RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/EEC/19
8 October 1999
(99-4221)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions from the UNITED STATES1 regarding the
New and Full Notification of the EUROPEAN COMMUNITIES2
The following communication, dated 17 September 1999, has been received from the
Permanent Delegation of the European Commission.
_______________
EUROPEAN COMMUNITIES
The following are questions regarding the notification of the European Communities made
pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and
Countervailing Measures, in document G/SCM/N/38/EEC.
PART I:  STRUCTURAL ACTIONS
(i) European Regional Development Fund
Q1. Could you please specify to  whom the assistance is paid?
Reply
Aid is paid from the Community budget to the Treasury of the Member States.  Member
States are then responsible for payments to beneficiaries of aid under individual projects.
(ii) European Social Fund
Q2. How is the Fund used in a manner that renders "...the employment of workers easier..."
under heading number three?
Reply
The Fund supports measures to prevent and combat unemployment and to develop human
resources and social integration into the labour market in order to promote a high level of
employment, equality between men and women, sustainable development, and economic and socialcohesion.
                                                     
1 G/SCM/Q2/EEC/17 and 18.
2 G/SCM/N/38/EEC + Adds. 1-15G/SCM/Q2/EEC/19
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(iii) European Agricultural Guarantee and Guidance Fund (EAGGF) - Guidance Section
Q3. Could you please clarify, with regards to the ‘Policy Objective’ of the programme, what
is meant by "speeding up " and "adjustments"?
Q4. Please provide a detailed explanation of how the “multi-annual operational
programmes” are administered and whom they benefit .
Reply
The full text of Regulation 2085/93, governing the EAGGF Guidance Section for the period
1994-99, is attached as an annex.
PART III:  INDUSTRY SECTORS
Community Framework programmes
Q5. Under each of the community framework programmes listed, could you please provide
information on who receives benefits from these programmes as well as the amount of the
subsidy given to each unit?
Reply
Aid is granted to participants in research projects, normally companies, universities, institutes
etc.  The amount of aid varies considerably per programme and per project.  As explained in the 1998
New and Full Notification, on average in 1994 a project received financing of some ECU 400,000 for
a duration of three years and involved three or four partners.
(ii) Aid to the Coal Industry
Q6. Please provide  information concerning the beneficiaries of the programmes and the
amount given to each unit.
Reply
The subsidies are not granted on a per unit basis;  the available data is provided in the
notification.
PART IV:  OTHER PROGRAMMES
Common Organization of Markets in Fishery and Aquaculture Products
Q7. Please provide an explanation of the information provided with respect to the duration
of this programme.
Information Society Initiative in Standardisation
Q8. Please provide additional information on the types of “partners” that receive this
subsidy.  What is the estimated amount per unit?
Reply
It is not possible to estimate the amount per unit.G/SCM/Q2/EEC/19
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Q9. Please provide more detailed information on each of the initiatives.  We would also
appreciate a full explanation of why, in the Community’s view, each of these initiatives should
be not be considered a separate programme fo r which of the requisite information stipulated
under Article 25 would be provided.
Reply
The 1999 New and Full Notification contains a list of projects launched under the ISIS
initiative;  although the projects are differentiated per area of research, the general rules on eligibility
and administration of the projects are common to all projects.  There is, therefore, no need to notify
each project separately.
SPRITE - S
Q10. Please provide additional information on  the types of “partners” that receive this
subsidy.  What is the estimated amount per unit?
Q11. Please provide more detailed information on each of the initiatives.  Again, we would
also appreciate a full explanation of why, in the Community’s view, each of these initiatives
should be not be considered a separate programme for which of the requisite information
stipulated under Article 25 would be provided.
Reply
It is not possible to estimate the amount per unit.
The 1999 New and Full Notification contains a list of projects launched under the above
initiative;  although the projects are differentiated per area of research, the general rules on eligibility
and administration of the projects are common to all projects.  There is, therefore, no need to notify
each project separately.
We are also aware of the following programmes and measures in the European
Communities that may meet the Agreement’s notification requirements.  Please explain why theEuropean Communities determined that the following measures or activities did not fall within
the notification requirements of GATT Article XVI:1 and Article 25.5 of the Agreement on
Subsidies and Countervailing Measures, or if they are covered by one of programmes already
notified, could you please so indicate and provi de information about the indicated activities.
Q12.Resider Programme, Resider II, and Successors
This programme was intended to assist in the reconversion in the iron and steel sector.
According to Commission publications, its objectiv e is to support efforts to create alternative
jobs to replace those lost during the restructuring and to develop appropriate opportunities for
new employment in other sectors in the affected regions .
Reply
The programme currently in operation is Resider II, which can be described as follows:The Resider Community programme was adopted in 1988 to support the economic and social
conversion of the steel areas of the Community.G/SCM/Q2/EEC/19
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Resider II will seek the same goal over the period 1994-99 by giving priority to the
environment, new economic activities and human resources in order to accelerate the adaptation of the
areas concerned to the deterioration in their economic conditions.  Resider II is a "Community
initiative" under the Structural Funds of the EU.
Eligible areas
The steel areas which the Member States may propose to the Commission are defined as
small spatial units (below NUTS level III) or geographically contiguous groups of such units which
satisfy one of the following conditions:
- At least 1000 steel jobs have been lost since 1 January 1986;  or- job losses since that date and future job losses publicly announced amount to at least
1000 jobs;  or
- at least 1000 steel jobs have been lost since that date or are at risk (as accepted jointly by
the Commission and the Member State).
The Member States may also propose for eligibility other areas highly dependent on the steel
industry, taking account of other factors such as:
- High unemployment;
- environmental degradation;- isolation or remote location.
In some cases these areas need not be eligible under Objectives 1, 2 or 5(b).Eligible measures
Environmental improvement and restoration to new commercial uses of old steel industrial
buildings in seriously damaged areas, renovation of social and economic infrastructure in steel areas(community facilities, water, electricity, etc.) as part of an economic re-deployment strategy.
Promotion of new economic activities, and in particular those undertaken by small firms,
through various supporting measures (new industrial premises and advance factory units, productive
investment, access to risk capital, common services, market studies, co-operation networks andinnovation in products and processes).
Promotion of tourist activities, particularly those based on the industrial heritage.Assistance to bodies concerned with economic conversion and regional development.Assistance for training and employment, particularly in small firms whose activity is essential
for the development of the area, and for the retraining of steel workers and former steel workers.
Interest subsidies on ECSC loans, particularly those for small firms, and any conversion
measures eligible for an EIB loan.G/SCM/Q2/EEC/19
Page 5
Funding
ECU 575 million, of which ECU 151 million must go to Objective 1 regions. In addition to
Community grants, EIB and ECSC loans are available.
RECHAR
Q13. This programme was intended to assist in  the economic reconversion of the coalfields
and is intended to assist in the worst affected regions by restoring the environment, promoting
new economic activities and developing the potential of the workforce.  Areas eligible for
support are regions in which the decline of coal mining will lead to serious economic problems
and a large increase in unemployment .
Reply
The programme currently in operation is REC HAR II, which can be described as follows:
The Rechar Community Initiative was adopted by the Commission in 1989 to support the
economic conversion of the coal-mining areas of the Community hardest hit by the decline of their
industry and of employment.
Rechar II will seek the same goal over the period 1994-99 by giving priority to the
environment, new economic activities and human resources in order to accelerate the adaptation of the
areas concerned to the deterioration in their economic conditions. The measure may also include the
effects of the downturn in lignite extraction.   Rechar II is a “Community initiative” under the
Structural Funds of the EU.
Eligible areas
Areas already eligible under Rechar I.
The Member States may propose to the Commission the addition of other areas where coal-
mining or lignite extraction takes place provided they are eligible under Objectives 1, 2 or 5(b), are
defined as small spatial units (below NUTS level III) or are geographically contiguous groups of suchunits and satisfy one of the following conditions:
- At least 1000 coal-mining jobs have been lost since 1 January 1990;  or- job losses since that date and future job losses publicly announced amount to at least
1000 jobs;  or
- at least 1000 coal-mining jobs have been lost since that date or are at risk (as accepted
jointly by the Commission and the Member State).
The Member States may also propose for eligibility other areas highly dependent on the coal-
mining industry, taking account of factors such as:
- High unemployment;
- environmental degradation;
- isolation or remote locationG/SCM/Q2/EEC/19
Page 6
In some cases these areas need not be eligible under Objectives 1, 2 or 5(b).
Eligible measures
Environmental improvement and restoration to other commercial uses of old mining buildings
in seriously damaged areas, renovation of social and economic infrastructure in mining villages
(community facilities, water, electricity, etc.) as part of an economic re-deployment strategy.
Promotion of new economic activities, and in particular those undertaken by small firms,
