the last regular meeting of the Committee, the Ch airman had been authorized to begin informal
consultations with respect to the procedure for the conduct of the review.  The Chairman reported that
informal bilateral consultations had been held with some delegations, and that consultations wereexpected to be held with others.  It would be pr emature to express any views on the procedure at this
time.  Accordingly, the Chairman requested th e Committee to authorize him to continue his
consultations on the matter.
32. The representative of Egypt requested that his delegation be included in the consultations.
33. The Committee so decided.
H. SEMI-ANNUAL REPORTS OF COUNTERVAILING DUTY ACTIONS
34. The Chairman reported that a request for semi-annual reports for the first half of 1998, to be
submitted by 31 August 1998, had been circulated to the Committee in document G/SCM/N/40 dated
1 July 1998.  Turning to the reports submitted to date, did any Member have comments or questions
concerning the semi-annual reports of Argentina, Australia , Brazil , Canada , the EC , Mexico ,
New Zealand, Peru , the United States , or Venezuela ?
35. The representative of the EC noted that countervailing duties had been imposed by Argentina
on olive oil and wheat gluten from the EC.  The EC looked forward to this information being reflected
in Argentina's next semi-annual report.G/SCM/M/18
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36. The representative of the EC enquired as to the status of the ongoing countervailing duty
investigation by Mexico of canned peaches from Greece.  The EC had been notified of no
developments since provisional measures were imposed on 9 December 1997.
37. The representative of Mexico indicated that the final determination was to be published
shortly.
38. The representative of the EC enquired as to "sunset" review arrangements regarding the
countervailing duties imposed by Venezuela on certain types of cheese from the EC in May 1994.
39. The representative of Venezuela stated that a changed circumstances review had been
conducted in 1996 and had resulted in a change in the margin of subsidization due to a reduction in
subsidies.  The "sunset" period had not yet arrived, and the measure would remain in force for another
three years.
40. The Chairman expressed his concern regarding compliance with this notification obligation.
A majority of Members had not yet submitted semi-annual reports.  The current status of these
notifications was reflected in Annex E to the draft Annual Report of the Committee.  The Chairman
urged those Members which had not yet submitted a semi-annual report to do so promptly.
I. REPORTS OF PRELIMINARY AND FINAL COUNTERVAILING ACTIONS
41. No statements were made with respect to these notifications.
J. STATUS OF MEMBERS IN ANNEX VII OF THE AGREEMENT
42. The Chairman indicated that Annex VII of th e Agreement provided that certain identified
WTO Members would be subject to the provisions which were applicable to other developing country
Members under paragraph 2(b) of Article 27 when their GNP per capita had reached US$1,000 per
annum.  The Chairman had routinely informed the Committee when a listed Member's GNP per capitahad reached that level.  Accordingly, the Chairman reported that the most recent data obtained from
the World Bank indicated that the GNP per capita of two additional Members – Egypt and Indonesia –
had reached US$1,000 in 1997.
43. The representative of the Philippines recalled that his delegation had raised a similar issue in
an earlier session of the Committee.  What would happen if, a year later, Indonesia's GNP per capita
fell below US$1,000 due to a weaker exchange rate?  If, at the end of 1998, the Philippines' GNP per
capita stood at under US$1,000, the Philippines having graduated from Annex VII based on 1995
data, his delegation intended to send an appropriate communication to the Committee.
44. The Committee took note of the Philippines' statement.
K. PERU – IMPLEMENTATION OF ARTICLE 14
45. The representative of Brazil recalled that, during the review of Peru's implementing
legislation, notified in documents G/ADP/N/1/PER /1/Suppl.2 and G/SCM/N/1/ PER/1/Suppl.2, at the
Committee's meeting of April 1998, Brazil had enquired as to the implementation of Article 14 of the
Agreement.  Brazil had noted that the Peruvian legislation did not comply with the requirement of that
Article that the "method used by the investigating authority to calculate the benefit to the recipient" be
provided for in the "national legislation or implementing regulations".  Besides, Brazil had noted that
Article 14 also required that the application of this methodology "to each particular case shall betransparent and adequately explained".  In essence, Peru's written response had pointed out that the
Peruvian national legislation incorporated the Uruguay Round Agreements and, consequently, theG/SCM/M/18
Page 8
letter of the SCM Agreement had the "status of domestic law".  Peru had concluded that this ensured
" . . . the Commission conformity in every respect to the provisions of Article 14, sub-paragraphs (a)
to (d)".
