WORLD TRADE
ORGANIZATIONTN/RL/W/40
10 December 2002
(02-6820)
Negotiating Group on Rules Original:  English
INTERVENTION BY INDIA ON THE PROPOSAL BY THE EC
CAPTIONED WTO NEGOTIATIONS CONCERNING THE WTO AGREEMENT
ON SUBSIDIES AND COUNTERVAILING MEASURES (TN/RL/W/30)
The following communication, dated 29 November 2002, has been received from the
Permanent Mission of India.
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We thank the Communities for their submission TN/RL/W/30.  As we have not had enough
time to examine it in detail, our comments at this meeting would be preliminary in nature.  We would
be giving more detailed comments on certain aspects of this submission in the next meeting of NG
Rules.  We would also like to thank the EC for their introductory statement, wherein they informed
Members about their strict policy on subsidies.
Mr. Chairman, this meeting is particularly difficult for us.  We would have preferred to keep
the deliberations of the Rules Negotiating Group at the technical level.  However, the latest
submission from the Communities has reluctantly forced us to depart from this.  Given the nature of
some of the suggestions made in this submission, it is inevitable that non-technical issues would now
be the subject of deliberations of the Rules Group.
The Communities have sought to expand the scope of the so-called safe harbour, provided in
the Illustrative List of Export Subsidies under item k Annex I of the ASCM.  The proviso to item k
applies only to interest rate provisions and at present does not apply to export guarantees, risk premia
and matching.  In short, the so-called safe harbour addresses certain types of export financing, while
other types of export financing continue to remain prohibited export subsidies.  In case the scope andcoverage of the so-called safe harbour were to be expanded, it would result in other types of export
financing not being considered a prohibited export subsidy as understood in terms of Article 3.1 (a) of
the ASCM.  This would increase the flexibility available to certain countries for giving such export
subsidies.
The question which must then be addressed is- which are the countries that would benefit
from such enhanced flexibilities?  Clearly th e countries that are participants to the OECD
Arrangement on official support export credits.  Developing countries would not stand to gain from
any enhanced flexibility that  may result from establishing consistent rules for all types of export
financing.  There cannot be a better example, than this, of an inverse S&D provision designed tobenefit the developed countries.
It may not be out of place to mention that there is no commitment to phase-out the so-called
safe harbour for export financing.
The submission from the  Communities states the necessity to address the environmental
dimension of subsidies and in particular, to consider how to approach subsidies aimed at protection ofTN/RL/W/40
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the environment, following the expiry of Article 8 of the ASCM.  This could perhaps result in making
such subsidies non-actionable again.  Which are the countries that would, in effect, make use of the
flexibility for giving such subsidies?  Clearly not the developing countries.  Not because they are less
concerned about protecting the environment, but from financial constraints which leave little
resources for such subsidies being given after addressing development needs.
Mr. Chairman, the short point which we are making is that some of the suggestions from the
Communities , if implemented in the form of new provisions to the ASCM, would clearly place a
group of counties at an advantageous position compared to the developing countries, as far as the
flexibility for giving subsidies is concerned.
We would now turn to certain other suggestions made by the Communities, to establish the
unbalanced nature of the submission.  It has been stated that a package of S&D treatment provisions
for developing countries would be for a strictly temporary period and applicable in clearly defined
circumstances.  The attempt is to further constrict the policy options available to developing countries
for subsidisation that is so necessary for achieving development objectives.  Developing countries
suffer from permanent structural disadvantages.  It  may therefore not be appropriate to consider an
S&D package only for a temporary period.
In line with its earlier submission, the Communities have reiterated their two-step approach to
addressing the developing countries' concerns after rules applicable for all members are agreed upon.
We have, along with many other countries, opposed this approach.  We again express our strongreservations  against negotiations being undertaken along these lines.  Any negotiated package would
necessarily involve a balance of rights and obligations.  The developing countries would be severely
disadvantaged if they are asked to take on new obligations without any reassurance that their concerns
would be satisfactorily addressed at the end of the negotiations after agreement on rules applicable to
all countries.  The negotiating process should show, to the extent possible, simultaneous progress onboth these tracks-rules applicable to all Members and the S& D package.