through various supporting measures (new industrial premises and advance factory units, productive
investment, access to risk capital, common services, market studies, co-operation networks and
innovation in products and processes).
Promotion of tourist activities, particularly those based on the industrial heritage.Assistance to bodies concerned with economic conversion and regional development.
Assistance for training and employment, particular ly in small firms whose activity is essential
for the development of the area, and for the retraining of miners and former miners.
Interest subsidies on ECSC loans, particularly those for small firms, and any conversion
measures eligible for an EIB loan.
Promotion of cross-border co-operation between coal-mining areas.
Funding
ECU 459 million, of which ECU 142 million must go to Objective 1 regions. In addition to
Community grants, EIB and ECSC loans are available.
European Investment Bank Loans
Q14. The European Investment  Bank (EIB) is a European Community (EC) financial
institution which offers loans to designated depressed areas for EC member states .
Reply
The objectives of the EIB are far wider than is suggested.
1.   Within the European Union (EU), projects considered for EIB financing must contribute
towards one or more of the following objectives :
- Fostering the economic development of the less favoured regions;
- improving European transport and telecommunications infrastructure;
- protecting the environment and the quality of life, promoting urban development and
safeguarding the Community's architectural and natural heritage;
- attaining Community energy policy objectives;
- enhancing the international competitiveness of industry;G/SCM/Q2/EEC/19
Page 7
- supporting the activities of small and medium-sized enterprises;
- extending and modernising infrastructure in the health and education sectors as well as
assisting urban renewal, under the Amsterdam Special Action Programme in support of
growth and employment.
Outside the Union, the EIB supports the Union's cooperation and development aid policies in
over 120 countries in Africa, the Caribbean and the Pacific, the Mediterranean area, Central and
Eastern Europe, Asia and Latin America.
These activities, conducted in close cooperation with the European Commission, are aimed at
fostering sustainable development, as well as underpinning efforts to achieve stability and peace inseveral regions.
2. The European Investment Bank (EIB), the financing institution of the European Union, was
created by the Treaty of Rome.  The members of the EIB are the Member States of the European
Union, who have all subscribed to the Bank's capital.
The EIB enjoys its own legal personality and financial autonomy within the Community
system.  The EIB's mission is to further the objectives of the European Union by providing long-term
finance for specific capital projects in keeping with strict banking practice.
It thereby contributes towards building a closer-knit Europe, particularly in terms of economic
integration and greater economic and social cohesion.
As an institution of the Union, the EIB continuously adapts its activity to developments in
Community policies.
As a Bank, it works in close collaboration with the banking community both when borrowing
on the capital markets and when financing capital projects.
The EIB grants loans mainly from the proceeds  of its borrowings, which, together with "own
funds" (paid-in capital and reserves), constitute its "own resources".
Outside the European Union, EIB financing operations are conducted principally from the
Bank's own resources but also, under mandate, from  Union or Member States' budgetary resources.
3. Since the EIB, which enjoys an “AAA” Credit rating, borrows on international capital
markets and lends at a rate which fully covers its costs, it does not grant any subsidy to thebeneficiaries of its loans.
ECSC Article 56(2)(b) Retraining Grants
Q15. ECSC readaptation aid is granted in favour of workers affected by restructuring in the
coal and steel industries.  It is the workers who are the beneficiaries and not companies
Reply
In view of the above description of this programme, it is clear that it does not confer a benefit
to enterprises;  it was therefore not notified.G/SCM/Q2/EEC/19
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BRITE/EuRAM II
Q16. BRITE/EuRAM II is a European Community-wide research and development policy
under Article 130 of the European Economic Community (EEC) Treaty.  The programme aims
to revitalize European industry by reinforcing its scientific and technological base throughresearch and development. Assistance is only awarded for multi-sectoral, multi-disciplinary,
multi-company research and development projects.  The programme usually funds 25 per cent
to 30 per cent of research costs, and companies must fund at least 50 per cent.  Please indicate
whether this programme replaces BRITE/EuRAM which expired in 1994.
Reply
BRITE-EURAM II is part of the Community’s fourth framework programme for research,
which was notified in the 1998 new and full notification .  Although notified for transparency
purposes it is not specific as it applies to all sectors:  it is a continuation of the BRITE-EURAM
programme financed under the Community’s third framework programme, which ran from 1989-
1993. .
Electric Arc Furnace Programme
Q17. This programme, which funds the use of electric arc furnaces in the steel industry, is
believed to have provided grants to both  Usinor in France and ARBED in Luxembourg.
Reply
This is not an EC programme; it is aid granted by France for a specific project which has
merely been authorised by the EC in accordance with our State Aid rules.
Though the following programmes were partially explained in your 20 February 1997
replies (G/SCM/Q2/EEC/10) to questions from the United States, please explain why the
European Communities again determined that the following measures or activities did not fall
within the notification requirements of GATT Article XVI:1 and Article 25.5 of the Agreement
on Subsidies and Countervailing Measures.  Please provide full notifications of the programmes
listed.
ECSC Article 54 Loans and Interest Rebates
Reply
This programme is no longer used.
ECSC Article 56 Programmes
Article 56(2)(b) of the Treaty of Paris, which created the European Coal and Steel
Community (ECSC), authorizes the ECSC aid to "activities capable of reabsorbing redundant
ECSC workers into productive employment."
1. Conversion Loans (2a)
European Coal and Steel Community decision published in the Official Journal of the
European Communities, No. C 178 of July 27, 1977, authorized conversion loans for projects
that involve, or are likely to involve, reemployment of redundant ECSC workers.  An applicant
must be a small- or medium-sized enterprise, de fined as an enterprise that: (1) employees lessG/SCM/Q2/EEC/19
Page 9
than 500 people; (2) has net fixed assets of le ss that 75 million European Currency Units
("ECUs"); (3) has no parent enterprise that owns more than one-third of its share capital. A
qualifying project must create new positions that are capable of being filled by coal and steel
industry.
Reply
This programme is no longer used.
2. Interest Rebates
For firms located in "priority " regions that  have suffered high unemployment in the
coal and steel industries, the interest rebate is granted whether or not a qualifying firm actually
employs redundant ECSC workers.  A 5 per cent interest rebate is granted for the portion of
loan principal equal to (a) the number of new positions created, multiplied by (b) two-thirds,
multiplied by (c) 20,000 ECU's per worker. In co ntrast, firms located outside "priority" regions
must hire redundant ECSC workers. Their 5 per cen t interest rebate applies only to a portion of
the loan equal to the proportion of newly-created positions actually filled by redundant ECSC
workers multiplied by 20,000 ECU's.
Reply
This programme is no longer used.
AUSTRIA
The following are questions regarding the notification of Austria made pursuant to
Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/EEC.
Q1. For the vast majority of programmes, the notification contain insufficient information
regarding to whom and how the subsidy is provided.  For those notifications in which the
subsidy recipients are vaguely identified as “indi vidual enterprises,” “industrial enterprises,” or
“producers,” please clarify which types of industrial enterprises or producers are eligible (i.e.,to which industry sector(s) they belong).
Reply
Generally speaking, the types of mentioned recipients comprise enterprises in the non-
agricultural sector as defined by the EC-Treaty with the exclusion of certain services at the retail level
and banks.  Eligible service-related industries in clude, for example, the tourist sector, the catering
trade, consulting, project management, training and electronic data processing.
A subsidy is granted by the institution providing the aid after the potential recipient has filed a
pertinent application and if the criteria of the respective guidelines are fulfilled.
Q2. For the following programmes, please explain what is meant by “steel industry which is
not subject to ECSC Treaty.”  Are these subsidie s available to enterprises in the steel industry
or to enterprises not involved in the steel industry?
* Guidelines on Aid to Industry for Environmental Protection Measures (Programme #7)
* Aid for Waste Water management in Industrial Enterprises (Programme #17)G/SCM/Q2/EEC/19
Page 10
Reply
The term “steel industry which is not subject to ECSC Treaty“ means that under the  aid
schemes in question subsidies are made available to enterprises fulfilling the criteria as stipulated in
the “Framework for specific, non-ECSC-Treaty-relevant steel industries“.  This means that theindustries concerned produce types of steel which is outside the scope of the products covered by the
ECSC Treaty definition.
Q3. For the following programmes, please indicate the manner in which the subsidy is
provided (e.g. grant, loan).
* Aid Programme for the Establishment of New Enterprises and the Expansion of
Existing Enterprises (Programme #34)
* Aid Programme for Small and Medium-Sized Enterprises (Programme #37)
* Promotion of Environmental Protection Measures in Upper Austria (Part 1)
(Programme #54)
Reply
Programme #34 was terminated prematurely on 31 December 1997, Programme #37 ceased
already with 30 June 1997.  Subsidies under Programme #54 are provided either as non-repayable
cash grants or as low-interest loans (“soft loans“).
Q4. For the following programmes, please indi cate the subsidy per unit, total amount of
subsidy, or annual amount of subsidy budgeted.
* Focal Point:  Regional Planning Relocation (Programme #40)
* Establishment and Creation of Key Industries Programme (Programme #47)
* Scheme for the Development of Industrial Sites (Programme #48)
* Aid under Section 4 Paragraph 5 of the Economic Assistance fund Act (Programme #59)
Reply
Regarding Programme #40 the annual amount of subsidy budgeted equals ATS 5 million,
regarding Programme #47 the total amount of the final subsidy payments in 1997 was ATS 7,235,000,
