WORLD TRADE
ORGANIZATIONTN/RL/W/95
5 May 2003
(03-2379)
Negotiating Group on Rules Original:  English
ELEMENTS OF A STEEL SUBSIDIES AGREEMENT
Comments from the United States
The following communication, dated 2 May 2003, has been received from the Permanent
Mission of the United States.
_______________
The attached paper is provided by the United States for the information of other WTO
Member delegations participating in the Rules Negotiating Group.  Delegations will recall the
December 2002 communiqué from the OECD High Level Group on Steel instructing work to begin
“on the elements of an agreement for reducing or eliminating trade-distorting subsidies in steel”
(TN/RL/W/24).  In follow-up to that decision, the OECD Secretariat drafted for the consideration and
comment of all participants in that process a list of questions and propositions relating to seventeen
proposed elements of a steel subsidies agreement.  In turn, the United States submitted the attached
comments addressing each of the proposed elements, just as have other participants.
Consistent with our objective of keeping the Rules Negotiating Group fully informed of
relevant work undertaken in the OECD exercise , we present these comments which outline the
United States’ initial reflections on the direction, scope, and nature of a steel subsidies agreement.  Asstated in the introduction to our OECD submission, our remarks should not be construed as official
US positions or negotiating proposals, but rather as commentary intended to encourage further
reflection and the exchange of views among participants.  Similarly, they should not be considered as
necessarily indicative of the views of other participants in the OECD steel process on the elements of
an eventual agreement.TN/RL/W/95
Page 2
Introduction
Following the decision by participants in the OECD High Level Process on Steel to initiate
discussions on an international steel subsidies ag reement, the OECD Secretariat circulated for
consideration and reaction a list of questions and propositions relating to the possible elements of such
an agreement.  The United States has carefully reviewed the seventeen elements identified by the
OECD Secretariat and provides its initial thoughts with respect to those elements below.
Our senior officials have called for work on these issues to proceed expeditiously.  That said,
the United States views the Secretariat’s useful questions and comments, and participants’ reactions to
them, as necessarily being just the starting point for our discussions.  We urge other participants toconsider the remarks which we have set forth below not as official US positions or negotiating
proposals, but rather as commentary intended largely to provoke a constructive exchange and
additional reflection.  We look forward to reviewing other participants’ comments in the same light,
and to engaging in a productive discussion when the Disciplines Study Group meets on 24-
25 February.
1. Time frame and venues:  Development of elements initiated in the OECD, with a view
towards feeding the results into the WTO at an appropriate time.  Developmental work to be
completed in 2003.
US Position
SUMMARY:  The United States supports charti ng an ambitious schedule in the Disciplines
Study Group to arrive at the elements of a steel subsidies agreement that could be considered for
incorporation into the WTO rules framework.  We favor completing work as early as possible in2003, preferably in advance of the next WTO Ministerial scheduled for Cancun, Mexico, in
September 2003.
DISCUSSION:  The United States believes it is both desirable and feasible to move forward
quickly in the development of the elements of an agreement that substantially strengthens
international disciplines over distortive steel subsidies.  The desirability of moving forward quickly
stems from the urgent need to address meaningfully the longstanding problem of subsidization in this
sector and the momentum we have built in this  High Level Process, along with the opportunity
afforded us by the fact of ongoing WTO negotiations.  The feasibility stems from the significant
degree of consensus that exists among participants on the basic shape and thrust of an agreement,
notwithstanding any differences which may emerge ov er certain details.  In that regard, a maximum
effort should be made to achieve consensus on these elements, but if consensus is not possible toachieve in some areas, that should not stand in the way of completing the outlines of an agreement in
as much detail as possible.  At a minimum, in such cases, the work should identify the leading options
which might be considered with respect to the element on which a consensus cannot for the moment
be found.
