RESTRICTED
WORLD TRADE G/SCM/Q2/ROM/5
15August 1997
ORGANIZATION(97-3410)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Replies ofROMANIA1toQuestions Posed bythe
UNITED STATES2,JAPAN3,TURKEY4andARGENTINA5
Thefollowing communication, dated 8August 1997, hasbeenreceived from thePermanent
Mission ofRomania.
_______________
REPLIES TOQUESTIONS FROM THE UNITED STATES
PartI:Industry -Budgetary Transfers forCertain Mining andOreIndustries
Q1. Please provide amore detailed description ofthepolicy rationales forthisprogramme.
Forexample, insupporting theactivity ofthemining sector, what aretheGovernment 'sspecific
objectives (forinstance, toincrease productivity, increase supply, increase profitability, create
newjobs, protect national security interests, etc.)?
A1. Themainrationale oftheRomanian Government 'spolicy tosupport themining sector through
thisprogramme istoagreatextent related totheprotection ofnational security interests. Themining
sector isconsidered ofstrategic importance asfromsocial andnational energy supply security reasons.
Q2. Describe theapplication process andhowtherecipients ofthegrants areselected. Explain
whytheGovernment issues "adecision applicable foreachproducer".
A2. Subsidies aregranted totheproducers, from theState budget, onthebaseoftheeffective
production andcosts, within thelimits oftheapproved amounts. Inorder toobtain subsidies, each
recipient mustdrawupitsownactivity programme establishing measures fortheefficient useoffunds,
theways toreduce production costs, torestructure some activities andtoreach profitability.
Substantiation ofsubsidies observes, mainly, theobjectives established intherestructuring
programmes, namely making thesubsidized products profitable andreducing theweight ofsubsidies
perproduct unitandperactivities inthetotalproduction costs.
1G/SCM/N/3/ROM, G/SCM/N/9/ROM andSuppl.1, G/SCM/N/16/ROM andSuppl.1.
2G/SCM/Q2/ROM/3
3G/SCM/Q2/ROM/4
4G/SCM/Q2/ROM/2
5G/SCM/Q2/ROM/1G/SCM/Q2/ROM/5
Page2
Alltheproducersoftherespectiveproductsareeligibleunderthisprogramme.TheGovernment
issues adecision applicable foreachproducer inorder tomonitor subsidies granted, which isin
compliance withtheprovisions ofthelastsentence oftheArticle 2.1(b) oftheSCM Agreement.
Q3. Explain themeaning ofthefollowing sentence: "Thesubsidies aregranted through monthly
allocations according totheeffective results obtained."
A3. "Effective results obtained" refertothemonthly effective production obtained andtherelated
costs, which constitute thebasis forthecalculation andtransfer oftheduesubsidy amount.
Q4. With respect totheper-unit amount ofthissubsidy, please explain your statement that
"there isafixed amount pereachproduct unit(ton)."
A4. ByLawafixed amount isestablished perproduct which isbased onthedifference between
average costs andcurrent prices.
Q5. What ismeant bythe"horizontal character oftheextractive industry" andhowdoesthis
characteristic relate topossible trade effects ofthissubsidy?
A5. Theextractive industry isconsidered tohaveahorizontal character duetothefactthatits
products areincorporated asrawmaterials inother goods. Thus, thereisnoevidence concerning trade
effects ofthissubsidy.
Q6. Please indicate whether theprogramme isscheduled tobeterminated and,ifso,when?
A6. Theprogramme continues tobeinoperation andforthetimebeing nodeadline hasbeen
established foritselimination. Incasethisprogramme willbeterminated, Romania willnotify
accordingly.
PartIII:Research andDevelopment
Q7. Please specify theselection criteria usedtoaward these grants. Must recipients ofgrant
awards adhere tospecific guidelines when using grant monies (e.g., areawards limited strictly
toresearch and/or pre-competitive activities within themeaning ofthose terms assetforth in
theAgreement onSubsidies andCountervailing Measures)?
A7. Romania notified thisprogramme fortransparency purposes, thesubsidies granted under this
programme notbeing specific inthesense ofArticle 2oftheSCM Agreement. Theoverall goalof
theprogramme istostimulate thescientific research andtechnological development activities.
Thesubsidy isstrictly limited tocover upto50%ofpersonnel, material andequipment related
costs ofaresearch project, uptothestage ofcreating theprototype, thusbeing incompliance with
theprovisions ofArticle 8.2(a) oftheSCM Agreement.
Entities established aslegal persons under theRomanian Lawbeing interested inobtaining
co-financing oftheRDactivities andhaving concluded contracts areeligible under thisprogramme.
Theselection ofresearch projects submitted byinterested entity under thisprogramme takes into
consideration thenational priorities inthisfieldandtheeconomic andsocial effects oftheactivities.