and regarding Programme #59 the amount of the final subsidy payments totalled ATS 14,103,098 in
1997.  Under the Programmes #47, #48 and #59 aid requests had to be submitted by
31 December 1995. No further subsidy commitments were made any longer under the aid schemes in
the year under review.  With regard to the question on “subsidy per unit“, it has to be noted that no
precise information on this or similar indicators is available, given the fact that aid is granted almost
exclusively with respect to investment-like expend itures. However, considering the limited weight of
the aided assets in the total costs per unit (average depreciation period about 8 years; no subsidies to
operating costs), the “subsidy per unit“ is of negligible size.
Q5. For Programme #44, Special Programme for Strengthening the Tyrolean Economy
(Tyrolean Impulese Programme), please elaborate regarding which enterprises are of special
regional or public interest.G/SCM/Q2/EEC/19
Page 11
Reply
The mentioned aid focus "Establishment and Creation of Key Industries" of the ROSP
regional planning focal point scheme was taken out of the scheme when the 1991-1995 period ended
and shifted to the new Special Programme for Strengthening the Tyrolean Economy ("TyroleanImpulse Programme").  In doing so, the terms "regional and/or technological importance" used in the
guidelines were no longer defined in such detail as in the preceding 1991-1995 ROSP programme.  It
had turned out in that programme that due to the very distinct development of the individual Tyrolean
regions it was not very expedient to assess all applicant enterprises in a uniform way on the basis of
the same criteria with the same benchmarks.  When judging the individual aid applications, however,
the competent assistance board continued to apply these criteria analogously adapting them to the
specific level of economic development of the pertinent region and to the significance of the applicantenterprise for this region.  In addition, other criteria, such as the relation between the specific
investment and the size of the enterprise, play a certain role so that only investment projects  that pose
a particular challenge for the enterprise, and provide an appropriate stimulus to the region, are actually
assisted..  Practice has shown that this can already be achieved by very small enterprises that cater for
niches and gaps in the market.  Also, it needs to be pointed out that as a rule small and medium-sizedenterprises (SMEs) are given preferential treatment.
Q6. For Programme #47, Establishment and Creation of Key Industries Programme, please
identify the key industries and discuss the criteria for being designated a key industry.
Reply
Programme #47 terminated already on 31 December 1995. For further details, see Answer 4.
Q7. For Programme #51, Tyrolean Credit Guarantee Company, please elaborate on the
information pertaining to the subsidy recipients.  Specifically, describe the contents of  §§ 35-40
of the Chamber of Commerce’s regulations.
Reply
According to the guidelines, accepting credit guarantees within the framework of the
Tyrolean credit guarantee scheme generally applies for companies of the business sector. Articles 35-30 - with the exception of Article 38 - of the Economic Chamber Act, Federal Law Gazette
No.182/1946 as amended, referred to in the guidelines in brackets, contain a more detailed description
of the businesses coming within the scope of the individual branches of the Economic Chamber
(trades and crafts, industry, commerce, banking and insurance, tourism and transport).  Due to the fact
that Economic Chamber membership is mandatory in Austria, this means all businesses, providedthey are appropriately licensed.  The exceptions of Section 38 relate to the banking and insurance
sector.  The reason for this is that while the pertinent applications for guarantees are made via the
credit institution granting the credit to be guaranteed, the eventual beneficiary is not the credit
institution itself but always the business utilizing the credit.
Q8. For Programme #68, Guideline of the Vienna Credit Guarantee Company Ltd., please
clarify  the policy objective/purpose of the subsidy.
Reply
Small and medium-sized enterprises often get no bank credit for financing necessary
investments, as they usually have no collateral security required by banks. In 1970, the Vienna Credit
Guarantee Company Ltd. was founded, in order to provide such kind of collateral security in the formG/SCM/Q2/EEC/19
Page 12
of a guarantee.  Focal points are the granting of guarantees for investment in new product lines, in
relocation, in the foundation and take-over of enterprises.
The average gross cash grant equivalent of subsidies under this aid scheme is extremely low.
BELGIUM
The following are questions regarding the notification of Belgium made pursuant to
Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/EEC.
Q1. Please provide the background and authority for the programmes listed under
section 2.2.
We are aware of the following programmes and measures in Belgium that may meet the
notification requirements of the Agreement.  Please explain why the European
Communities/Government of Belgium determined th at the following measures or activities did
not fall within the notification requirements of GATT Article XVI:1 and Article 25.5 of the
Agreement on Subsidies and Countervailing Measures.  Please provide full notifications of the
programmes listed.
* SNCI Loans - provides long-and medium-term  financing to encourage the development
and growth of industrial and commercial enterprises in Belgium.
* Belfin Loans - provides financing for the restructuring and development of various
Belgian sectors.
Reply
SCNI Loans
Until 1995, the SCNI was a public credit institution which encouraged the activities and
growth of Belgian industrial and commercial enterpri ses by providing financing.  It was owned 50 per
cent by the public authorities and 50 per cent by private shareholders.  In 1995, the ASLK bankpurchased a majority of SCNI shares.
Initially, the SCNI provided medium- and long-term financing.  It was until the late 1980s and
early 1990s that private commercial banks began to enter the long term financing market.  The SCNI
funds its lending activities with deposits from private credit lines from other banks and capitalmarkets.
The SCNI operates like any other credit institution.  Since prime rates were published in the
early 1990s, SCNI’s long-term lending rates are based upon the prime rate.
Belfin loans
The “Companie belge pour le Financement de l’Industrie” (Belfin) was created in 1981 for
the purpose of providing credit to certain Belgian industries, in particular the steel industry.  The
economic situation of the steel industry was so poor that it was hard for companies to get creditwithout a guarantee.
Therefore, Belfin would borrow money within Be lgium and on international markets, with the
benefit of government guarantees, in order to obtain funds needed to grant loans to BelgianG/SCM/Q2/EEC/19
Page 13
companies.  Belfin loans to Belgian companies are not themselves guaranteed by the state, however,
Belfin charges a one percent commission which is used to finance a guarantee fund to support the
State guarantee of Belfin’s borrowings.  Belfin was authorized to grant loans until 1991; in the
meantime all outstanding credits have been paid back almost entirely.
DENMARK
The following are questions regarding the notification of Denmark made pursuant to
Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/EEC.
Export Credit and Insurance Programme
Q1. Though this programme was partially explained in the 20 February 1997 response
(G/SCM/Q2/EEC/10) to questions posed by the United States, please explain why this
programme was not included in the new and full no tification of subsidies.  In addition, please
give a full notification of the programme as required under Article 25.5 of the Agreement onSubsidies and Countervailing Measures.
Reply
This programme was not included in the notification of subsidies, since it is in full conformity
with the terms and conditions of the OECD Arrang ement on guidelines for officially supported export
credits.
We are also aware of the following programmes and measures in Denmark that may
meet the notification requirements of the Agreement.  Please explain why the EuropeanCommunities/Government of Denmark determined that the following measures or activities did
not fall within the notification requirements of GATT Article XVI:1 and Article 25.5 of the
Agreement on Subsidies and Countervailing Measures.  Please provide full notifications of the
programmes listed.
Export Training Programme
Assistance for Export Groups
International Tender Programme
Reply
In 1998, a grant of DKr 120.9 million was given for general export promotion.  The initiatives
included general promotion of Danish industry a nd products, participation in the EXPO 2000 in
Hanover, and expenses for Danish Trade Commissi ons abroad.  In addition, the development and
growth of industries in the East bloc and sector specific environmental efforts were assisted.
The programmes listed in the question are included in the ‘general export promotion’ entry as
notified in G/SCM/N/38/EEC, table 1.  This pertains to the Export Training Program,  the Assistance
for Export Groups and the International Tender Programme.  Accordingly, the notification of these
programs is included in the general notification of the Trade and Industrial Development Act.
The Export Training Programme is to be considered as an apprenticeship for Danish students
of economics.  The programme sets up a contract between a student and a company of limited
duration, where the student is occupied with the export activities of the enterprise.  It should beG/SCM/Q2/EEC/19
Page 14
emphasized that the programme is aimed more at the requirements of the student than the company.
Not only is the programme limited in time, but any economic benefit for the enterprise is likely to be
so insignificant that it is difficult to evaluate.  Budget 1998: DKr 2 million.
The Assistance for Export Groups is designed to initiate the development of export
competence in smaller enterprises.  The programme primarily favours the employees through
collective development and education programmes.  Budget 1998: DKr 13 million.
As regards the International Tender Programme, the purpose of the programme is to expedite
participation in international adjudication by limiting the financial risk of tenders.  Budget 1998:
DKr 5 million.
FINLAND
The following are questions regarding the notification of Finland made pursuant to
Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/EEC.
State Aid for the Internationalization of SMEs
Q1. Please provide the name of the law, act, or other legal authority under which this aid is
provided.
Reply
 Aid is provided under the Ministry of Trade and Industry Decision on State aid for
Businesses' Internationalization (Kauppa- ja teollisuusministeriön päätös yritystenkansainvälistymisen edistämiseksi myönnettävän tuen käytöstä, 2/022/98).
 