We also feel that it is important for such elements to be developed based on the likelihood
that they ultimately would be implemented within the WTO rules framework.  This should have the
effect of maximizing their compatibility with basic WTO rules and principles, and would allow us to
focus initially and primarily on the substantive result, potentially deferring certain questions of
implementation and enforcement.  This would not, however, definitively resolve or forever side-step
such important questions as whether a sectoral agreement should be added to the WTO or whether a
stand-alone agreement might be feasible should it not become possible to integrate immediately the
results of our work into the WTO.  Our task should be to develop the elements of an agreement
appropriate to address the problems of steel; at a later stage, and in the appropriate forum, separateTN/RL/W/95
Page 3
decisions may be reached concerning how/whether/when such elements might be taken into the WTO
and, if so, what application they should have (e.g. either generally or to specific sectors).
2. Character :  The objective would be to work to wards a formal, binding, enforceable subsidies
agreement.
US Position
SUMMARY:  The United States concurs that the agreement needs to be formal, binding and
enforceable.
DISCUSSION: Only a binding and enforceable agreement will provide the certainty needed
to deal effectively with the subsidy problems that have hampered and distorted global steel industry
adjustment.  This element is essential to secure the confidence of both involved governments and
affected industries.  This, in part, is why eventual incorporation of the results into the WTO is both
logical and desirable, given that institution’s expeditious and professional system of dispute
settlement rules and procedures.  Of course, incorporation into the WTO is not the only way for suchan element to be satisfied, but it may be one of the more efficient and easier ways available to us.
The binding nature of the agreement should a pply at all levels of government within the
jurisdiction of each signatory party, and include measures meeting the definition of a covered subsidy
that are provided by state-owned and -controlled entities, as well as entities that are directed orentrusted to provide such measures by public authorities, with or without public funds.  In this regard,
participants might wish to consider the adoption of an explicit “ de facto ” standard by which it would
be possible to present convincing evidence indicative of government direction in the provision of a
subsidy by non-governmental entities.
Our initial thoughts on the matter of enforcement are discussed in more detail below, in
relation to item 9.  However, it probably bears mentioning here that, although we are recommending
incorporation of the results of this work into the WTO, that does not exclude consideration of
alternative or supplementary modes of enforcement beyond the customary procedures and standards
of WTO dispute settlement.  As it is, many agreements in the WTO contain “special and additional”
rules on dispute settlement that are factored into dispute proceedings when those agreements are at
issue.
3. Product Coverage:  The agreement could cover subsidies and related supports benefitting
producers of the steel products defined in sections 7206 to 7306 of the Harmonized Tariff
Schedule.
US Position
SUMMARY:  The United States generally agrees that the agreement should discipline
subsidies provided to producers of steel products defined in sections 7206 to 7306 of the Harmonized
Tariff Schedule.
DISCUSSION:  Sections 7206 to 7306 of the Harmonized Tariff Schedule generally
encompass the range of products of concern to us, but they do exclude certain products which were
under consideration for inclusion in the draft Multilateral Steel Agreement (MSA).  We believe it may
be important to consider why these products were proposed to be included in the MSA, and whetherthose same considerations apply here.
On a more general level, however, to the extent that we are contemplating sectoral rules and
disciplines, consideration of coverage issues must also take account of the parties receiving subsidiesTN/RL/W/95
Page 4
(e.g. producers and exporters) as much as the product scope itself.  Given the underlying objectives of
the agreement and the nature/extent of the disciplines being contemplated (see below), we need to
consider what, if any, treatment under the agreement may be appropriate for subsidies that either are
not tied expressly to the production or export of  any product, or are tied exclusively to the
production/export of a non-covered product, if such subsidies are nonetheless provided to a produceror exporter of a covered product.  In much the same vein, there may need to be certain rules aimed at
identifying and capturing subsidized products that have been altered or transformed in minor or
cosmetic ways with the apparent aim of evading the agreement’s disciplines.
4. Scope of Subsidies Covered (and Nature of Discipline):  The agreement could apply to
subsidies particular to the steel industry, as well as generic subsidies where the steel industry
or a steel firm was a beneficiary.  Or, all generic subsidies could be banned in the case ofsteel.
All subsidies and related supports could be forbidden, except for those that were expressly
permitted.
Alternatively, with a view towards structur ing a solution within the existing WTO Subsidies
Agreement, all subsidies could be prohibited, except for those that were demonstrated not to
have adverse effects or be causing serious prejudice to the industries in participating
economies, and those that were otherwise expressly permitted.
