RESTRICTEDWORLD TRADE
ORGANIZATIONTN/RL/M/2
11 June 2002
(02-3218)
Negotiating Group on Rules
SUMMARY REPORT OF THE MEETING
HELD ON 6 & 8 MAY 2002
Note by the Secretariat
1. The Negotiating Group on Rules held its second formal meeting on 6 and 8 May 2002.
2. The Group adopted the following agenda:
A. Adoption of the agenda
B. Subsidies and countervailing measures, including fisheries subsidies
C. Anti-dumpingD. Regional trade agreements
E. Other business
- Request from the African, Caribbean and Pa cific Group of States for observer status 
in the Trade Negotiations Committee and subsidiary bodies
- Electronic distribution of documents
B. SUBSIDIES AND COUNTERVAILING MEASURES, INCLUDING FISHERIES
SUBSIDIES
3. The Group had before it four submissions relating in whole or in part to this agenda item.
4. The first submission introduced was "Export Credits in the WTO" (TN/RL/W/5). The sponsor
noted that an increasing number of developing countries exported higher value-added goods, which
required financing, yet these countries faced constraints in competing with exports from developed
countries to finance trade.  Items (j) and (k) of the Illustrative List of Export Subsidies, the main
provisions of the SCM Agreement regarding export credits, had become obsolete in light of the new
export  credit practices that have developed.
5. A number of delegations shared the concerns expressed in the paper.  It was observed that the
current rules regarding export credits were negotiated plurilaterally outside the WTO, and needed
multilateral control.  It was further observed that  the current rules involved asymmetries against
developing countries.  One delegation suggested that the goal should be tougher disciplines on export
credit practices, while another suggested that there should be non-actionable status for certain
developing country export credit practices.  The issue of an "a contrario" reading of items (j) and (k)
was discussed.TN/RL/M/2
Page 2
6. The second submission introduced was Improved Disciplines under the Agreement on
Subsidies and Countervailing Measures and the Anti-Dumping Agreement (TN/RL/W/1 ). The
sponsor noted that recent dispute settlement decisions regarding export contingency placed certain
economies at a disadvantage vis à vis those with large domestic markets.   Further, the lack of
recourse to the Agreement's serious prejudice provisions, and the lapsing of the deemed seriousprejudice provision, suggested a need to consider a more viable and accessible serious prejudice
remedy.  The lapsing of the non-actionable subsidies category at the end of 1999 negatively affected
the so-called traffic light framework of the SCM Agreement; Participants needed to consider whether
such a category of subsidies should again be pursued.
7. Regarding non-actionable subsidies, one delegation supported the idea of re-creating such a
category, and suggested that the Secretariat might prepare a compilation of the extent and the nature
to which Members had availed themselves of the category in the past.  Another delegation recalledthat the green light provisions were agreed to only in conjunction with the stronger disciplines on dark
amber subsidies, and expressed support for a close examination of how the serious prejudice
provisions could be strengthened and made more effective.
8. The third submission  introduced was Proposals on Implementation Issues and Concerns
(TN/RL/W/4). The sponsor considered that the disadvantages faced by developing country industries
required the state to assume a more active role in supporting industry.  However, special and
differential treatment in the SCM Agreement was inadequate.  The sponsor proposed amendments to
Article 27 of the SCM Agreement to improve special and differential treatment in respect of
negligible import volumes and de minimis  subsidization in the case of countervail investigations
regarding imports from developing countries.   The sponsor also proposed to amend Article 27 so thatthe prohibition in Article 3.1(b) of the SCM Agreement would not apply to developing countries.  The
sponsor reserved the right to table additional implementation-related proposals on the AD and SCM
Agreements, including on issues under discussion in the respective Committees.
9. Several delegations expressed support for the paper, with one delegation noting the need for
space for development. The question was raised whether the proposed amendments regardingcountervail investigations would apply wherever im ports from developing countries were involved, or
only where a developed country was conducting an investigation?  The linkage between the
developmental problems identified and the proposed changes to the trade remedy rules was
questioned, and it was observed that the proposal that countervailing duties on imports from
developing countries be restricted to the amount by which the subsidy exceeds the de minimis  level
was inconsistent with the underlying purpose of the de minimis  rule, which is to eliminate nuisance
cases. Concern was also expressed regarding any weakening of the disciplines of the SCMAgreement, as this would not advance development. One delegation noted that, in addition to
problems of developing countries, areas where the Agreement lacked clarity, or where certain
provision had not been much used, should be addressed.
