RESTRICTED
WORLD TRADE G/SCM/Q2/POL/5
12May1997
ORGANIZATION(97-1999)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies toQuestions from ARGENTINA1,JAPAN2,
TURKEY3andtheUNITED STATES4Regarding
theNewandFullNotification ofPOLAND5
Thefollowing communication, dated 30April 1997 hasbeenreceived from thePermanent
Mission ofPoland.
_______________
Replies toquestions from Argentina
I. Loan from EFSAL Fund
Q.1 What willbethetotalduration oftheprogrammes?
Reply
Utilization oftheItranche ofloantookplace intheperiod 1994-1995.
Utilization oftheIItranche ofloanisassumed totakeplace intheperiod 1996-1997.
II. Support toRegional Programmes
Q.1 Poland hasnotified investment support toareas withahighlevelofstructural unemployment.
What arethegeographic regions which havebenefited fromtheprogramme?
Reply
Thecomplete listofregions threatened withhighstructural unemployment isincluded inannex
totheRegulation oftheCouncil ofMinisters of24January 1995 (Dz.U. No.14, Item64).
Q.2 What willbetheduration oftheprogrammes?
Reply
There isnotimelimits concerning thisprogramme. Regional programmes were supported
alsoin1996 andaccording totheBudget Lawfor1997, aretobesupported incurrent year.
1G/SCM/Q2/POL/1,2G/SCM/Q2/POL/4,3G/SCM/Q2/POL/2,4G/SCM/Q2/POL/3.
5G/SCM/N/3/POL.G/SCM/Q2/POL/5
Page2
III. TaxForgiveness
Q.1 Could Poland clarify iftheprogramme onlyremains ineffect forobligations payable in
instalments?
Reply
Yes,theunderstanding ofpoint 5.7iscorrect.
Q.2 CanPoland stateifitconsiders thatitwillhavetoapply thissubsidy mechanism again infuture?
Ifso,forhowlong?
Reply
Forthemoment there arenosuchplans, however, itisdifficult todefinitely exclude sucha
possibility infuture.
IV. Assistance forRestructuring oftheBanking Sector
Q.1 When doesPoland intend toeliminate thisprogramme?
Reply
Subsidizing under points 3.5(i) -3.5(iv) finished in1996.
In1997 "Bank Gospodarstwa Krajowego" bank istobegranted anadditional sumof
PLN15million forincreasing itsstatutory fundunder point 3.5(v)ofthenotified programme.
Q.2 CanPoland specify thenumber ofcompanies which havereceived suchaid,within theterms
ofArticle 2.1(c) oftheSubsidies Agreement, inorder todetermine thespecificity or
non-specificity ofthisaid?
Reply
Thenumber ofbeneficiaries ofthisprogramme islisted precisely inpoint 3.8.
Asthissubsidy programme wasincluded inthenotification under Article 25oftheSCM
Agreement, itisinouropinion aspecific subsidy, moreover itisspecific under Article 2.1(a).
V. Restructuring Programme ofMining Sector
Q.1 When doesPoland intend toeliminate thisprogramme?
Reply
Thenotification covers theperiod 1994-1995. Within thisperiod oftime,stageIIofprogramme
ofrestructuring mining industry wascompleted.
Thenextstageofthisprogramme isforeseen foryears 1996-2000 anditsdetails willbecovered
bynotification under Article 25oftheSCM Agreement concerning year1996.G/SCM/Q2/POL/5
Page3
Q.2 CanPoland specify thenumber ofcompanies which havereceived suchaid,within theterms
ofArticle 2.1(c) oftheSubsidies Agreement, inorder todetermine thespecificity or
non-specificity ofthisaid?
Reply
Thenumber ofbeneficiaries ofthisprogramme islisted precisely inpoints A7.8 andB6.2.
Asthissubsidy programme wasincluded inthenotification under Article 25oftheSCM
Agreement, itisinouropinion aspecific subsidy, moreover itisspecific under Article 2.1(a).
VI. System ofWarrants forSmall andMedium-Sized Enterprises
Q.1 CanPoland specify thedates fortheelimination ofprogramme, inaccordance withArticle 27.4
oftheSubsidies Agreement?
Reply
Article 27.4concerns export subsidies. There arenoexport subsidies under thenotified
programme "System ofWarrants forSmall andMedium-Sized Enterprises" andhence Article 27.4
isnotapplicable.
VII. Warrants andGuarantees oftheState Treasury
Q.1 Could Poland givedetails concerning thebeneficiaries oftheprogramme owing tothesize
ofthescheme andthedistribution ofthesectors?
