RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/COL/12
16 May 2002
(02-2706)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Comments and Questions from ECUADOR Regarding COLOMBIA1
The following communication, dated 7 May 2002, has been received from the Permanent
Mission of Ecuador.
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1. Colombia has requested the Committee on Subsidies and Countervailing Measures to extend
the transition period for the continued application of export subsidy programmes, in accordance with
Article 27.4 of the Agreement on Subsidies and Countervailing Measures and pursuant to
paragraph 10.6 of the Ministerial Decision on Implementation-Related Issues and Concerns
(WT/MIN(01)/17 ).  The Decision emphasizes that developing country Members requesting extension
of the transition period for specific export subsidies must meet the criteria laid down in the Procedures
for Extensions (G/SCM/39), specifically those in paragraph 2 (Eligible Programmes).  The
programmes included in this request are the Special Import-Export System For Capital Goods And
Spare Parts (SIEX) and the  Free Zone Regime .
2. Pursuant to Article 27.4 of the SCM Agreement, Colombia is also requesting an extension of
the transition period for the continued application of the export support programme known as the
Transport Compensation Mechanism .
3. The information obtained from Colombia's consultations with various countries, in particular
Colombia's replies to the comments and questions from Peru, already provides some clarification and
enables us to reach some conclusions regarding the status of and outlook for the Colombian request.
4. As regards the Special Import-Export System For Capital Goods And Spare Parts
(SIEX) and the  Free Zone Regime , we note that Colombia may not be fulfilling at least two of the
criteria in paragraph 2 of document G/SCM/39, since, according to the WTO Secretariat's calculations
in Appendix 3 of the Chairman's Report (G/SCM/3 8), the country has more than a 0.10 per cent share
of world merchandise export trade  (i.e. 0.20 per cent), as Colombia itself points out in paragraph 9
of its request (G/SCM/N/74/COL).
5. Colombia's total gross national income (GNI) for the year 2000, published by the World
Bank, exceeds US$20 billion (US$85,279 million, World Bank, Total GNI 2000, Atlas Method, World
Development Indicators Database, April 2002 ).  Yet Colombia provides no information on its total
                                                     
1 G/SCM/N/74/COL and G/SCM/N/48/COL-G/SCM/N/60/COL-G/SCM/N/71/COL.G/SCM/Q3/COL/12
Page 2
GNI, which would be much appreciated in light of the requirements in paragraph 2 of document
G/SCM/39.
6. Another variable to be considered in granti ng an extension for the two programmes, which is
set out in paragraph 10.6 of the Decision on Implementation (invoked by Colombia), is Colombia'srelative competitiveness  in relation to other developing country Members that have requested
extension of the transition period following the pr ocedures laid down in document G/SCM/39.  In this
regard, paragraph 5 of document G/SCM/39 reaffirms that notwithstanding these procedures,
Articles 27.5 and 27.6 of the SCM Agreement will apply in respect of export subsidies for which
extensions are granted pursuant to these procedures.  Paragraphs 27.5 and 27.6 specify that where
export competitiveness has been reached in any given product, export subsidies will be phased out for
such product(s) over a period of two years.  In its request for extension, Colombia does not provideany details regarding the competitiveness of exports of its products subject to export subsidies, but it
maintains that its parameters are similar to those of other countries of Central America and the
Caribbean.   We would therefore welcome a detailed and duly substantiated analysis by Colombia of
the competitiveness of exports of all products covered by the Special Import-Export System for
Capital Goods and Spare Parts (SIEX) and the  Free Zone Regime  in relation to those of other
developing country Members having requested an extension of the transition period, following the
procedures set forth in document G/SCM/39.
7. Regarding the Transport Compensation Mechanism , if Colombia bases its request on
Article 27.4 of the SCM Agreement, then it must apply the subsequent provisions of this Article, inparticular paragraphs 5 and 6, as there is a necessary and logical correlation and substantive linkage
between these two paragraphs, which are legally i ndissociable.  It is therefore also necessary to
determine the competiveness of exports of products covered by this programme.  Accordingly,
Colombia should first provide a detailed description of all the products under the programme and then
present a detailed and duly substantiated analysis of the competitiveness of exports of all theseproducts, pursuant to Articles 27.5 and 27.6.
8. Concurrently, Ecuador formally requests that the competitiveness of exports be determined on
the basis of a computation undertaken by the Secretariat, in accordance with Article 27.6(b) of the
SCM Agreement.
9. Incidentally, Ecuador concurs with the comment, made by the United States
(G/SCM/Q3/COL/10) on the Specia l Import-Export System For Capital Goods And Spare Parts, that
no deferral of the obligation to make the VAT payment should extend beyond the extended transition
period.
10. Lastly, Ecuador would be grateful if Colombia could specify whether it considers that
measures under the Transport Compensation Mechanism, which refunds 26 per cent of the total cost
of freight to the country of destination over the first three years and 13 per cent over the last two years
of the programme, would come under Article 3.1(a) and Annex I(c) of the SCM Agreement.
11. Although special and differential treatment measures may play an important role in countries'
economic development programmes, such measures, particularly in the case of subsidies under
Article 27 of the SCM Agreement, will be authorized only where they fully comply with the relevant
international rules;  they must also be duly evaluated in relation to the situation in other developing
countries, especially countries – like Ecuador – which are geographically close to Colombia.  In the
present situation, the granting of such subsidies will clearly have a negative impact on internationalcompetitiveness of similar products exported by Ecuador for which subsidies have not been extended,
and may result in a loss of market positions and segments or even in the closure of certain foreignG/SCM/Q3/COL/12
Page 3
markets.  Likewise, current and potential foreign investment could easily shift to neighbouring
countries where such subsidies are granted.
12. For all the above reasons and in the light of the information supplied by Colombia to date,
Ecuador considers that evidence of fulfilment of th e criteria for authorizing extension of the above
export subsidy programmes has not been provided, and it therefore opposes Colombia's request.
Ecuador would nevertheless welcome Colombia's replies to its comments and questions.
13. Ecuador reserves the right to submit further arguments and ask other questions in the course
of this process, until the issue has been settled.
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