US Position
SUMMARY:  The United States believes that the basic discipline accorded by the agreement
should be to establish a blanket prohibition on all subsidies that are specific to the steel industry,
whether on a de jure  or de facto  basis, providing exceptions for certain narrowly articulated forms of
assistance that would facilitate the permanent closure of uneconomic steelmaking capacity (as well as
for the “safe harbours” for certain specific practic es provided for in Annex I to the WTO Subsidies
Agreement).
DISCUSSION:  As a starting point, the United States believes we should generally frame our
work in reference to the definition of a subsidy contained in Article 1 of the WTO Subsidies
Agreement and the concept of specificity as set forth in Article 2 of that Agreement.  This wouldobviously facilitate integration of the results of our work into the WTO at a later stage.  Of equal
importance, however, these definitions also provide useful and widely acceptable parameters for
identifying and segregating generally distortive subsidy practices from measures that are not.
We concur that the most effective approach towards fixing a practical and workable discipline
would probably be to establish a general rule prohi biting covered subsidies, and then to articulate
carefully crafted exceptions to that general rule only for the particular subsidies that participants wish
to permit.  However, as to the question of what subsidies would be covered, we do not take the view
that the coverage should extend to subsidies that are not specific to the steel industry (i.e. genuinely
“generally available” subsidies).  This would, admittedly, complicate the identification of prohibitedsubsidies, but we believe that distinguishing non-specific from steel-specific subsidies is justified on
both economic and public policy grounds and that it outweighs other complications which would arise
if virtually all subsidies to steel were to be prohibited.
Therefore, under this type of framework, subsidies that are provided exclusively, whether in
law or in fact, to all or part of the steel indust ry within the jurisdiction of the subsidizing authority
would be prohibited in their entirety.  Subsidies that are provided in law or in fact to a broader yet still
limited number of recipient firms or industries with in the jurisdiction of the subsidizing authority
would be prohibited only to the extent of their subsidization of any steel industry recipients.TN/RL/W/95
Page 5
However, subsidies that are not “specific” to all or part of the steel industry, even though steel firms
may be beneficiaries among a diverse range of many other beneficiaries – i.e. “generally available”
subsidies – would not be prohibited or otherwise addressed by the disciplines of the agreement.  For
example, this would (at least in conceptual terms) permit steel producers to use general infrastructure
made available by public authorities within an economy or use certain neutrally fashioned taxprovisions, such as an R&D or investment tax credit that has been enacted for use by all productive
enterprises in order to stimulate broad economic growth.
1
As regards the issue of “related supports,” while our work in the DSG has periodically
referred to this term, we have not yet arrived at a precise and commonly acceptable understanding of
the measures encompassed by it.  In light of that fact, we should not necessarily assume that all
related supports would fall within the WTO definition of a subsidy.  Therefore, in addition to the
blanket prohibition that would be associated with the WTO definition of a “specific subsidy,” we may
also want to consider the possibility of a definitive list of specific measures and practices that wouldbe banned based on our collective agreement concerning their distortive nature.  That list would be
considered as part of the overall subsidies agreement, but if necessary we could hedge on the question
of whether the measures qualify, strictly speaking, as subsidies within the meaning of the agreement
and the WTO Subsidies Agreement, if that nuance was needed to reassure certain participants.
5. Scope of Permitted Supports:  Consideration coul d be given to permitting the following types
of support:
-  Certain support for redundant and retired workers affected by permanent plant closures;
-  Certain time-limited aid to facilitate the privatization of state-owned facilities;-  Certain environmental assistance;
-  Certain support for research and development
US Position
SUMMARY:  The United States could consider  supporting certain carefully circumscribed
exceptions from the prohibition, in order to allow go vernments to provide limited assistance to steel
firms to help absorb certain dismantlement, lab our and environmental remediation costs specifically
linked to the permanent closure of capacity.