Mr. Chairman, at the risk of repeating, we reiterate that there could be contrasting impact on
developing countries and other countries if some of the suggestions from the Communities were to be
implemented in the form of new disciplines.  First, the OECD countries would gain additional
flexibility for granting export financing, which may no longer remain prohibited.  Second, certain
countries, which would certainly not include the majority of developing countries, may again acquirethe flexibility to give other types of subsidies which have little linkage with development.  Third,
there is no indication that these flexibilities would be available for a temporary period only.  On the
other hand the development policy options and flexibilities available to developing countries is sought
to be restricted.  There is even a threat that the S& D package would be temporary in nature.  Is this
not an ironical situation, in what is being referred to as the "Doha Development Agenda"?
We have in the past, at this forum, heard the professed commitment of the Communities to
addressing and resolving the problems and concerns of developing countries.  We had, in fact, at the
last meeting of the Rules Negotiating Group, expressed the hope that this commitment would be
translated into concrete action.  In this context, the latest submission from the Communities hasdisappointed  us and other developing countries immensely.  This submission, in conjunction with the
lack of progress in addressing developing countries' issues, is forcing us to draw just one conclusion-
the Doha Development Agenda is a mere rhetoric, devoid of any substance and meaning for the
developing countries that would be required to  take on new obligations while rights would be
acquired by certain limited group of countries for increasing their flexibility to give certain subsidies,some of which are at present prohibited.
The development dimension is clearly sought to be given a short shrift and subsequently
jettisoned.  In case the proposals from the Communities were to achieve fruition, then from the viewTN/RL/W/40
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point of developing countries there would be a serious lack of balance between what such countries
may be asked to concede and what they may be offere d in return.  This is certainly not what has been
envisaged by the Doha Mandate on Rules which requires that the negotiations take into account the
needs of developing countries.
Mr. Chairman, we have certain systemic concerns with regard to the suggestion by the
Communities for establishing clear and consistent rules for all types of export financing, if these
disciplines are in the first instance discussed and decided at the OECD or if the relevant OECD
provisions are in some manner sought to be grand-fathered into the ASCM.  The experience of the
developing countries on this aspect has been far from satisfactory.  The present provisions in respect
of export credits has virtually grand-fathered some of  the  OECD provisions on export credits into the
WTO.  Consequently, the GATT membership at large, with the exclusion of a selected few membercountries, had no role in negotiating this provision.  We do not want a repeat of this unsatisfactory
experience. Negotiations at the OECD is not an inclusive process as most of the developing countries
are not party to such deliberations.  We cannot have a situation wherein provisions of an
Arrangement, which may have been or may in future be agreed to at the OECD by a limited few
countries with the exclusion of an overwhelming majority of  the WTO membership, are incorporated
into the ASCM changing the rights and obligations of all the member countries.  The developing
countries are in effect being asked to waive their rights to negotiate provisions on export credits, if the
scope of so-called safe harbour on export credits is expanded to include other forms of  export
financing in accordance with the OECD Arrangement.
Another concern regarding the OECD Consensu s is that non-OECD countries are not aware
of the details of the Arrangement. To illustrate, under what circumstances is "matching' permitted?
How is Commercial Interest Reference Rate calculated?  What constitute "market window"
operations?  The questions are many, but very little information is available to non-OECD countries
regarding the provisions and working of the Arrangement on official support on export financing.  Itis patently unfair to expect non-OECD countries  to agree to any further inclusion in the ASCM
provisions of an Arrangement which was negotiated without their involvement and whose working is
unknown to them.
In conclusion, Mr. Chairman, we strongly oppose the suggestions made by the Communities
on export financing and  the S&D package and consider these to be unbalanced, designed to restrict
the policy options available to developing countries, while at the same time seeking to increase theflexibility of developed countries to grant subsidies.  As it is the ASCM is tilted in favour of
developed countries by the way it is structured, by defining subsidies based on non-specificity and by
including under Article 8.2 broadly only those subsidies granted by developed countries.  All these
new proposals would only tilt the Agreement even more in favour of the developed countries.
Finally, Mr Chairman, my delegation has a  question for the EC delegation.  Does the strict
policy on Subsidies of the EC, which the EC delegation outlined while introducing the paper apply
only to industrial products or does it extend to agricultural products also.
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