10. Turning to a general discussion on the suite of papers relating to subsidies and countervailing
measures other than fisheries subsidies, one delegation recalled the mandate provided by theMinisters. This delegation indicated that its core pr inciples for the negotiations involved strengthening
the effectiveness of the trade laws, improving disciplines on the underlying distortive trade practices,
and ensuring that contingent trade laws operate in a transparent and open manner.  Another delegation
indicated a need to further address countervail issues, some of which could be addressed in parallel
with anti-dumping issues.
11. In respect of fisheries subsidies, two submissions relating in whole or in part to this subject
were discussed.TN/RL/M/2
Page 3
12. Regarding the first  submission introduced , Improved Disciplines under the Agreement on
Subsidies and Countervailing Measures and the Anti-Dumping Agreement (TN/RL/W/1),  the sponsor
observed that Participants needed to consider whether fisheries subsidy issues would be best
addressed on a sectoral basis or under generic di sciplines. The sponsor was concerned about the
implications of fragmenting subsidies disciplines on a sector by sector basis, and concluded that thelogical approach was to examine specific sectoral issues in the light of the existing SCM Agreement
framework, and then to address any deficiencies found.
13. The second submission introduced, The Doha Mandate to Address Fisheries Subsidies –
Issues (TN/RL/W/3),  was sponsored by eight Participants. The sponsors explained the need for
dedicated negotiations in the fisheries sector.  It was observed that fisheries differed from other
sectors in that it was a renewable resource which was vulnerable to depletion if overexploited.
Because many fisheries were of interest to more than one country, subsidies in this sector could affectnot only markets, but also access to the resource.  Yet SCM Agreement rules focused on the impact of
subsidies on markets, not on the damage to productive resources.  The heterogeneous character of
fisheries products and the structure of the industry were additional complicating factors.
14. The two papers attracted substantial discussion. Some delegations contended that there was
nothing unique about the fisheries sector, that it was no more heterogeneous than many other sectors,that many fish stocks were within exclusive econom ic zones, and that in any event the nexus between
subsidies and stock depletion was not clearly established.  Other delegations supported the view that
the fisheries sector was unique and required distinct rules, and that the nexus between subsidies and
stock depletion was clear; it was further observed that the Ministerial Declaration provided a sectoral
mandate in this area.
15. Some delegations contended that subsidies would not result in overexploitation of fish stocks
if there were proper management of fish stocks.  Other delegations, while not contesting that fisheries
management was an important issue, considered that fisheries subsidies issues should be addressed in
parallel to management issues, with one delegation noting that some developing countries lacked the
resources for efficient fisheries management.
16. It was observed the there was a need to differentiate between those subsidies that had harmful
effects and those that did not; in this context, cert ain delegations noted that subsidies for small scale
and artisanal fisheries would not have harmful trade effects and should not be subject to any new
disciplines.
17. One delegation noted that the submissions showed the need to address environmental issues
in the WTO, while others considered fisheries subsidies to be a trade issue, including in particular
distortions caused by fishery subsidies to developing countries' market access.  One delegation notedthat, by addressing the trade issue, environment and development questions would also be addressed.
18. A number of delegations made reference to work on fisheries subsidies being done in other
bodies, including APEC, FAO, OECD and UNEP.
19. Certain delegations disagreed as to whether the joint submission was or was not within the
mandate set forth in the Ministerial Declaration.