DISCUSSION:  Given the extent of excess, inefficient steelmaking capacity which exists in
the world, the United States is willing to consider  an agreement which permits governments to offer
limited and carefully regulated types of subsidization that would facilitate the genuine closure of such
capacity.  To be acceptable, these exceptions would need to be tightly structured in order to avoid the
indirect subsidization of productive activities and to minimize further distortion of international steel
markets.  To achieve this, there should be limitations on the types of closure costs to be covered,
limitations on the extent to which such costs woul d be subsidized and multilateral surveillance to
verify compliance with the terms and conditions of the assistance, including with respect to the
disposition of the facility to be closed.  Violations of such terms and conditions could be subject to a
subsidy payback requirement and/or the withdr awal of trade concessions by other parties.
The scope of permitted supports should be limited to only those forms of assistance which
directly and genuinely facilitate capacity closure.  As a result, we do not believe that subsidies
provided expressly to facilitate privatization of state-owned facilities or to support research and
development activity should be permitted.  To the ex tent that privatization is to be encouraged,
                                                     
1 Nothing in this conceptual framework is intended to disturb the terms of Annex I to the WTO
Subsidies Agreement which sets forth specific rules defining certain types of prohibited export subsidy practices
and “safe harbours” for other practices.TN/RL/W/95
Page 6
however, we might consider privatization to be a re quirement for any state-owned firm to qualify for
permissible capacity closure assistance.  This would avoid the undesirable practice of governments
using subsidies merely to make uneconomic facilities more attractive for private ownership, and yet it
could still encourage both capacity closure and the exit of governments from the steel business.
As a final comment, it bears noting that the characterization of a subsidy as “permissible”
does not, ipso facto , mean that the subsidy would also be non-countervailable under countervailing
duty law or non-actionable in multilateral dispute settlement.  That is a separate question to be settled,
and the establishment of terms designed to limit the aid to specific closure costs does not necessarily
render it non-distortive.  The United States believes that parties’ rights to eliminate or offset the
effects of distortive subsidies – subject, of course, to the terms and conditions imposed upon those
rights by WTO rules – is not something which can or should be readily discounted.  Moreover,subjecting permissible aid to potential WTO or CVD challenge could help to ensure that such
exemptions are not abused or do not contribute unduly to further distortions in the international steel
market.
6. Special and Differential Treatment:  Should consideration be given to special and differential
treatment for transition and/or developing econom ies and, if so, should such treatment be
different from that already provided for in WTO agreements?
US Position
SUMMARY:  In considering the possibility of special and differential treatment, the
United States believes that it is first important to determine the basic framework of rules and
disciplines, and then to determine whether any party has a legitimate problem conforming to those
rules and disciplines due to real constraints related to underdevelopment or the process of
transitioning from a centrally planned to a market economy.
DISCUSSION:  The United States understands the importance which many participants
attach to the principle of “special and differential treatment,” and it would certainly be our view that a
steel subsidies agreement should be consistent with and reinforce policies which promote sound
economic development and market economy reforms.  In that regard, it should be noted that the
principal underlying objective of this agreement, viz., the elimination of virtually all distortive
subsidization in the steel sector, serves the interests of both developing and transition economycountries, whether from their perspective as steel producers and traders wishing to compete on a level
playing field, or from their perspective as governments wishing to support economic growth without
distorting the internal allocation of resources or overburdening the public purse.
Therefore, in the view of the United States, our efforts are best devoted first to obtaining an
ambitious and workable set of disciplines governing subsidies specific to the steel industry.  Once the
baseline has been established, we will be better positioned to determine both the needs and constraints
of developing and transitional economy countries, as well as whether/how it might be possible to
address them in a manner consistent with the underlying objectives of the agreement.
7. Needs of Developing Economies:  Other t han special and differential treatment, how
could/should the needs of developing economies be reflected?
US Position
SUMMARY: The United States considers that it is difficult to propose an answer to such a
question in the abstract.  It would first be necessary  to learn and understand the specific needs that are
perceived to be at issue in the particular context of steel and the rules and disciplines that will be
developed.TN/RL/W/95
Page 7
DISCUSSION: The United States would be happy to participate in a discussion about the
specific needs of developing economies, but to be meaningful, that discussion must focus on the
concrete needs of specific countries that arise in the context of steel and in relation to the rules and
disciplines under consideration.  We note in this context that the Capacity Working Group has beenmandated to evaluate the feasibility of options for helping to facilitate plant closures, which may
provide a vehicle for identifying and addressing certain developing country and transition economy
needs.