Theselection takesalsointoconsideration theneedtostimulate thedevelopment ofsmall andmedium-
sized enterprises.G/SCM/Q2/ROM/5
Page3
Q8. Wasthisprogramme terminated on31December 1995? Ifnot,isitsettoterminate at
aspecific point intime? Ifyes,when?
A8. Theprogramme continues tobeinoperation andforthetimebeing nodeadline hasbeen
established foritselimination. Incasethisprogramme willbeterminated, Romania willnotify
accordingly. Romania 'snotification under Article XVIoftheGATT 1994andArticle 25oftheSCM
Agreement (G/SCM/N/16/ROM, 31October 1996) reflects thecontinued operation ofthisprogramme
in1996.
PartIV:Export Promotion
Q9. Could Romania provide information ontheactual interest rates andinterest rate
differentials between thedomestic andexport markets forwhich thisprogramme seeks to
compensate?
A9. Asclearly stated inparagraphs 1,3and6ofRomania 'snotification (G/SCM/N/3/ROM), the
granting ofsubsidies under thisprogramme isstrictly limited, through itsobjective andmechanism,
tocover 50%oftheinterest tothedomestic credits borrowed oncommercial terms byproducers for
export production purposes. Thus, there isnolinkbetween domestic andinternational interest rates,
aserroneously mentioned inthefirstpartofthesecond sentence under paragraph 1ofthepresentation
ofthisprogramme inthenotification. Theobjective andoperation ofthisprogramme shallberead
inthesense ofthestatements under paragraphs 3and6ofthenotification.
Q10. How is"export profitability" measured before agrant recipient actually exports?
A10. Theexport profitability isdeemed toexistiftheexport price covers allcosts, except upto
50%ofcredit costs.
Q11. Please explain yourstatement thatthisprogramme hasnotrade effects (especially inlight
ofitsexport promotion goals). How didyoureach thatdetermination?
A11. Thisprogrammeis,initsobjectivesandoperation,similartointernationalexportcreditpractices.
Forthetimebeing trade effects havenotbeendetected.
Q12. Wasthisprogramme terminated on31December 1995? Ifnot,isitsettoterminate at
aspecific point intime? Ifyes,when?
A12. Theprogramme continues tobeinoperation andforthetimebeing nodeadline hasbeen
established foritselimination. Incasethisprogramme willbeterminated, Romania willnotify
accordingly.
REPLIES TOQUESTIONS FROM JAPAN
Q1. General
- Aretheprogrammes which were notified pursuant toArticle 29.3oftheSCM
Agreement included inthenotifications pursuant toArticle 25oftheSCM
Agreement?
- That being thecase, could Romania clarify which programmes corresponds to
which programme?G/SCM/Q2/ROM/5
Page4
- Could Romania explain when theprogrammes notified pursuant toArticle 29.3
oftheSCM Agreement would bephased out?
Romania 'snotification under Article 29.3oftheSCM Agreement (G/SCM/N/9/ROM/) shall
alsobeimplicitly considered forthepurposes ofArticle XVIofGATT 1994 andArticle 25ofthe
SCM Agreement notification requirements.
Theprogrammes included inRomania 'snotification pursuant toArticle 29.3arealsoreflected
toagreat extent initsnotification under Articles 25andXVI, asfollows:
- theProgramme onthestimulation ofindustrial restructuring mentioned inPartIIof
Article 29.3notification corresponds tosubsidies included inPartI"Industry" of
Articles 25andXVInotification;
- theFarmers 'support programme mentioned inPartIofArticle 29.3 notification
corresponds tosubsidies included inPartII"Agriculture" ofArticles 25andXVI
notification;
- theExport incentives programme mentioned inPartIIIofArticle 29.3notification
corresponds tosubsidies included inPartIVofArticles 25andXVInotification.
Forthose elements oftheprogrammes notified under Article 29.3which, attheendofthetransitional
period provided forinthatArticle, could beconsidered indeviation fromtheprovisions oftheSCM
Agreement, itisRomania 'sintention tobring them intoconformity withtheSCM Agreement.
Q2. Special Programme onCertain Measures andActions fortheSupport oftheEconomic
andSocial Development ofBotos¸ani,Giurgiu andVaslui counties
- Does thisprogramme constitute anyprohibited subsidy within themeaning of
Article 3oftheSCM Agreement?
- That being thecase, could Romania explain when thesubsidy would bephased
out?
- That notbeing thecase, could Romania explain thereason withdetails ofthe
eligibility?
A2. Thesubsidies granted under theProgramme forthesupport oftheeconomic andsocial
development ofBotos¸ani,Giurgiu andVaslui counties were notified under Article 25oftheSCM
AgreementandArticleXVIofGATT1994(G/SCM/N/16/ROM/Suppl.1),whichareofanon-prohibited
typeinthemeaning ofArticle 3oftheSCM Agreement.