C. ANTI-DUMPING
20. The Group had before it four submissions relating in whole or in part to this agenda item.
21. The first submission  introduced,  Anti-Dumping: Illustrative Major Issues (TN/RL/W/6), was
sponsored by fourteen Participants. The majority of its sponsors made statements introducing theTN/RL/M/2
Page 4
paper.  It was observed that there was an increasing use of anti-dumping both by developed and
developing countries.  It was explained that the issues identified in the paper – sales in the ordinary
course of trade, constructed value, cyclical markets, prohibition of zeroing, cumulative assessment of
injury, causal relationship between dumping and injury, threat of material injury, thresholds under
Article 5.8, facts available, lesser duty rule, sunset of anti-dumping orders, and public interest – were
just examples of the problems being encountered, and that more issues would likely be identified,
either collectively or by individual delegations. It was further observed that outstanding issues
regarding implementation complemented this list.  One delegation noted that anti-dumping should be
used only where competition policy did not work.  It  was noted that there was a link between progress
on anti-dumping and on market access negotiations.
22. A number of delegations indicated support for, or interest in, certain of the proposals in the
submission.  One delegation observed that the AD Agreement represented a reasonable balance, thatthe problems related as much to implementation as to the Agreement itself, and that the extent to
which textual modifications were required was unclear. It was observed that anti-dumping was a
legitimate instrument, although it was sometimes misused. Several Participants referred to the
importance of enhancing S&D provisions within the Agreement.
23. The second submission introduced was Improved Disciplines Under the Agreement on
Subsidies and Countervailing Measures and the Anti-Dumping Agreement (TN/RL/W/1). The
sponsor noted that improvements to the rules governing anti-dumping were required in order to
achieve greater convergence in interpretation and to prevent unnecessary restrictions on trade.  Areas
that would benefit from clarification included rules pertaining to the initiation of investigations,
transparency and procedural fairness, the calculation of dumping margins and amounts of subsidy,injury determinations, duty enforcement, the consideration of broader public interest and sunset
reviews.
24. The third submission  introduced was Proposals on Implementation-Related Issues and
Concerns (TN/RL/W/4).  The sponsor noted an increa sing resort to anti-dumping actions, as well as a
lack of clarity in certain provisions, including Article 15 which was rendered inoperative.  Increasing
de minimis dumping margins, enhancing the negligible volume level, removing the requirement of
cumulation, and making mandatory application of the lesser duty rule when taking anti-dumping
actions against developing countries were some of the ways in which the objectives of the WTO could
be achieved.
25. The fourth submission introduced was Negotiating Group on Rules: Implementation-Related
Issues  (TN/RL/W/7). The sponsor elaborated upon tirets 42 and 44 in the Compilation of Outstanding
Implementation Issues Raised by Members (Job (01)152/Rev.1.
26. A general discussion was conducted on the suite of submissions relating to anti-dumping.  It
was noted that some implementation proposals remained before the Committee on Anti-Dumping
Practices.  One delegation observed that many of the issues identified as implementation questions
affected developed as much as developing countries.  The issue of whether sponsors of various
proposals sought codification of dispute settlement outcomes or something more was also considered.It was observed that developing countries are no w major users of anti-dumping measures, and that
new users brought new challenges with respect to transparency.
27. The Chairman thanked Participants for the cooperation they had demonstrated in respect of
procedures for the Group's work.  He noted the participation of capital-based officials, which he
encouraged.  He indicated his satisfaction regarding the number of submissions received, and inparticular welcomed the submissions from Brazil and India elaborating on implementation proposals;
he hoped other Participants advocating implementation proposals would follow the example.  He was
pleased that additional submissions were to be forthcoming.TN/RL/M/2
Page 5
D. REGIONAL TRADE AGREEMENTS
28. The Group had before it one submission relating to this agenda item.  The Chairman noted
that the Compilation of Outstanding Implementation Issues Raised by Members (Job(01)/152/Rev.1)
might also be of relevance for the discussion.
29. In introducing its submission on Negotiations on Regional Trade Agreements: Key Issues for
Consideration (TN/RL/W/2), the sponsor noted the long-standing concerns about the potentially
adverse impact of  the proliferation of regional trade agreements (RTAs) on the multilateral trading
system, particularly when they did not comply with WTO disciplines; he also recalled that the
Committee on Regional Trade Agreements (CRTA) had been unable to carry out effectively its
functions of review and oversight of the implementation of RTAs.  In order to ensure that RTAs
facilitated trade between the parties and did not raise barriers to third parties, a number of issues had
to be addressed, including those identified in a Secretariat document prepared for the CRTA in March2000, Synopsis of "Systemic" Issues Related to Re gional Trade Agreements (WT/REG/W/37).  The
sponsor explained that the issues listed in the submission had been put forward as suggestions for
consideration, to be supplemented by other delegations ' additions.  In the process of moving from the
identification of issues to addressing them, it would be helpful if the Secretariat could prepare an
updated checklist of systemic issues, based on that earlier document, but more targeted to the workahead of the Group.