8. Pre-Notification:  Participants could be required to notify other participants of their intent to
grant or alter allowed steel subsidies, and they  could commit to refrain from putting any new
or altered subsidies into effect until the other participants had been notified and had beenprovided with an opportunity to consult.
US Position
SUMMARY:  The United States believes that  it is both unnecessary and cumbersome to
establish a combined notification/consultation requirement that would apply prior to the introduction
of a permissible subsidy.
DISCUSSION:  We are sympathetic to the motivations for suggesting that, in order for a
subsidy to be “cleared” as legitimately permissible, it should first be notified, reviewed by otherparties and subject to possible consultation with other parties.  We are concerned, however, that what
sounds appealing in the abstract will quickly become untenable in its application.  First, domestic
legal and constitutional requirements will vary significantly from one party to the next, and it could
prove quite difficult to harmonize such requirements with separate multilateral procedures if we
consider that one feature of such an arrangement would be the delay in implementation of dulyenacted legislation.  At a minimum, such provisions could necessitate far more sweeping and radical
changes to domestic legal systems than might be initially imagined.  Moreover, in light of the number
of parties that we expect/hope will become signatories to this agreement, such a pre-notification and
approval obligation could quickly prove to be unwieldy.  These types of “efficiency” considerations
are magnified when one considers that the difference in status at issue is not actionability versus
non-actionability, as it was with the pre-notification rules of the WTO Subsidies Agreement for“green light” subsidies (which, it should be noted, were never tested in practice), but rather whetherthe subsidy is permitted or prohibited.  This kind of system may work effectively enough within a
constitutional structure already involving significant and extensive economic, political and legal
integration, but no such structure will co-exist with the prospective steel subsidies agreement.
While the timing of notifications and consultation rights is an important issue, of equal if not
greater importance is the quality of the notification in terms of whether it will permit other parties to
understand clearly the operation and effect of the subsidy.  In our view, therefore, our efforts would
be better spent ensuring that notifications are fully informative once a subsidy is introduced, instead
of requiring notification prior to the subsidy’s introduction.  (In many circumstances, it may not even
be possible to clearly understand the impact and operation of a subsidy until after its introduction.)Prompt notification following introduction should be required, in addition to annual comprehensive
notifications of all permissible steel subsidies bein g applied by a party.  Moreover, consultation rights
should be available at all times, whether to clarify reports about subsidies under consideration or to
raise concerns about subsidies that are already in use.TN/RL/W/95
Page 8
9. Enforcement of Principles and Rules and Remedies:  The agreement could be enforced under
the WTO’s dispute settlement mechanism.
Beyond those currently available in WTO agreements, are there other remedies or
enforcement mechanisms (such as payback) that  could be considered in instances where
participants provided banned subsidies to steel firms?
US Position
SUMMARY: The United States generally supports use of WTO dispute settlement
procedures but would like to encourage discussion among participants about additional enforcement
tools.
DISCUSSION:
Prohibited subsidies:  Our key objective in considering enforcement of any new agreement on
subsidy disciplines for the steel sector is to ensure that expeditious and effective procedures areavailable for addressing any use of prohibited subsidies.  We should aim for strong and effective rules
that both dissuade governments from violating their commitments and address the distortive effects of
prohibited subsidies until such time as their elimination can be secured.
(a) WTO procedures:  For a number of reasons, the United States concurs that one
appealing enforcement model is the customary procedures and standards of WTO
dispute settlement.  However, as is the case today with subsidies that are currently
prohibited under the terms of the WTO Subsidies Agreement, this should be an
expedited proceeding and should not require any demonstration either that a
prohibited subsidy has caused an adverse trade effect or of the kind of adverse effectit has caused.  All that should be at issue is whether a measure granted or maintained
by a signatory conforms to the definition of a measure prohibited by the agreement.