Loan Programme for SMEs (Kera Ltd.)
Q2. Please explain what is meant by the “aid intensity of loans”.
 
 Reply
 
 By the "aid intensity of loans" is meant the (effective) amount of subsidy as a proportion of
the total amount of loan.
 
Aland:  Grant for Technical Consulting and Promotion;
State Aid to Developing Businesses; and
Grant for Research and Development
Q3. Please explain whether these programmes are financed by the local government of
Aland, by the national government of Finland, or by some combination thereof.
 
 Reply
  
These programmes are financed by the local government of Åland.
 
Operational Conditions Aid
Q4. Please explain whether this subsidy was provi ded as a fixed amount to each recipient or
whether the amount is fluctuating.  Also, please provide the average amount per recipient .G/SCM/Q2/EEC/19
Page 15
 
 Reply
  
The amount of the subsidy is fluctuating. The maximum aid intensity remains normally under
50 per cent of the eligible costs.  In 1998 the average amount per project was Fmk 550,000(93,000 euros). There are usually many recipients per one project.
 
Waste Oil Management
Q5. Please provide the name of the law, act, or other legal authority under which this aid is
provided.
 
 Reply
 
The aid is provided under the Waste Oil Charge Act (Öljyjätemaksulaki 894/1986)  and the
Council of State Decision on the Use of Funds Accr uing from the Waste Oil Charge (Valtioneuvoston
päätös öljyjätemaksuina kertyvien varojen käytöstä öljyjätehuoltoon 1191/1997).
FRANCE
We are aware of the following programmes and measures in France that may meet the
notification requirements referenced above.  Please explain why the EuropeanCommunities/Government of France determined that the following measures or activities did not fall
within the notification requirements of GATT Article XVI:1 and Article 25.5 of the Agreement on
Subsidies and Countervailing Measures.  Please provide full notifications of the programmes listed.
1. DATAR programmes
The French government provides a series of tax and non-tax regional incentives to
French and foreign businesses to establish new, or to expand existing, businesses in certain
regions of France.  The Delegation a l’Amen agement du Territoire et  l’Action Regionale
(DATAR) coordinates the programmes of vario us government agencies and ministries. DATAR
programmes are limited to companies located in certain regions.
* Regional Development Grants (PATs):
Q1. Though this programme was partially explained in your 11 August 1998 response
(G/SCM/Q2/EEC/16) to questions by the United States, please explain why the programme was
not fully notified and please provide a full notification of the programme.
Reply
The PAT programme has been fully notifie d.  See document G/SCM/N/38/EEC/Add.5, p.13.
* DATAR 50 per cent Taxing Scheme:
Q2. Grants provided by DATAR for the purchase of fixed assets are taxed at a rate of only
50 per cent of the normal tax rate, because the depreciation basis for these assets is increased by
exceptional depreciation equal to 50 per cent of the grant.G/SCM/Q2/EEC/19
Page 16
Reply
Accelerated depreciation is an accounting mechanism contemplated under fiscal law and its
advantage for PAT beneficiaries is taken into account in calculating the net subsidy equivalent of the
PAT, as determined by the Commission's rules on regi onal assistance;  it is therefore not a mechanism
supplementary to the PAT.  Besides, the DATAR is not responsible for administering either this
accounting mechanism or the fiscal regulations connected with it.
* Tax Exemption for Industrial Expansion
Q3. DATAR also administers a programme th at exempts certain companies located in
development regions from the business tax ("taxe professionelle") for up to five years.
Reply
The business tax waivers may be approved by the local authorities in some areas;  they are
regional assistance programmes that have been  notified (document G/SCM/N/38/EEC/Add.5, p.9-11
and p.20).  In no instance are they administered by DATAR.
* Tax Credit for Companies Located in Special Investment Zone:
Q4. Companies located in the Nord-Pas-de-Ca lais region, which has been designated a
special investment area (ZIP), are eligible to receive a tax credit of 22 per cent of the pre-tax
manufacturing cost for industrial investments.
Reply
The ZIP programme in Nord-Pas-de-Calais was never implemented.
* Work/Training Contracts and Internships:
Q5. The "Worker/Training Contract" programme consists of two parts: 1) employers are
exempt from social security contributions, a nd 2) the employer is permitted to pay employees
lower salaries.  The employer is only eligible fo r participation in the programme if he or she
agrees to hire employees aged 16 to 25 with no work experience under a work/training contract
for six to 36 months.
In addition to the worker/training contract, another part of the programme consists of
internships where the French government pays intern  salaries as well as all or part of training
expenses for the interns.
Reply
The question would seem to refer to alternance training contracts which are basically forms of
vocational training whereby they undergo training alternating with periods spent in enterprises, where
they are given internship status and are trained by the company staff.  Indeed, when it comes to
preparation for technical trades, classroom training alone is not enough to guarantee young people ajob.  This type of training done in partnership with enterprises enhances young people's job prospects.
The programme is open to all enterprises and is not specific within the meaning of Article 2 of the
Agreement.G/SCM/Q2/EEC/19
Page 17
* Tax Credits for Research:
Q6. The DATAR Tax Credit for Research programme provides commercial or industrial
firms with a "tax credit break amounting to 50 per cent of research expenses which have
increased in comparison with the average for the 2 previous years."  The tax credit can be
applied to depreciation of assets used in resear ch, personnel costs, operating costs, cost of R&D
operations, expenses relating to submission and re gistration of patents, depreciation on patents,
and 50 per cent of certification costs.
Reply
The Credit for Research programme has been notified (G/SCM/N/38/ EEC/Add.5, p.30) and is
not administered by DATAR, as it is an R&D programme.
GERMANY
The following are questions regarding the notification of the European Communities
(Germany) made pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on
Subsidies and Countervailing Measures , in document G/SCM/N/38/EEC/Add.6.
Q1. According to programme number 4, “Bavarian Regional Programmes in Support of
Commerce and Industry”, a total of DM 177 million in subsidy support was provided to 177
companies.  Could you identify and explain the cri teria that are used to determine eligibility and
receipt of support under this programme?
Reply
According to the Bavarian Regional Programmes in Support of Commerce and Industry,
financial support, in principle, may be given for investments made by commercial companies in the
entitled areas of Bavaria and which are important in view of the regional economy and the structuralpolicy.  The support can be granted as investment subsidy and/or as a reduction in the interest rate of a
credit lent by the Bayerische Landesanstalt für Aufbaufinanzierung (LfA).  Within the investment
project, the subsidies of the Regional Programmes can be used for acquisition or manufacture of new
economic goods (movable or immovable) of the tangible fixed assets supposed they are effected at
appropriate places (in the entitled areas) and they contribute to create or safeguard jobs of long term.
The highest of subsidies are granted in the areas entitled by Bund-Länder-Gemeinschaftsauf-
gabe „Verbesserung der regionalen Wirtschaftsstruktur“ (federal and regional cooperation task for the
promotion of regional economic structures). In those areas subsidies can be granted up to 18 per cent
of the investment costs at a maximum for large sized companies and up to 28 per cent of the
investment costs at a maximum for small and medium sized enterprises (SME).
In others than the entitled areas investment s of commercial companies can be supported in
parts of less well-developed infrastructure and in ru rally characterised parts. According to the criteria
given by the European Commission only SME up to 250 employees can benefit therefrom.  The
subsidiaries are restricted to 7.5 per cent of the investment costs taken into account for the grant, for
small sized companies up to 50 employees up to 15 per cent of said investment costs.
Generally the Regional Programmes of Economic Support are not applicable to conurbations
i.e. to big cities and their surrounding countryside (Verdichtungsräume).  At the present subsidies can
be granted exceptionally and for a time-limited period to small and medium sized enterprises (SME)