Reply
Individual information concerning theamount ofwarrants orguarantees granted bytheState
Treasury totheparticular enterprises isconfidential, however, dataincluded inpoint 2.8ofthe
notification arerather detailed especially ifthedistribution ofaidamong sectors ofindustry isconcerned.
Q.2 CanPoland specify thecriteria which companies mustfulfilinorder toqualify foraidunder
theprogramme?
Reply
There arenospecified criteria fortheselection ofthefirms under thisprogramme.
Wemean herecriteria concerning enterprises themselves; there is,however, limited scope
ofundertakings listed intheRegulation oftheCouncil ofMinisters of19September 1995 andonly
credits destined forfinancing ofthose canbeasubject ofState Treasury warrants andguarantees.
Thelistofabove-mentioned undertakings isincluded inpoint 2.5ofthenotification.
Q.3 CanPoland givedetails ofthecompanies which havereceived suchaidinaccordance with
Article 2.1(c) oftheSubsidies Agreement, inorder todetermine thespecificity ornon-specificity
oftheaid?
Reply
Asthissubsidy programme wasincluded inthenotification under Article 25oftheSCM
Agreement, itisinouropinion aspecific subsidy, moreover itisspecific under Article 2.1(a).G/SCM/Q2/POL/5
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Q.4 Thenotification doesnotgiveadateonwhich theprogramme ends. CanPoland stateifit
willrespect thedeadline setoutinArticle 27.4oftheSubsidies Agreement fortheelimination
ofthisprogramme?
Reply
Apartofguarantees granted under thisscheme concern export credits thusthissubsidy
programmewasnotifiedunderArticle29.3asanexportsubsidy(documentG/SCM/N/9/POL,pointIV)
Although according toArticle 29.2prohibited subsidies aretobephased outuntil2001wewould like
todraw attention toparagraph (k)ofAnnex 1totheAgreement andstress thatPoland isaParty to
theOECD Agreement onGuidelines forOfficially Supported Export Credits of1April 1978, sowe
donotconsider thissubsidy aprohibited export subsidy andinthelightofthisinterpretation neither
Article 29.2norArticle 27.4areapplicable.
Replies toquestions from Japan
Q.1 AretheprogrammeswhichwerenotifiedpursuanttoArticle29.3oftheSCMAgreementincluded
inthenotifications pursuant toArticle 25oftheSCMAgreement? Thatbeing thecase, could
Poland clarify which programme corresponds towhich programme?
Reply
Twooftheprogrammes notified under Article 25were alsonotified under Article 29.3.
TheseareInvestmentTaxReductions(A4/B4)andWarrantsandGuaranteesoftheStateTreasury
(C2). Partofthesubsidies granted under these twoschemes were connected withexport activity,
however, schemes notified under Article 25haveawider range. Inthenotification under Article 29.3
respective programmes wereInvestment Related TaxRebates (I)andCredit Guarantee Schemes (IV).
Q.2 Could Poland explain when theprogrammes which werenotified pursuant toArticle 29.3of
theSCM Agreement would bephased out?
Reply
UnderArticle29.3Polandnotifiedfiveprogrammes.However,threeofthem:InterestSubsidies
onCertain Bank Loans, Credit Guarantee Schemes andExport Insurance Guarantees bytheState
Treasury arenotinouropinion prohibited subsidies andwere notified exclusively fortransparency
reasons.
Thereason whyweconsider these subsidies asnotbeing prohibited under theAgreement is
thattheyareinfullconformity withtheprovisions ofparagraph (k)ofAnnex 1totheAgreement.
Poland isaparty totheOECD Agreement onGuidelines forOfficially Supported Export Credits of
1April 1978, soitisourunderstanding thatprovisions ofArticle 29.2arenotapplicable here.
Theremaining twoprogrammes: Investment-Related TaxRebates andexport subsidies in
Euro-Park Mielec special economic zoneareprohibited subsidies. Wearenotinaposition todetermine
atpresent thedateofphasing outthese programmes however, weareaware oftheprovisions of
Article 29.2inthismatter.G/SCM/Q2/POL/5
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Replies toquestions from Turkey
I. Warrants andGuarantees oftheState Treasury (p.26)
Q.1 Could Poland clarify thecriteria fortheselection offirms fortheprogramme?
Reply
There arenospecified criteria fortheselection offirms under thisprogramme.
Wemean herecriteria concerning enterprises themselves; there is,however, alimited scope
ofundertakings listed intheRegulation oftheCouncil ofMinisters of19September 1995 andonly
credits destined forfinancing ofthose canbeasubject ofState Treasury warrants andguarantees.