We may want to consider developing specific enforcement tools as guidelines for a
dispute settlement panel once a decision on the existence of a prohibited subsidy has
been made.  In addition to elimination of the subsidy in question, the concept of a
subsidy “payback” provision, as suggested in the Secretariat’s question, has alreadybeen adopted to some extent in WTO dispute settlement cases involving subsidies,
such as the dispute concerning certain subsidies bestowed to Australia’s automotive
leather industry.
(b) Other measures:  The above discussion concerns potential modifications in the
current application of WTO dispute settlement for prohibited steel subsidies, but, as
we have suggested, the United States also believes it would be appropriate to consider
additional options for complementing the dispute settlement mechanism, such as
through additional early international consultation, domestic countervailing duty
remedy procedures, or other options, particularly where prohibited subsidies are atissue.  It may even be useful to consider the possibility of expedited procedures
and/or strengthened remedies in such circumstances, bearing in mind the importance
of existing international obligations and reco gnizing that the swift elimination of the
prohibited subsidy would be the preferred outcome.  In any event, the interaction of
domestic and international remedies should not result in dual penalties.
Permissible subsidies:  For a subsidy that meets the terms and conditions set forth in the
agreement that would render the measure permissible, if the permissible subsidy is determined to
cause or to threaten an adverse trade effect, th e subsidizing signatory could still be obligated toTN/RL/W/95
Page 9
withdraw or adjust the subsidy in order to remove the adverse effect.  To the extent that permissible
subsidies are left actionable for purposes of WTO dispute settlement, they should also remain
countervailable under countervailing duty law.
Expedited procedures might also be considered  for addressing any failure to implement the
measures recommended through the dispute settlement process with respect to either prohibited or
permissible-yet-actionable subsidies.
10. Surveillance:  Consideration could be given to the maintenance of a group to oversee,
examine subsidy-related initiatives taken in the steel area, and to review “pre-notifications”.
The group could include industry experts as well as government officials and other outside
expertise.
US Position
SUMMARY:  The United States supports the establishment of a committee of all signatory
parties to oversee implementation of the agreement and provide a forum for clarifying and addressingissues relevant to the application and objectives of the agreement.
DISCUSSION:  We agree on the need for a committee of the parties to provide oversight with
respect to the implementation of new disciplines, and a setting in which to discuss relevant matters of
mutual interest and concern regarding such implementation and fulfilling the objectives of theagreement.  If these new rules and disciplines are, ultimately, subsumed into a broader WTO
agreement, such as the Subsidies Agreement, then  the committee would presumably exist as a matter
of course.  If the agreement were to remain a sectoral, stand-alone instrument, then a committee
should be established and, in those circumstances, might be charged with additional responsibilities
that are of particular relevance or benefit to the steel sector.  In general terms, the committee should
serve as a vehicle for multilateral review of dome stic legislative changes made to conform to the
agreement’s obligations and of notifications of subs idies falling within the purview of the agreement.
(However, for the reasons described above, we do not favor using this committee to review any sort of
“pre-notifications” of subsidies.)
We also believe that, in general, the committ ee should be intergovernmental in nature,
normally excluding the direct participation of outsid e parties.  In that the agreement would be formal
and legally binding, it is appropriately within the province of governments to ensure its effective
administration.  Moreover, to the extent that the proper functioning of the committee or any subsidiary
bodies would necessitate dissemination, review or discussion of information that any participating
party would consider sensitive (including with respect to any review of notifications or discussion of
disputes), the full participation of any non-governmental entity could further complicate or impedesuch activities.  For these reasons, while we consid er it critical that the committee have available the
option of organizing – with ap propriate safeguards – special ad hoc meetings with outside parties
(including industry representatives) in order to benefit from their advice or expertise on particular
matters, regular “ membership” on the committee should be reserved for governments alone.
11. Critical Mass of Participants:  Which economies would have to participate in an agreement
to make it acceptable/viable?