located in towns of Augsburg, Fürth and Nürnberg.G/SCM/Q2/EEC/19
Page 18
As a general condition of support and because of regional economic reasons companies have
to sell an essential part of their products or services nationwide respectively world wide (primary
effects).  Only those investment projects can be granted, where special efforts turn out necessary in
the company - taking into account the volume of the investment and the number of the created long-
term jobs.
Pursuant to the budgetary regulations the applications for subsidies, generally, have to be
submitted to the competent authorities before starting with investment measures;  this applies
especially for the conclusion of contracts as sell and purchase or delivery agreements or take-overs.
To assure the financing in whole, the customer bank of the company is involved in the granting
procedure.
The locally competent district-government (Bezirksregierung) in its quality as granting
authority (Bewilligungsbehörde) decides about the subs idies, it also controls the correct application of
the subsidies and decides about recovery in part or in whole of incorrect applied subsidies.
The payment of the subsidies is effected by the Bayerische Landesanstalt für
Aufbaufinanzierung (LfA).
Q2. Under programme number 7, “Consolidation Programme of the Land Mecklenburg-
Western Pomerania on the Granting of Public Financial Aid to Small and Medium-sized
Commercial and Industrial Enterprises - Special Fund to Support Companies”, small andmedium-sized companies (SMEs) within the meaning of the Community Framework may
receive loans of up to DM 5 million.  Were any other criteria used in determining loan
recipients?  How were SMEs defined for purposes of this programme?
Reply
Definition of SME status:
The SME status governing eligibility of companie s for receipt of support is determined by the
Community Framework pursuant to the Community Guidelines on State Aid for Small and Medium-
Sized enterprises (96/C 213/04) of 23 July 1996.
Further criteria on defining recipient firms are as follows:  Recipient companies must be
„firms in difficulties“ within the meaning of the „Community Guidelines on State Aid for Rescuing
and Restructuring Firms in Difficulty“ of 19 September 1997 (OJ C 283/2). The whole programme is
subject to these Guidelines.
Q3. According to programme number 12, “Regional Economic Support Programme”,
DM 181.2 million were provided in the form of gr ants towards investment projects of trade and
industry and local infrastructure.  How many projects received support, and what criteria
govern the receipt of assistance under this programme?
In 1997 (DM 181.2 million) 213 projects in trade and industry and 8 local infrastructure
projects were supported.
Grants were provided in accordance with the directives of 12 March 1997 (public grant
No. N591/97) and authorised by the EU Commission, DG IV, in a letter dated 5 February 1997.G/SCM/Q2/EEC/19
Page 19
GREECE
The following are questions regarding the notification of Greece made pursuant to
Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/EEC.
Law 260/98
Q1. Could you please provide information concerning the amount of funding provided
under this programme?
Reply
We presume that the question refers to Law 2601/98.  All available information was given in
the notification.  As explained in item 7, data on the amount of the subsidy was not available, the
programme having only entered into force on 15 April 1998.  Further information on funding will be
given in this year’s update notification.
We are also aware of the following programme that may meet the notification
requirements of the Agreement.  Please explain why the European Communities/Government of
Greece determined that it did not fall with in the notification requirements of GATT
Article XVI:1 and Article 25.5 of the Agreement on Subsidies and Countervailing Measures.Please provide full notifications of the programmes listed.
Reduction in Excise Tax for Greek Ouzo
Q2. Greek Ouzo (distilled spirit) receives a tax reduction over imported spirits.
A reply will be provided as soon as possible.
ITALY
The following are questions regarding the notification of Italy made pursuant to Article XVI:1
of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures, indocument G/SCM/N/38/EEC.
We are aware of the following programmes and measures in Italy that may meet the
notification requirements of the Agreement.  Please explain why the European
Communities/Government of Italy determined that the following measures or activities did notfall within the notification requirements of GATT Article XVI:1 and Article 25.5 of the
Agreement on Subsidies and Countervailing Measures.  Please provide full notifications of the
programmes listed.
Export Marketing Grants under Law No. 304/90
Q1. Provides grants to food and agricultural companies to increase market share in non-
Community markets.G/SCM/Q2/EEC/19
Page 20
Reply
Law 304/90
- This law provided grants to “pilot projects” promoted by food and agricultural
companies to increase market share in non-EU markets.
- The programme is no longer in force: this law was financed only until 1993 .
- Subsidies regarding projects approved in the past were  distributed until 1997.
Social Security Reductions and Exemptions, including Fiscalizzazione Benefits
This nationwide programme, with higher benefits in the south of Italy, provides
deductions on payments for health care and insurance:  Law No. 407/90, which provides a two-
year exemption from social security benefits for hiring employees that were previously
unemployed for two years; and Law No. 863, which provides a social security reduction forworkers who are in training.
Reply
Laws 407/90 and 863/84
- Law 863/84 was modified by Law 407/90.
- Law  No. 407/90: provides exemption ( higher in  the south of Italy) from social security
benefits for companies hiring employees that were previously unemployed for two years.
This programme will be notified in the Community’s update notification.
NETHERLANDS
Q1. We are aware of the following programmes and measures in the Netherlands that may
meet the notification requirements of the Agreement.  Please explain why the EuropeanCommunities/Government of the Netherlands determined that the following measures or
activities did not fall within the notification  requirements of GATT Article XVI:1 and Article
25.5 of the Agreement on Subsidies and Countervailing Measures.  Please provide full
notifications of the programmes listed.
Stimulation for the Innovation of Electric Energy (SES)
The goal of this programme is to stimulate energy conservation by encouraging the
installation of co-generation equipment.  It pr ovides payments of up to 25 per cent of the
equipment cost with a certain cap per project.
Investment Incentive (WIR)-Regional Programme
The WIR investment incentive is granted as a reduction of income tax due, or if no tax is
due, as a cash payment at rates ranging from 8 per cent to 14 per cent of the investment cost,
based on the nature of the structure or investment (e.g., sea vessels-12 per cent; new non-
residential buildings-14 per cent; existing non-residential buildings-8 per cent; etc).G/SCM/Q2/EEC/19
Page 21
Reply
Both of these programmes were abolished in 1991.  In fact, the most important part of the
WIR programme, the so-called basic premium, was abolished in 1988.
SPAIN
The following are questions regarding the notification of Spain made pursuant to
Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/EEC.
Fisheries
Q1. You said in your 11 August 1998 respons e (G/SCM/Q2/EEC/16) to our question about
Structural Aid to Fisheries, Aquaculture, and the Processing and Marketing of Fish Products
that “part of the financial aid, up to a maximu m of 50 per cent, may be used to reduce the
interest on loans granted to owners of new fishin g vessels by the various loan bodies.”  However,
you did not clarify in this new notification the form in which this financial aid was granted
under the various programmes listed under the Fisheries section of your notification.  Please
clarify for each programme in what form th e subsidies are provided (e.g. loans, grants).
Reply
Form of the subsidy
1. Individual compensatory premiums (for definitive stoppage of fishing):  non-repayable
subsidy covering a percentage of the request.
2. Subsidies for the improvement of fishing.  Up to  100 per cent of the expenses incurred for the
purposes of the subsidized activity, 75 per cent of which is reimbursable by the European Social Fund
for activities carried out in objective 1 regions.
3. Promotion of aquaculture.  Direct assistance.
4. Marine cultivation plans.  Form of subsidy:  direct subsidization of eligible costs of the
activity carried out, in which the IFOP finances 47.4 per cent, the member State 24.36 per cent and
the beneficiary 28.2 per cent.