Thelistofabove-mentioned undertakings isincluded inpoint 2.5ofthenotification.
Q.2 Could Poland please clarify whatismeant bythephrases "central investments" and"foreign
warrants andguarantees"?
Reply
Central investments areinvestments ofstateenterprises andbudgetary unitsinpartorwholly
financed from theState Budget orwithabank credit guaranteed bytheState, providing thatthe
investment cycle exceeds oneyearandgeneral costestimate value oftheinvestment exceeds theamount
stated every yearintheRegulation oftheMinister ofFinance.
Thelistofcentral investments isincluded every yearinannex totheBudget Law.
Foreign warrants orguarantees concern credits granted byforeign persons within themeaning
oftheLawof2December 1994 -Currency Law.
According tothisLawaforeign person is:
- natural orlegalperson having nodomicile inPoland;
- branch orrepresentative office ofdomestic person abroad;
- branch orrepresentative office offoreign person inPoland established under the
international agreement concluded bythePolish Government; and
- foreign representative offices orinternational organizations having diplomatic or
consular immunities.
Q.3 CouldPolandprovidethefiguresofprogramme,forthebeneficiariesemployingtheclassification
usedinArticle 2.5?
Reply
In1995 allsixgranted warrants concerned credits fordevelopment andmaintenance ofthe
infrastructure (point 1intheclassification usedinArticle 2.5).G/SCM/Q2/POL/5
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Q.4 CouldPolandprovideinformationaboutthedifferencesbetweenthecompetitivefinancialmarket
credit ratesandtheinterest ratesofthecredits provided under government warranty through
theprogramme?
Reply
Statebudget warrants orguarantees ofrepayment ofcredit donotmean decreasing ofinterest
ratesofthecredit oranyeasier terms ofit.
II. Programme ofRestructuring oftheIronandSteel Industry
Q.5 CouldPolandexplainhowthesubsidygrantedundertheprogrammeisconsideredofnoinfluence
ontheforeign trade, having regard tothefactthatthesubsidy willbeatthematurity phase
ofrealization inthefollowing years?
Reply
Thenotification covers onlytheperiod 1994-1995. Programme ofrestructuring oftheiron
andsteelindustry started in1995soitisinitsinitial phase ofrealization; moreover subsidies granted
sofarunder thisscheme arecredit warrants, which mayhaveonlyindirect influence, ifany,onthe
foreign trade. Bearing inmind theabove itisreally extremely difficult toestimate suchaninfluence.
Wewould liketostress thattheonlygrant under thisprogramme wasconnected withliquidation
procedure.
Replies toquestions from theUnited States
I. ReleaseoftheStateEnterprisefromtheObligationofPayingDividendintotheStateBudget
Q.1 Please explain whatismeant bythecompulsory dividends totheState budget?
Reply
Compulsory dividend totheState budget wastheform ofproperty taxpaidbytheState
enterprises. Taxable amount wasstatutory fundofenterprise, taxratefortheperiod covered bythe
notification amounted to10%.
Thistaxwaseliminated 1January 1996.
II. Increase ofReserve Capital ofState Treasury Corporations
Q.2 Please provide amore detailed explanation oftheformofassistance. Does thisprogramme
provide equity infusions tocommercial enterprises?
Reply
Thisprogramme didnotprovide equity infusion. State Treasury astheowner ofenterprise
abandoned thecollection ofthepartofinterest oncapital andthisamount increased thereserve capital
oftheenterprise.G/SCM/Q2/POL/5
Page7
Q.3 Please explain theapplication process andhowrecipients ofbenefits areselected?
Reply
Every State Treasury corporation could apply forthisassistance provided itcarried out
restructuring investments. Applications were transferred bytheorgan representing State Treasury
intheenterprise totheMinister ofFinance.
Q.4 Whydidthecoalindustryreceivegreaterassistancethanotherrecipientsunderthisprogramme?
Reply
Thecoalindustry ischaracterized bycostly structural adjustments, andisintheprocess of
serious restructuring.
III. Loan from EFSAL Fund
Q.5 What terms andconditions areattached totheloans provided under thisprogramme?
Reply
Terms ofloans within thefirsttranche weremorefavourable thanthoseproposed onthemarket.
Rates amounted from 1/3to0.8oftherateofrefinancing credit, repayment period -two-six years,
grace period -oneyear, quarterly capital repayments, monthly interest repayments. Terms ofloans
within thesecond tranche arelessfavourable (e.g.interest ratecannot belower thanthemarket rate
WIBOR -Warsaw Interbank Offered Rate).
Q.6 What arethecriteria foreligibility forassistance under thisprogramme?