US Position
SUMMARY:  The United States considers it important that all major steel-producing
countries participate in the agreement.TN/RL/W/95
Page 10
DISCUSSION:  Insofar as the results of this work will produce an agreement of clear benefit
to all significant steel-producing countries, we hope and expect that all such countries will ultimately
become party to it.  Moreover, because any such agreement will work most effectively when all major
steel-producing countries are signatories, we collectively have an important interest in ensuring that
all those who have participated in this High-Level Process remain a part of the result.  We recognize
that certain participants in the High-Level Process are not yet Members of the WTO, but those
participants are both WTO observers and in the process of negotiating agreements of accession with
the WTO membership.  Whereas the timing of their accessions may be difficult to predict, we also
don’t know when any strengthened steel subsidy disc iplines might enter into force.  Ultimately, we
don’t believe that there are any insuperable impedi ments to ensuring that all OECD Steel Process
participants can become parties to the final package of disciplines.
As for other WTO implications of this question, most agreements within the WTO are part of
the single undertaking.  That said, some agreements that are largely hold-overs from the pre-WTO,
Tokyo Round era, such as the Agreement on Trade in Civil Aircraft and the Agreement on
Government Procurement, remain plurilateral in nature, i.e. their membership consists of a subset of
all WTO Members.  In addition, certain special market access agreements negotiated since theinception of the WTO have entered into force only when a “critical mass” of participants representing
a minimum percentage of world production or trade in the product concerned have joined.  The
Information Technology Agreement (ITA) negotiated at the 1996 WTO Ministerial in Singapore is an
example of such an agreement, and Members have continued to sign on to the ITA over time.  To the
extent that one theory behind these “plurilateral models” is that there usually is a special, reciprocalbenefit which only membership confers, it may be useful for us to consider the possibility and
feasibility of according certain benefits to one another which outside parties may not enjoy.  It would,
of course, be necessary that any such features be consistent with WTO rules designed to ensure
general respect for the principle of non-discrimination.  As the Capacity Working Group undertakes
its study of options aimed at facilitating plant closure, both it and the Disciplines Study Group maywant to consider the implications of the study’s conclusions for this question.
12. Existing Programmes: How long would existing programmes be allowed to remain in place
once an agreement came into force?
US Position
SUMMARY:  The United States supports allowing parties a reasonable but not unduly long
period of time to abolish their inconsistent subsidy programmes.  We also believe it is worth
considering the scope for carefully crafted “grandfather” provisions for individual subsidies granted
prior to entry into force of the agreement, but under which benefits are still being paid or might be
allocated into the future.
DISCUSSION:  While we all might wish to see distortive subsidies terminated immediately,
particularly given the history and magnitude of this problem in the steel sector, we need to be realistic
about the time it takes to repeal legislation and revoke decrees in a manner which respects the
requirements of good governance and due process.  Therefore, as regards subsidy programmes, partiesshould be permitted a reasonable period of time from entry into force of the agreement to come into
conformity with their obligations concerning prohibited measures.
The WTO Subsidies Agreement allowed WTO Members three years to abolish or amend
subsidy programmes that would be prohibited by the terms of the agreement, but afforded only 90days for Members to come forward and identify the relevant measures via notification.  For purposes
of a steel subsidies agreement, we will likely want to shorten the period allowed to come into
conformity, but slightly lengthen the period in which such measures should be notified.  Another
example which may be instructive is that of WTO dispute settlement, where the baseline assumptionTN/RL/W/95
Page 11
for setting a “reasonable period of time” for coming into conformity with an adverse panel ruling is 15
months from the date of adoption of the final deci sion.  On the one hand, we can already perceive in
rough terms today the scope of the prohibition which an agreement would produce, and can begin
immediately to work within our own jurisdictions with that objective in mind.  On the other hand,
none of us will know the precise outlines of the prohibition until an agreement is concluded.  The
period selected must balance those two realities, and should probably be no longer than 18 months.
As for individual subsidies or subsidy “packages” bestowed prior to entry into force of the
agreement, the benefits of which are being paid or  might be allocated into the period following entry
into force of the agreement, these types of situations do not seem to lend themselves readily to
transitional phase-out arrangements.  In these circumstances, it may be appropriate to consider some
sort of grandfather clause that is subject to strict notification and surveillance requirements to ensurethat the terms of the subsidization are fully transparent, and that the subsidies are neither extended nor
expanded.
13. Duration of the Agreement:  How should the duration of the agreement be specified?  Should
review periods be established?
US Position
SUMMARY: The United States believes that the agreement should not have a specified
termination date.