5. Reorganization and renovation of fishing fleet.  Non-repayable subsidies.  The subsidies are
intended for capital investment in the building of vessels and may go towards reducing by 1 or more
points the interest payable by the owner of the vessel to a lending body that has made him a loan for
building the vessel.
In no case does the administration grant direct loans to beneficiaries, pursuant to Article 18 of
Royal Decree 798/1995 of 19 May setting out the criteri a and conditions of structural aid to fisheries,
aquaculture, and the processing, marketing and promotion of its products, as amended by Royal
Decree 290/1997 of 28 February, which states:
"Part of the IFOP subsidy, up to a maximum of 50 per cent, may be used to reduce the interest
on loans granted to owners of new fishing vessels by the various loan bodies.
To that end the following conditions are established:G/SCM/Q2/EEC/19
Page 22
1. Amount of the loan:  up to 40 per cent of the investment.
2. Pay-back period:  up to 12 years, during the first two of which capital repayments are waived.3. Interest rate:  the interest rate agreed between the owner of the vessel and the lending entity
will be reduced by up to 3 percentage points.  The resulting rate of interest may not be less than 3 per
cent.  That minimum may be changed in accor dance with the provisions of governing the
implementation of this Royal Decree".
1. Conversion of the fishing fleet.  Non-repayable subsidy.2. Compensatory early retirement as a result of restructuring of the fishing fleet.  Non-repayable
subsidization of a percentage of the amount requested.
Q2. What is the duration of the various fisheries programmes?
Reply
Duration
The duration of assistance programmes varies according to the period of effectiveness of
Community regulations, in this case EEC Council Regulation 3699/93 of 21 December setting out thecriteria and conditions for Community structural aid to fisheries, aquaculture, and the processing and
marketing of fish products, which period of effectiveness ends in December 1999.
1. Individual compensatory premiums:  Paid annually.  1994-99.
2. Subsidies for the improvement of fishing.  1994-99.
3. Promotion of aquaculture.  1994-99.4. Marine cultivation plan.  Duration will be that of Community assistance programmes for
these structural measures in objective 1 regions and in other regions (1994-99).
5. Reorganization and renovation of fishing fleet.  1994-99.
6. Conversion of fishing fleet.  1994-99.7. Compensatory early retirement as a result of the reorganization of the fishing fleet:  paid
annually.  1994-99.
Q3. Who are the recipients of the seven types of fishery subsidies listed on page 3?
Reply
Beneficiaries
1. Individual compensatory premiums:  fishing sector workers.  Some 800.
2. Subsidies for the improvement of fishing.  A ssociations (e.g. associations of shipowners,
fishermen's guilds or unions) or national bodies.  Conditions:  providing training in the nautical and
fisheries sector on a non-profit basis.G/SCM/Q2/EEC/19
Page 23
3. Promotion of aquaculture.  Enterprises in the aquaculture sector.
4. Marine cultivation plans.  Producer organi zations and marine cultivation associations.
5. Reorganization and renovation of fishing fleet.  The beneficiaries are the owners of new
fishing vessels.  Shipowners in the fisheries sector.
6. Conversion of fishing fleet.  Shipowners in the fisheries sector.7. Compensatory early retirement as a result of the reorganization of the fishing fleet.  Workers
in the fisheries sector.
Q4. Please explain whether these subsidies are pr ovided as a fixed or fluctuating amount for
each recipient.  Also, please provide an estimated average amount received per recipient.
Reply
Amount of the subsidy.  The notification already indicated the amount.  Information will
therefore now be included as to the number of beneficiaries.
1. Individual compensatory premiums:  fixed amount.  Number of beneficiaries:  331 workers.
2. Subsidies for the improvement of fishing.  Variable amount.  Number of beneficiaries:
7 national entities.
3. Promotion of aquaculture.  Variable amount.  Number of beneficiaries:  163 projects.
4. Marine cultivation plans.  Variable amount .  Number of beneficiaries:  10 Autonomous
Communities.
5. Reorganization and renovation of fishing fleet.  The amount is determined according to the
loan requested by the shipowner from the lending entity and is therefore variable.  450
subsidies have been granted.
6. Conversion of fishing fleet.  Average subsidy for joint-venture projects:  160 million pesetas.
Average subsidy for temporary business association project:  80,700,000 pesetas.
7. Compensatory early retirement as a result of the reorganization of the fishing fleet.  Fixed
amount.  Number of beneficiaries:  12 workers.
Special Economic Aid to Shipowners and Crews Affected by the Stoppage of Fishing
Q5. Please clarify whether all shipowners and crews receive the same amount of aid or
whether the amounts fluctuate.
Reply
In the case of the temporary stoppage of fishing activities for biological reasons,
EEC Regulation 3699/936 of 21 December and Span ish Royal Decree 798/1995 of 19 May stipulate
that  owners of fishing vessels will receive an amount, according to a scale, taking account of gross
registered tonnage and the days of actual stoppage of fishing.G/SCM/Q2/EEC/19
Page 24
Crew members will receive a fixed amount under their unemployment benefit entitlements, in
keeping with the Social Security Regime for Marine Workers.
Promotion of the Economic and Social Sectors of the Agri-Food Industry
Q6. Please explain what is mean by the “economic and social sectors” of this industry.
Reply
As explained in the section on beneficiaries and as stated in the Ministerial Order of
4 July 1985 establishing subsidies for technical assistance and management plans for agri-foodindustries, the subsidies will go to specific projects with detailed objectives and means and which are
scheduled over time, proposed by:  associations of firms in the agri-food sector, associations of
agricultural producers, trade unions in the agri-f ood industry, professional associations, foundations
and other bodies whose objective are connected with the agricultural and food industries.
Q7. Please develop your answer to question 8 ("Duration of Subsidy").
The programme was launched following publication of the Ministerial Order of 1985 and is
of annual duration.
Support Initiative for Technology, Quality and Industry Safety (ATYCA)
Q8. Please explain whether these subsidies were  provided as a fixed or fluctuating amount
for each recipient.  Also, please provide an estimated average amount received per recipient.
Reply
There are no estimates of recipients and hence of amounts per recipient or project, as the
ATYCA initiative is a programme based on public tenders.  The average amount per recipient in 1997
was approximately 7 million Pesetas.
R&D Plan for the Aeronautical Sector
Q9. Please explain what form these subsidies ta ke in addition to being “repayable advances.”
For example, is the interest rate subsidized and/or are the recipients granted certain grace
periods?
Reply
These subsidies take the form of loans.  Interest rate rebates and grace periods are granted,
always ensuring, in keeping with Community standards, that the 25 per cent subsidy equivalent
ceiling is not surpassed and assuming that the project succeeds, plus the appropriate supplements ifthe beneficiary is an SME or is eligible for regional assistance.
Aid Under Technological Programmes Connected With the SEAT Modernization Plan
Q10. Please indicate whether any subsidies were gr anted in 1998 and, if so, details about those
subsidies including amounts, recipients and dates.G/SCM/Q2/EEC/19
Page 25
Reply
In 1998, the SEAT company received 3,715 million Pesetas under this programme.
Q11. In your subsidies notification, you stated that subsidies may be granted in the years 1995
to 1998.  Has this programme been terminated?  If  so, please indicate the legislation terminating
the programme and when that legislation became effective.  If this programme is continuing,
please indicate the new legislation author izing the continuation of the programme.
Reply
The programme has ended, the last subsidy having been granted in 1998.  No additional
legislation exists nor is there the need for such le gislation for terminating this programme, as the law
that created it expressly authorized it strictly for the period 1995/98.  The programme will not be
continued.
ARTE/SME Programme
Q12. Please explain what the letters “ARTE” represent.
Reply
ARTE means Regional Access to Telecommuni cations and PYME stands for Small and
Medium-size Enterprises.
Regional Economic Incentives Scheme
Q13. Please identify the type of recipient of this subsidy (e.g., private businesses or regional
government authorities).
Reply
 