Reply
There arenoadditional criteria ofeligibility other thanthose described inthecharacteristics
oftheprogramme (point 3.5).
Q.7 Whydidtransport industry receive themajority ofsubsidies under thisprogramme?
Reply
Thissituationdoesnotresultfrompreferentialtreatmentofthissectorbutisaresultofindividual
applications andiscoincidental.
IV. Investment TaxReductions
Q.8 What arethecriteria foreligibility forthese taxdeductions?
Reply
There arenoadditional criteria ofeligibility other thanthose described inthecharacteristics
oftheprogramme (point 4.5).G/SCM/Q2/POL/5
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Q.9 Arethere varying levels oftaxdeductions andwhatdetermines thelevelofdeduction?
Reply
There arenovarying levels oftaxdeductions.
Q.10 Isthetaxdeduction automatic ordotaxpayers havetoapply fordeductions?
Reply
Itisautomatic foralltaxpayers whohavesatisfied thecriteria listed inpoint 4.5.
V. TaxForgiveness
Q.11 Isthetaxforgiveness programme nolonger available?
Reply
Yes,theRegulation which wasthelegalbasis forthisprogramme wasinforce onlyuntilthe
endof1994.
VI. Direct Grants forExtra Charges toProducts andService
Q.12 Please clarify howthegrants support "thepoorest social groups". Does theGovernment pay
forthecostofproduction ofcertain goods which arethen"donated" bytheproducer to"social
groups"?
Reply
Ofcourse thesubsidy isnotadirect support tothepoorest social groups, everybody canfor
example haveamealinthesubsidized milkbarorbuysubsidized school books, nomatter whathis
financial standing is,however, Stategrants make these goods cheaper andavailable forawider range
ofconsumers, which isinouropinion akindofindirect support tothe"poorest social groups", especially
taking intoaccount arange ofgoods included under thisprogramme.
Thissubsidy issupport tothecostofproduction.
Q.13 Please explain theapplication process andhowtherecipients ofbenefits areselected. What
arethecriteria foreligibility forassistance under thisprogramme?
Reply
Subsidies aregranted uponapplication toevery producer whomeets thecriteria listed below:
(a) subsidies tomeals soldinmilkbarsaregranted ifthebarsellsmilk-grocery-vegetarian,
alcohol-free products andareself-service diners withmargin notexceeding 25%;
(b) subsidies topassenger transport aregranted toenterprises offering services according
totimetable, atofficial prices andhonouring rights toreduced orfreefeesresulting
from regulations;G/SCM/Q2/POL/5
Page9
(c) subsidies toschools andacademic books aregranted topublishers ofhandbooks for
vocational training, forschools ofnational minorities, forspecial schools, andfor
academic handbooks. Allthese books areissued inrelatively short series which
increases theircostthusthesubsidy isaimed atcounteracting thistrend.
VII. Restructuring Programme ofMining Sector
Q.14 Are"investments grants" capital infusions?
Reply
Asubsidy supports investment process, itdoesnotincrease thecapital oftheenterprise.
VIII. Other programmes
Q.15 Please provide further information ontheselection criteria usedinthefollowing programmes:
A. Assistance forRestructuring theBanking Sector
B. System ofCredit Warrants forSmall andMedium-sized Enterprises
C. Support toRegional Programmes
D. Programme ofRestructuring theIronandSteelIndustry
E. Programme oftheRestructuring oftheSector ofNon-Ferrous Metals
Reply
A. Theonlycriterion which thebankhadtosatisfy wassolvency coefficient 12%.
B. Every enterprise meeting thecriteria listed below waseligible forthesubsidy:
- thenumber ofemployees upto250person;
- theannual income notexceeding ECU 20million.
C. There arenoadditional criteria ofeligibility other thanthose described inthecharacteristics
oftheprogramme (point 5.5).
Thecomplete listofregions threatened withhighstructural unemployment isincluded inannex
totheRegulation oftheCouncil ofMinisters of24January 1995 (Dz.U. No.14, Item64).
DandE
Guarantees andwarrants granted tothesesectors ofindustry havethesamecriteria ofeligibility
asthose listed inpoint C2.5concerning allwarrants andguarantees oftheStateTreasury which means
thatthere arenospecified criteria fortheselection ofthefirms under thisprogramme concerning
enterprises themselves; there ishowever, alimited scope ofundertakings listed intheRegulation of
theCouncil ofMinisters of19September 1995 andonlycredits destined forfinancing ofthose can
bethesubject ofState Treasury warrants andguarantees.
Thelistofabove-mentioned undertakings isincluded inpoint 2.5ofthenotification.