30. Delegations thanked the sponsor for its submission, indicating that it would help to map out
the road of the negotiations.  A few delegations were of the view that some of the issues listed in the
submission went beyond the scope of the negotiations mandate, and one delegation remarked that the
mandate did not refer to the elaboration of a WTO Agreement on RTAs.  Some other delegations
noted that the mandate of the Group was wide-ran ging, covering all WTO provisions relevant to
RTAs.
31.  A number of delegations stressed the need to maintain the primacy of the multilateral trading
system vis-à-vis  RTAs.  Some delegations were of the view that the proliferation of RTAs, and the
increased overlapping of membership, presented a risk for the multilateral trading system.  They notedthat over the years RTA trade-diversion aspects have increased, and access to markets under MFN has
eroded.  One delegation draw a parallel between the resurgence of protectionism and RTA
proliferation.  In the current situation, where MFN treatment was becoming the exception and not the
rule given the very high number of countries recipients of preferential treatment, prospects for success
in trade liberalization at the multilateral level could not be but sub-optimal.
32. The fact that the Doha Ministerial Declaration, while noting that the WTO was the unique
forum for global trade rule-making and liberalizati on, also recognized the important role played by
RTAs in promoting the liberalization and expansion of trade and in fostering development was
highlighted by several delegations.  Some delegations noted that RTAs were a reality which found its
rationale at the economic, political and legal levels;  they were authorized by the WTO and
contributed to its objective of trade liberalization.  A number of delegations argued that, given the
significant role played by RTAs in fostering development, negotiations should take that into accountso that any new rules on RTAs protect the interests of developing and least-developed countries.  The
difficulty recently encountered concerning the granting of the waiver for the Cotonou Agreement
between the European Communities and countries of the Africa, Caribbean and Pacific (ACP) were
noted in this context; some delegations also expressed the view that the rules would have to be
flexibly applied on matters related to the foreseen post-Cotonou Economic Partnership Agreements.
33. One delegation observed that a parallel lowering of MFN tariff rates would significantly
reduce the risk of trade diversion brought by the formation of an RTA.TN/RL/M/2
Page 6
34.  The need to clarify WTO rules on RTAs through the consensus-building process of
negotiations was supported by all delegations.  One delegation noted that the present situation of
unclear and disputed rules benefitted none, give n that neither the parties to RTAs knew the
benchmarks they had to follow nor did third parties know their rights.  Another delegation foresaw, in
the absence of clearer rules, an increased number of dispute settlement cases relating to RTAs; giventhe very legal nature of dispute settlement interpretations, these might not always be politically
welcome.
35. Several delegations referred to preferential rules of origin as an issue needing to be tackled
and disciplined in the negotiations.  One delegation noted that unlimited freedom was provided to
parties to RTAs to design them.  A few delegations suggested that harmonization of RTA rules of
origin might be desirable in the long run..
36. One delegation was of the view that all RTAs, i.e. those notified under Article XXIV of the
GATT 1994, the Enabling Clause and Article V of th e GATS, should be notified to a single body,
namely the CRTA, which would adopt the terms of reference for the examination, as appropriate.
Some other delegations noted that this would require changes to existing legal provisions.
37. Another delegation suggested that the Enabling Clause should provide legal cover for RTAs
among developed and developing countries of a non-reciprocal nature.  Acknowledging developing
countries' concerns relating to RTAs of a lesser-than-full reciprocal nature, one delegation noted that a
number of exceptions were provided for developing countries in the context of the Enabling Clause
and other special and differential treatment provisions in various WTO Agreements and Decisions,
and that in the negotiations close attention should be given to those instruments.  For another
delegation, the Enabling Clause could not be seen as presenting a problem.