Theselection criteria werebased onastudy made within theframework ofPHARE Programme
"Regional Development Politics" which identified thatthecounties Botos¸ani,Giurgiu andVaslui rank
inthatorder intheforefront ofthesixmostdisadvantaged regions ofRomania. Some oftheselection
criteria taken intoconsideration were:
- thegeneral index ofdevelopment (1990-1994) established onthebasisoffivecategories
ofindicators: theindex ofeconomic development, ofinfrastructure development, of
household resources development, ofsocial-demographic development andofurban
development (thelevelofthegeneral index was: 27.5to32.3forthesethreecounties,
while themedium levelwasaround 50);G/SCM/Q2/ROM/5
Page5
- theGDP percapita adjusted withthepurchasing power index, which inthecaseof
thesethreecounties islower thanthelevelmentioned inArticle 8.2(b)(iii) oftheSCM
Agreement, asfollows: 77%fromthenational GDPpercapita forGiurgiu andVaslui
and81%forBotos¸ani.
REPLIES TOQUESTIONS FROM TURKEY
Q1. With regard tothe"Export Promotion" programme, onpage 8,could theRomanian
authorities clarify howtheyevaluate that50%oftheinterest ratetothedomestic credits are
estimated tobeequal totheinternational interest rates? DotheRomanian authorities assume
theinternational anddomestic interest rates arebothfixed inthisevaluation?
A1. Asclearly stated inparagraphs 1,3and6ofRomania 'snotification (G/SCM/N/3/ROM), the
granting ofsubsidies under thisprogramme isstrictly limited, through itsobjective andmechanism,
tocover 50%oftheinterest tothedomestic credits borrowed oncommercial terms byproducers for
export production purposes. Thus, there isnolinkbetween domestic andinternational interest rates,
asinadvertently mentioned inthefirstpartofthesecond sentence under paragraph 1ofthepresentation
ofthisprogramme inthenotification. Theobjective andoperation ofthisprogramme shallberead
inthesense ofthestatements under paragraphs 3and6ofthenotification.
Q2. Could Romania please explain thecriteria ofexport profitability stated onpage8,Article 6,
forgranting thesubsidy through the"Export Promotion" programme?
A2. Theexport profitability isdeemed toexistiftheexport price covers allcosts, except upto
50%ofcredit costs.
Q3. Could Romania please clarify when thesubsidy granted under the"Export Promotion"
programme willbephased outorbrought intoconformity withArticle 3oftheSCM Agreement.
A3. Thisprogrammeis,initsobjectivesandoperation,similartointernationalexportcreditpractices.
Under these conditions, thisprogramme fallsunder Footnote 5toArticle 3andunder point (k)of
Annex ItotheSCM Agreement. Fortransparency purposes, theprogramme wasnotified under
Article 29oftheSCM Agreement, irrespective ofthenature ofthesubsidies, asindicated inthecover
pageofthenotification (G/SCM/N/9/ROM). Forthose elements oftheprogramme which, attheend
ofthetransitional period provided forinArticle 29,could beconsidered indeviation fromtheprovisions
oftheSCM Agreement, itisRomania 'sintention tobring them intoconformity withtheSCM
Agreement.
REPLIES TOQUESTIONS FROM ARGENTINA
Q1. CanRomania stateifitintends torenew thesubsidies tothecoal, ironandnon-ferrous,
radioactive andraresectors which expired on31December 1995?
A1. Theprogramme continues tobeinoperation andforthetimebeing nodeadline hasbeen
established foritselimination. Incasethisprogramme willbeterminated, Romania willnotify
accordingly. Romania 'snotification under Article XVIoftheGATT 1994andArticle 25oftheSCM
Agreement (G/SCM/N/16/ROM of31October 1996) reflects thecontinued operation ofthisprogramme
in1996.G/SCM/Q2/ROM/5
Page6
Q2. Asregardstheexportpromotionprogrammenotified,willtheexpirydateofthisprogramme
respect thedeadline specified inArticle 29.2oftheAgreement onSubsidies?
A2. Thisprogrammeis,initsobjectivesandoperation,similartointernationalexportcreditpractices.
Fortransparency purposes, theprogramme wasnotified under Article 29oftheSCM Agreement,
irrespective ofthenature ofthesubsidies, asindicated inthecover page ofthenotification
(G/SCM/N/9/ROM). Forthose elements oftheprogramme which, attheendofthetransitional period
provided forinArticle 29,could beconsidered indeviation fromtheprovisions oftheSCM Agreement,
itisRomania 'sintention tobring them intoconformity withtheSCM Agreement.