46. The representative of Brazil indicated that this was not a satisfactory answer.  Peru's
legislation did not conform to the provisions of Arti cle 14.  If the national legislation did not provide
for the method used by the authorities to calculate the benefit, Members would be at a loss as to the
compatibility of that methodology with the parameters of Article 14.  This was a serious transparency
issue in the determination of the benefit to the recipient and, consequently, in the determination of the
existence of subsidy.  The absence of the methodo logy in the national legislation would, in theory,
allow the investigating authorities to apply methods in an arbitrary or even discriminatory fashion.
Moreover, Members whose practices were under investigation would be at a disadvantage when
trying to defend their interests, due to the lack of referential methodological parameters.
47. The representative of Brazil stated that this was an implementation issue given the facts of a
particular investigation launched by Peru.  In the late stages of this investigation, the Peruvian
authorities had significantly changed the method used to calculate the benefit to the recipient, in an
effort to confer some legitimacy to the claims of the petitioner.  Such legitimacy could not possibly
have been achieved under the parameters used at the beginning of the investigation.  This was animportant transparency issue which significantly affected the balance of rights and obligations
contracted by Members under the Agreement.  Finally, non-compliance of Article 14 was a clear
violation of the terms of the Agreement.
48. The representative of Peru wished to confirm his delegation's earlier written response.  Peru
had incorporated the SCM Agreement into Peruvian legislation, and it therefore had the force of law.
Those matters which had not been spelt out in detail were dealt with as per the provisions of the SCM
Agreement.  With respect to the calculation of the amount of subsidy, the guidelines set out in
Article 14 were to be applied, and there was therefore no non-compliance or arbitrariness.
Notwithstanding these remarks, the Peruvian authorities were presently considering the possibility of
developing or detailing some of these provisions wi th a view to improving Peruvian legislation, and
the results of this work would be notified to the Committee.  Brazil's remarks would be useful in this
context.
49. Regarding the technical points made by Brazil at this meeting vis-à-vis  a countervailing duty
investigation launched by Peru, the representative of Peru requested Brazil to put its questions in
writing.  Peru was of the understanding that all consultations between them were being completed inthe capitals, and this included a detailed description of the methodology used by the Peruvian
authorities in this case.  Peru was prepared to respond to any further written questions Brazil might
pose.
50. The Committee took note of Brazil's and Peru's statements.
L. OTHER BUSINESS
(i) US countervailing duty petition on imports of live cattle from Canada
51. The representative of Canada indicated that his government had requested consultations with
the US Department of Commerce before the deadline for initiating any countervailing duty
investigation of live cattle from Canada.  The consultations, required by Article 13.1 of the SCM
Agreement, were to express Canada's view that, because of substantial deficiencies relating to
industry support and to the programme allegations, no investigation should be initiated.  Canada had
two principal concerns.  First, the petitioner was not acting by or on behalf of the US domesticindustry.  It was clear from the face of the petition that the petitioner did not meet the minimumG/SCM/M/18
Page 9
requirements for industry support set out by the SCM Agreement.  Second, the petition had not
sufficiently alleged the conferral of more than a de minimis  level of countervailable subsidies.  Its
allegations with respect to the Canadian Wheat Bo ard and the Net Income Stabilization Account were
deficient, and, without those claims, the total alleged subsidy was less than 1 per cent ad valorem .
52. Further, the representative of Canada wished to remind the United States of the provisions of
Article 13 of the Agriculture Agreement.  Specifically, Members were required to exercise "due
restraint" in initiating countervailing duty cases against domestic agricultural support measures of
other Members in the circumstances listed in that Article.  The SCM Agreement established basic
requirements that petitions must meet, and the United States must respect its international obligations
by not initiating an investigation on the basis of this petition, which contained claims of standing and
allegations of subsidization that were unsubstantiated and deficient.
53. The representative of the United States was unable to offer any substantive information at this
time, but committed to convey Canada's concerns to the relevant authorities.  He assured the
Committee that the United States' actions in this case would be in conformity with the SCM
Agreement and the Agriculture Agreement.
54. The Committee took note of Canada's and the United States' statements.
M. ANNUAL REPORT TO THE COUNCIL FOR TRADE IN GOODS (Article 32.7)
55. The Committee adopted its Annual Report to the Council for Trade in Goods.*
N. DATE OF NEXT REGULAR MEETING
56. The Chairman stated that, pursuant to the Procedure for Review of 1998 New and Full
Notifications (G/SCM/18), a specia l meeting to review 1998 new and full notifications would be held
"in conjunction with the regular meeting of the SCM Committee" in Spring 1999.  Based on pastexperience in the review of 1995 new and full notifications, the Committee would require a full week
for the regular and special meetings combined.  Accordingly, the Chairman proposed that the
Committee hold its regular and special meetings in the week of 3 May 1999.
57. The Committee so decided.
58. The meeting was adjourned.
__________
                                                     
* Circulated in document G/L/267.