38. Divergent views were expressed on the "grandfathering" of (or, conversely, the retroactive
application of new rules  to) existing RTAs.  One delegation noted that this question should be looked
at once new rules had been developed, and that it would seem possible that some of the new rules
might deserve retroactive application while others might benefit from grandfathering.
39. Some delegations noted that issues related to economic integration agreements on trade in
services had not deserved the same level of attention neither in the sponsor's submission nor in the
Group's discussion.
40. Several delegations also stressed the need to improve the transparency of RTAs and the
efficiency of the procedures related to the examination of RTAs, noting that the CRTA had been
unable to adequately fulfil its mandate of reviewing RTAs and overseeing their implementation.
Some delegations noted that it might be possible to achieve an "early harvest" on procedures for the
examination of RTAs.  One delegation suggested that  the examination of an individual RTA could be
carried out on the basis of a prior factual analysis by the Secretariat, which would not only help
Members to better understand the functioning of the RTA under examination but would also ensure
that all RTAs be treated on an equal footing.
41. A number of delegations indicated that it would seem advisable to organize the negotiations
under two topics, namely procedural and systemic issues, though a few saw the division betweenprocedural and systemic issues as an artificial one.  One delegation noted that while many of the
procedural issues would very quickly translate into systemic ones (e.g., the provision of statistics on a
tariff-line basis), a few genuine procedural issues existed (e.g., the timing of notifications).
42. Many delegations stressed the need to setting priorities at an early stage of the Group's work,
though a few delegations noted that the issues to be negotiated had first to be identified.TN/RL/M/2
Page 7
43. The Group widely supported the proposal that the Secretariat prepare an updated and more
concise version of a document circulated in 2000, under the form of a checklist of RTA-related issues.
Two delegations indicated that they would make submissions in time for the July meeting.
44. In his summing-up, the Chairman underlined that the Group would provide adequate time for
negotiations covering the issue of RTAs.  He noted that almost all WTO Members were parties to at
least one RTA.  Further, since all Members were third parties to many RTAs, there was a clear
common interest in ensuring that RTAs in which they were not participants did not undermine
Members' WTO rights.  He highlighted the fact that the present context surrounding RTAs had
changed significantly from the time Article XXIV had been drafted, both with respect to the number
of existing RTAs, which was very high and yet increasing, and to their scope, which had widened
from reductions in frontier protection to cover the granting of preferential treatment on matters
covered by other GATT Articles.  He noted that the blockage in the CRTA work, which had beenmentioned by various delegations, benefitted no-one and that the Negotiating Group had as one of its
tasks to find ways to unblock that situation.  Regarding organization of work, he indicated his
intention to split the RTAs agenda for the next se ssion in two sub-headings, namely procedural issues
and systemic issues.  He noted that a few dele gations had mentioned that progress would require
setting priorities, and invited Members to keep that  in mind.  When time would be right for priority-
setting, he would consult so that the Group's priorities adequately reflect those of the Membership.
He cautioned the Group in trying to achieve an "early harvest" on procedural aspects of RTAs, as
suggested by some delegations; by experience he knew that such an approach might not always prove
conclusive.  He noted that strong support had been  shown in the Group for a note to be prepared by
the Secretariat summarizing the systemic issues on RTAs raised in the CRTA, as well as  in other
WTO Bodies, and he requested the Secretariat to act accordingly.  He indicated that the note was
expected to be distributed within 10 days, so as to assist delegations in preparing their submissions.
1
E. OTHER BUSINESS
45. The Chairman noted that a request for observer status in the Trade Negotiations Committee
and subsidiary bodies had been received from Africa n, Caribbean and Pacific Group of  States.  As
this matter of observers was the subject of horizontal consultations, the Group was not in a position to
take a decision on this matter at this meeting.
46. The Chairman recalled that the next formal meeting of the Group would take place on 8-
10 July 2002.  Proposals and any other documentation for consideration at that meeting should be
submitted to the Secretariat by 17 June, in order to insure that they could be circulated and translated
in a timely manner.
47. One delegation suggested that Group documents be circulated to Participants via email, a
view seconded by another delegation.  The Chairman indicated that he would consult with the
Secretariat in respect of the request.
__________
                                                     
1 This note was later circulated as TN/RL/W/8.