Subsidies for the regional incentives scheme are granted to private enterprises.
 
Q14. Please explain whether this subsidy was pr ovided as a fixed or fluctuating amount for
each recipient.  Also, please provide an estimated average amount received per recipient.
 
Reply
The percentage subsidization of the approved investment is variable and depends on the
project.  The average percentage subsidization between 1 June 1988 and 31 December 1997 was
19.5 per cent.
Autonomous Communities
Q15. Please explain whether the amounts listed under each subsidy programme for the
autonomous communities are provided by the central government, by regional governments, or
by some combination thereof.
Reply
The subsidies are generally granted by the autonomous communities with funds from their
own budgets.G/SCM/Q2/EEC/19
Page 26
Catalonia :  Aid Under Technological Programmes Connected With the SEAT Modernization
Plan
Q16. Please explain whether this subsidy was provided in addition to the SEAT subsidy
discussed on page 13 of your notification document.
Reply
The subsidies granted by the Autonomous Community of Catalonia are additional to those
accorded by the Ministry for Industry and Energy.
Galicia:  Non-Repayable Subsidies to Cooperation Among Enterprises
Q17. Please provide the total amount budgeted for or disbursed in 1997.
Reply
Budgeted amount:  100 million Pesetas.
Amount disbursed:  0 Pesetas.
UNITED KINGDOM
The following are questions regarding the notification of the United Kingdom made pursuant
to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/EEC.
Business Connect Wales
Q1. What type of support is provided under this programme?  In addition, please explain
how the funding contracts work.
Reply
Business Connect is the advice, information and support network from small and medium
sized enterprises in Wales.  Through an all Wales helpline number and a network of 30 local centres,
it provides easy access for firms (especially small companies) to the range of available business
support – from counselling for new starters to specific grants and help with innovation, etc.
In March 1999 a new Business Connect Management Board (Business Connect Wales Ltd)
was established to help further improve the co-ordination of business support across Wales and to
help increase take-up of the available support.
Business Connect Wales Ltd is funded by the National Assembly for Wales by direct grant
(£2m in 1999/2000).  For this money Business Connect Wales has to undertake a range of tasks
including measures to improve the marketing of the Business Connect service to Welsh firms (too
many are currently unaware of its existence) ; to improve the use of ICT ; and to improve the quality
of the service provided.  No central monies from Business Connect Wales go direct to companies in
Wales : rather they are used for the further development of the business support infrastructure.G/SCM/Q2/EEC/19
Page 27
Business Links
Q2. It is not clear who actually receives thes e grants. Do the Trade and Enterprise Councils
(TEC) receive these grants from Government Offi ce contracts and then distribute them to other
entities such as Chambers of Commerce, Enterprise  Agencies, etc. - or do these grants stay with
the TECs?
Reply
 Under the Structural Funds regulations, which operate from 1 January 1994 to
31 December 1999, the DTI is co-financing its funding of the development of Business Links within
the European Regional Development Fund (ERDF) Objective 1, 2 and 5(b) areas.  Co-financing refersto ERDF direct support for DTI expenditure on Business Links, rather than more general co-financing
of individual projects.
 Single Programming Documents (SPDs) set out the level of DTI expenditure that must be
spent in the eligible area in order to get ERDF gr ant.  Government Offices are responsible for the
administration of the Single Programming Documents.
A new funding regime was introduced from 1 April 1997 and is working well.   This funding
regime fits well with the approach to accessing ERDF funding, with TECs being well placed in
leading on Action Plans being drawn up by the partnerships (usually TECs, Business Links, Local
Authorities, Chambers of Commerce, Careers Servi ces, Employment Services etc.) and have in place
effective project appraisal and financial management systems to meet existing EC Structural Fundsrequirements.  Normally co-financing of pump-priming grant will be through the pump-priming offer
letter, and for additional costs for business support services through TEC/CCTE contract.
Civil Aircraft Research and Demonstration Programme (Carad)
Q3. How are eligible costs determined and how are the levels of eligible costs on projects
established?
Reply
The eligible costs for the CARAD programme are those set down in the EC framework on aid
for research and development.  Support is negotiated within these limits, as the UK Government seeksto provide the minimum assistance from the state to enable the project to go ahead.
The level of  CARAD grant set for individual projects takes account of the Programme
objectives of achieving maximum benefit from the limited funding available and of encouraging the
aeronautics  industry to collaborate. Funding is established after discussion with the applicants to
ensure that costs claimed are relevant to the project.  An additionality criteria is applied when
determining the levels of aid.
Cardiff Bay Development Corporation
Q4. What type of investment costs are eligible and how are the levels of eligible costs on
projects established?
Reply
Cardiff Bay Development Corporation has powers to make grants for anything that furthers
its objectives – subject to limits on state aid established by the European Commission.  In general itG/SCM/Q2/EEC/19
Page 28
gives grants only for fixed assets.  The Corporation is due to be wound up at the end of March 2000
and does not intend to consider new applicants for grant (although some are still being processed).
Development Board for Rural Wales
Q5. How is it determined whether eligible businesses qualify for whole or partial rent waiver
and how is the eligible time period determined?  Are there any fixed amounts of rent
determined per project and, if so, how are these amounts determined?
Reply
To qualify for rent concession support a business must be undertaking a new investment
project (investment aid as defined by European Commission’s Regional Aid Guidelines) and must be
leasing new or extended business premises in which to undertake that investment project.
As a general principle the Welsh Development Agency, (which has taken over the functions
of DBRW), is required to maximise rents, save that the offer of rent free periods or reduced rents maybe made in order to attract tenants to premises that would otherwise be difficult to let.  Such an offer
must be the minimum necessary to secure a tenant.  In line with this the Agency may waive rent in
whole or in part for a maximum of two years, t hough if the premises have been continuously vacant
for a period of not less than 18 months a further one year rent free occupancy may be granted and
where premises have been continuously vacant for not less than three years a second additional yearmay be granted rent free.
It can be seen from the above that the total maximum period of rent free is four years with
two years of that being determined by the amount of time the premises have been vacant and available
for letting.  In determining the ac tual period awarded the Agency must satisfy itself that the amount is
