RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/W/463
10 September 2001
(01-4247)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
IMPLEMENTATION-RELATED ISSUES REFERRED TO THE
COMMITTEE AT THE REQUEST OF THE CHAIRMAN OF
THE GENERAL COUNCIL ON 31 JULY 2001
Communication from Jamaica
The following communication, dated 4 September 2001, has been received from the
Permanent Mission of Jamaica.
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Implementation of Article 27 of the Agreement on Subsidies and Countervailing Measures as it
relates to particular issues concerning developing country Members with a small percentageshare of exports in import markets and in global trade
1. Paragraph 1 of Article 27, "Special and Differential Treatment of Developing Country
Members", of the Agreement on Subsidies and Countervailing Measures provides explicit recognition
on the part of Members "that subsidies may play an important role in economic development
programmes of developing country Members".  It seems clear that Article 27 - in terms of title as well
as stipulated provisions - is intended to provide special and differential treatment for developingcountry Members, " in accordance with the objective of sustainable development, … in a manner
consistent with their respective needs and concerns at different levels of economic development ."
(Marrakesh Agreement Establishing the World Trade Organization, first preambular paragraph.)
2. Article 27.2(b) excludes developing country Members from the scope of application of the
substantive obligations of Article 3.1(a) of the SCM Agreement for a transitional period provided that
they comply with certain specified conditions.  The provision is a fundamental recognition of the need
for differentiated treatment in favour of developing countries in the application of subsidy rules.
3. Article 27 further recognizes that developing countries may require additional flexibility.  In
this context Article 27(4), (5), and (6) indicate certain market criteria and development parameters
and that are relevant to the extension of transition periods.  Article 27.4 refers to the "relevant
economic, financial and development needs of the … Member in question" .
4. Our proposal builds on this approach.  Many small developing economies are in a state of
transition entailing reforms geared to building sust ainable competitive advantage in the long run and
face particular economic and structural constraints which we consider warrant additional flexibility
regarding the use of export incentives.
5. We support the view that a subsidy should not be applied in a manner which results in a
Member having more than an equitable share of world exports in that product.  Our proposal for
additional flexibility for developing country Members based on their percentage share of exports inG/SCM/W/463
Page 2
import markets and in global trade, is advanced in the context of the rules governing export
competitiveness and on the basis that because the trade shares involved are small there is little or
negligible implication for global trade while the beneficial consequences are great for the countries
concerned in terms of facilitating their integration into the global trading system.
6. We believe that a credible rules based system should administer rules flexibly according to
Members' ability to meet them and according to their actual or potential impact on the system.  A
fundamental premise that has been repeatedly stressed by many countries is that transitional periods
and thresholds should be based on measurable parameters.  We are of the view that these should take
into account constraints such as those applicable to certain small and vulnerable developing
economies.
7. Many of these constraints are well-known.  Small market size results in the absence of
production economies of scale and heavy dependence on exports, even while it limits the range of
economic activity and the quantity and diversity of exports.  The constraints of the SCM Agreement
and its interpretation in the WTO jurisprudence affects small economies particularly severely since
rational levels of economic production invariably can only be achieved by exporting and agovernment incentive which confers a benefit may be deemed an export subsidy.
8. This situation has pronounced adverse implications for many small economies given the
many difficulties inherent in achieving economies of scale through exporting and in penetrating
external markets.  Many transport systems are only economic if based on regular large shipmentswhich small producers cannot provide.  Furthermore, marketing and related costs are
disproportionately high.  We consider that it is precisely also because of the small volumes and trade
shares involved that the provision of the additional flexibility being sought will not result in
distortions to global trade.
9. We propose that additional flexibility in the context of Article 27 should be based on
individual developing country Members' percentage share of exports in import markets and in global
trade and on utilization of a cut-off threshold.  Additionally, the exclusion from disciplines on
prohibited subsidies should take into account existing competitiveness criterion relating to market
share.
10. On this basis we propose the following:
"In order to foster sustainable development of small developing economies,
where total covered
1 exports as a share of covered global trade of a developing
country Member is less than 0.05 per cen t and where the share of world trade of
a particular product is no greater than 3.25 per cent of covered world trade, theprovisions of Article 3.1(a) shall not apply to that product."
11. We trust that all Members will view our proposal favourably.  We believe that adopting this
approach to special and differential treatment in the implementation of subsidy disciplines would be
of benefit to developing countries, helping many of them to offset the disadvantages inherent in their
situation with minimal trade-distorting effects.
                                                     
1 "Covered" refers to "Merchandise trade".G/SCM/W/463
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APPENDIX
Share of World Exports Excluded from Prohibited Export
Subsidy Disciplines Under Proposal
Proposed criteria for exemption
from disciplinesIncrease in share of world
exports exemptedTotal share of world exports to
be exempted from Art. 3.1(a)
0.05% of world exports 0.695% 1.147%
Source:  Calculations based on WTO Statistics.
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