DISCUSSION: Given the enduring nature of the problems that have led to this agreement, we
fail to see a need for establishing a particular period of duration.  The disciplines which it would
establish will be needed for the foreseeable future, and are not inconsistent with the general direction
in which multilateral subsidy disciplines should be directed.  It may, however, be useful to incorporateprovisions which would automatically provide the parties an opportunity to assess on a periodic basis
how well the agreement is functioning.
14. Accession and Withdrawal:  How could accession and withdrawal actions be handled?
US Position
SUMMARY:  The United States believes that, however accession and withdrawal provisions
are structured, they must take account of the fact that the functioning of the agreement is tied, at least
in part, to the participation of most if not all of the world’s major steel-producing countries.
DISCUSSION:  The United States does not, at present, hold particularly strong views on this
question and would recommend that the Discipline s Study Group, through the good offices of the
Secretariat, seek information about how such prov isions are fashioned for other international trade
instruments.  The one consideration that strikes us initially as being deserving of special attention
would be the circumstances under which the agreem ent as a whole might lapse upon the withdrawal
of (a) certain part(y)(ies).
15. Multilateral Institutions:  How might the support provided by multilateral institutions to the
steel industry be addressed?
US Position
SUMMARY:  The United States does not believe that it would be appropriate or feasible for
an agreement of this kind to discipline , or establish legal obligations affecting, the activities of
international financial institutions (IFIs).  However, we do support intensified contact andTN/RL/W/95
Page 12
coordination among participants in the OECD High-Level Process – backed by a collective, voluntary
commitment – to oppose the use of IFI financin g to increase global steelmaking capacity.
DISCUSSION:  The agreement which we are contemplating would impose disciplines on
subsidies and certain related supports offered by the signatory governments (or other coveredauthorities within their jurisdictions) with respect to enterprises or industries also within their
jurisdiction.  As a result, we don’t believe that it can or should address the financing or activities of
international financial institutions.  That said, the Disciplines Study Group has identified and called
attention to the problem that can sometimes arise when such institutions provide development
assistance which contributes to the problem of excess global steelmaking capacity.  As a result, we
continue to believe that, as a separate exercise, participants in the OECD High-Level Process might
profitably explore the extent to which they could jointly commit not to support the use of suchfinancing when it would lead inappropriately to cap acity expansion.  In particular, such efforts could
culminate in the announcement of “political commi tments” on the part of all High-Level Process
participants to oppose such financing.  Althoug h such commitments would not be legally binding,
they could still serve as a useful public signal and point of leverage to secure greater discipline over
the flow of international development aid to steel projects.
16. Incentives and Free Riders:  Are incentives needed to build sufficient support for a subsidy
agreement?
What, if anything, could be done about free-riders (i.e., countries that do not join the
agreement and would therefore be free to provide a wider range of government supports to
their industries)?
US Position
The United States recognizes that these are real issues and is continuing to consider them.  To
some extent, the views we expressed in reference to items 11 (“Critical Mass of Participants”) and 14
(“Accession and Withdrawal”) may also be releva nt here, but additional thought and discussion is
warranted, bearing in mind the role of participants’  existing multilateral obligations.
17. Industry Role: What roles could industry play in the development, implementation,
surveillance and enforcement of a subsidies agreement?
US Position
SUMMARY: The United States believes that special efforts should be made to find
appropriate roles for industry to play in these areas, consistent with antitrust considerations andrecognizing the fundamentally intergovernmental nature of the eventual agreement.
DISCUSSION:  In some respects, we have already spoken to this issue in relation to item 10
(“Surveillance”).  As we have stated from the beginning of the High-Level Process, we believe that
input and support from industry has been and will cont inue to be critical to the success of our efforts.
As a result, we will continue to seek advice from our own industry representatives, and continue to
feel that it will be important to create opportuniti es for industry representatives to provide their input
to us collectively as our work on an agreement proceeds.  Once we have a better sense of what the
agreement will look like in more relevant detail, we will be in a better position to reach judgments
about how industry might be able to contribute to its effective implementation.  We need to find
practical means of tapping into their expertise and experience without transgressing important
confidentiality and antitrust concerns.
__________