RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/COL/11
19 April 2002
(02-2237)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies by COLOMBIA to Questions Posed by PERU1 and the UNITED STATES2
The following communication, dated 4 April 2002, has been received from the Permanent
Mission of the United States.
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REPLIES BY COLOMBIA TO THE QUESTIONS POSED BY PERU
1. In the light of the tables below, does Colombia consider that it meets conditions similar
to those strictly fulfilled, on an individual basis, by countries that have requested the extension
under Article 27.4 of the Agreement on Subsidies and Countervailing Measures?  Has Colombia
considered other indicators or aggregate compet itiveness indicators for determining its overall
position in relation to Latin American and Caribbean countries?
See document G/SCM/Q3/COL/7, reply to question 1 from the United States.
As to the existence of other indicators of comp etitiveness in relation to Central American and
Caribbean countries, see paragraph 16 of docume nt G/SCM/N/ 74/COL containing Colombia's request
for an extension, which indicates the sectors in which Colombia's exportable supply is similar to that
of the WTO Members mentioned in this question.
It is worth pointing out that the table of countries included in this question contains a mixture
of countries requesting the extension exclusively under Article 27.4 of the Subsidies Agreement andcountries invoking paragraph 10.6 of the Implementation Decision or the special procedure
established in document G/SCM/39.
2. Article 27.4 stipulates that developing-country Members shall phase out their export
subsidies, preferably in a progressive manner.  Although some developing countries areaccorded a grace period during which they may co ntinue to apply such subsidies, has there been
any progress in the phasing out of such measures  since the period began in 1995, in pursuit of
one of the key objectives of the multilateral trading system, which is to achieve freer, more
competitive and undistorted trade?
                                                     
1 G/SCM/Q3/COL/9.
2 G/SCM/Q3/COL/10.G/SCM/Q3/COL/11
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See document G/SCM/Q3/COL/7, reply to question 4 from the United States.
3. Does your country have a plan for phasing out the prohibited subsidies for which the
extension is being requested?  Please provide details in this respect.
See document G/SCM/Q3/COL/7, reply to questi on 1 from Australia and reply to question 7
from the European Communities.
4. Colombia points out that, since it has no assurance of obtaining the extension for the
continuation of export subsidies, domestic and foreign investors could decide to shift
investments to countries where incentives were guaranteed.  Could Colombia specify whether it
has any experience in this regard, consider ing that investors knew that the period for
maintaining export subsidies would expire at the end of 2002?
At this stage in the process, Colombia does not have evidence that this has actually occurred
inasmuch as the Agreement on Subsidies gave the oppor tunity to request an extension for dismantling
subsidies.  However, it does have experience in the displacement of investment caused by other trade
policy instruments applied differentially to countries with a similar level of development and relative
competitiveness, inter alia , as competitors on the same markets.  Hence the reference in paragraph 45
of document G/SCM/N/74/COL concerning the negative impact on the Colombian economy in terms
of investment displacement if the extension were not granted.
5. Why does Colombia consider that only one ex tension is needed for productive activity to
attain all the objectives under the country's strategic and development plans?
The request submitted by Colombia (G/SCM/N/74/COL) includes in paragraph 32 the five
strategies under the Export Plan, which is set in the context of the national development plan "Change
to Build Peace".
Thus we wish to reiterate the importance of the extension of the transition period for
subsidies, while making it clear that this should not be construed as the exclusive element of a ten-
year export strategy.
6. Why does Colombia consider that its incen tives are not trade-distorting for countries
that do not apply trade-distorting measures?
In this connection Colombia stated that it has a very small share in world trade.  Now, it is
important to note that the special procedure adopted at the last Ministerial Conference for extendingthe transition period, set out in document G/SCM/39, explicitly reiterates (paragraph 7(b)) that this
procedure does not affect any other right or obligation provided for in the Agreement on Subsidies.
7. Has Colombia performed any analysis of co mpetitiveness in products subject to export
subsidies?  By way of introduction to this question reference is made to paragraphs 5 and 6 ofArticle 27 of the Agreement on Subsidies.
Paragraph five of document G/SCM/39 makes it clear that paragraphs five and six of
Article 27 shall apply in respect of export subsidies for which extensions are granted pursuant to the
special procedure.
8. Why is the Transport Compensation Mech anism (MTC) necessary in the context of
economic, financial and development needs?  What products benefit from this mechanism?
Please provide further details.G/SCM/Q3/COL/11
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See the replies to the questions from Australia, Switzerland, European Communities and
Canada (document G/SCM/Q3/COL/8).
REPLY BY COLOMBIA TO THE QUESTION POSED BY THE UNITED STATES
If a five-year deferral of a VAT payment is provided under the Special Import-Export
System for Capital Goods and Spare Parts (SIEX), technically, a benefit is received in each year
the payment is deferred.  In other words, the def erral is, in essence, an interest-free loan for five
years.  In each year of the "interest-free loan ", a benefit is being provided.  Therefore, if a
deferral is granted in the last year of the extended transition period, the benefit or subsidy will
continue beyond the extended transition period.  To prevent this, any deferral of the obligation
to make the VAT payment could not extend beyond the extended transition period.  In other
words, the granting of deferrals would have to be discontinued five years prior to the end of any
extended transition period.  Is this Colombia's intention?
Colombia considers that this raises a general technical question as to the moment at which the
subsidy should be considered to have been granted and seeks to identify the treatment that would be
granted specifically to the SIEX programme.
Basically the issue is to determine whether the benefit is provided at the moment when the
programme is approved, when the capital goods are actually imported, or when the deferred VATpayment is made.
In this connection Colombia wishes to state that it considers that there should be a general
interpretation of this issue of the moment at which the subsidy is considered to have been granted, and
that this interpretation should apply for all the different incentives and for all the countries benefitingunder the special procedure.
Colombia will strictly comply with the te rms established in document G/SCM/W/471/Rev.1,
according to which the Committee should approve the extensions concerned.
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