the minimum for the project to proceed and therefore is a subjective judgement.
The rent on the premises to be leased is determined by open market valuation.  Therefore
there is no fixed amount of rent determined per project, rather the business must pay market rent and
it is that market rent which is waived for a period of time.
If the recipient of a rent concession does not maintain the initial investment for a period of at
least four years, and in some cases seven years, then the rent concession is recoverable by clawback.
The percentage recoverable is dependant upon the initial period of the rent free and the number of
years for which the investment is being maintained.
Energy Efficiency Best Practice Programme
Q6. What costs are eligible under this programme and how are the levels of eligible costs on
projects established?  Is there any fixed amount determined per project and, if so, how are these
amounts determined?
Reply
The Energy Efficiency Best Practice Programme is an information transfer programme.  The
aim is to encourage industry and commerce and the public sector to adopt energy efficient
technologies and techniques.  This is done by providing impartial advice and information.  There is nofixed amount determined per project.G/SCM/Q2/EEC/19
Page 29
Environmental Technology Best Practice Programme
Q7. What eligible technology transfer costs and R&D costs are covered by the programme
and how are the levels of eligible costs on projects established?   Is there any fixed amount
determined per project and, if so, how are these amounts determined?
Reply
The Environmental Technology Best Practice Programme disseminates information in the
form of best practice case studies, and does not provide grants.  It also promotes and advises on waste
minimisation and cleaner technology via the Environmental and Energy Helpline, waste minimisation
clubs, seminars, exhibitions etc.  The budget is £22m from April 1997 to April 2002, with the wholebudget being spent on technology transfer costs.  There is no fixed amount for individual projects
within the programme.
Environmental Technology Innovation Scheme
Q8. Who is eligible for assistance under this programme?
Q9. Were grants provided under this programme at a fixed amount or did the amount of the
grant fluctuate?  How was the total fixed amount (or fluctuating amount) level of grant
determined for each project?
Reply
This scheme has been closed since 1997.
Eureka (UK)
Q10. What costs are eligible under this programme and how are the levels of eligible costs on
projects established?
Reply
The eligible costs for the Eureka programme are as follows:
Pay of personnel directly employed on project
Overheads
Materials consumedCapital Equipment & Tooling (bought for project, less residual value)
Subcontract Charges
Consultancy Fees
Fees for trials and testing
Training costsPreparation of technical reports
Market assessments
Licensing in new technologies
Certification
Patent Costs (SMEs)Project Management costs
Travel & subsistenceG/SCM/Q2/EEC/19
Page 30
The company sets down the amount of money which it thinks is necessary to undertake the
project. The project officer the decides whether the costs are eligible and reasonable. The maximum
grant levels for funding depends upon the nearness of the activity to the market, i.e.,
Up to 50 per cent for technical/commercial feasibility work or basic research
Up to 45 per cent for applied research
Up to 30 per cent for developmental work
These rates apply for SMEs, research institutions and higher educational institutes. For large
companies, the rate is up to 25 per cent to a maximum of £250,000 per applicant.
General Industrial Collaborative Projects (GICP)
Q11. What costs are eligible under this programme and how are the levels of eligible costs on
projects established?   Is there any fixed maximum amount determined per project and, if so,
how are these amounts determined?
Reply
This scheme has been closed to new applicants since 1993.  The eligible costs are in line with
those set down in the EC framework on aid from research and development, and aid intensity is
limited to 50 per cent for basic research activities.
Launch Aid
Q12. For each project, is there a maximum amount of government investment established?
Reply
All launch investment given by the UK government for large civil airframe projects is done so
in accordance with the 1992 EU-US Agreement on Large Civil Aircraft which limits direct support
(such as launch investment) to 33 per cent of the programme's total development cost.  The agreement
also requires that direct support be repaid within 17 years at a rate of return above the cost of
government borrowing.  Each project is also subject to a critical project appraisal, to establish that theproject has satisfactory market prospects.
Q13. How are the levels of government assistance determined for each project?
Reply
Launch investment is only given following a critical appraisal of each project.  The applicant
must demonstrate that the project is commercially and technically viable; government support is
essential; and that the government will recoup the investment at a real rate of return.  The UK
government provides the minimum amount of support necessary for the project to proceed.
LEDU-Selective Financial Assistance
Q14. How does LEDU determine the total amount and type of assistance (i.e., grant, loan,
equity) each project receives?G/SCM/Q2/EEC/19
Page 31
Reply
The forms of aid are all discretionary rather th an automatic and LEDU's input is restricted to
the minimum amount necessary to ensure that the project can proceed.
Before any assistance is offered LEDU require the submission of a development plan which
must show how the company intends to improve its competitive position.  LEDU also seeks to ensure
that the company has maximised sources of private sector finance to ensure that LEDU assistance is
limited to what is essential and is in the form be st geared to enabling the company to achieve its
development aims.
LEDU- R&D
Q15. How does LEDU determine the level of funding provided to each project?
Reply
The forms of aid are all discretionary rather th an automatic. LEDU seeks to be satisfied that
the company has maximised sources of private sector finance to ensure that LEDU assistance is
limited to what is essential and LEDU's input is restricted to the minimum amount necessary to ensure
that the project can proceed.
LEDU- Local Enterprise Programme
Q16. How does LEDU determine the level of funding provided to each project?
Reply
Funding is determined on the basis of a comprehensive economic appraisal.  LEDU's input is
restricted to the minimum amount necessary to ensure that the project can proceed with a priority
focus on areas designated as disadvantaged.
Offshore Supplies and Service Company Assistance for Research
Q17. Under which government authority or legislation is this subsidy granted?
Reply
The authority for the programme comes from the Science and Technology Act 1965 and the
Industrial Development Act 1982.
Q18. How is the level of funding provided determined for each project?
Reply
In all cases, through negotiations, the UK Government seeks to minimise the grant awarded to
the point where the project can proceed at a scale, contents and pace acceptable to all parties
When direct support is provided to SMEs (generally companies with fewer than 250
employees) to develop new products and services, then a grant in the range 25-35 per cent of project
costs can be awarded.  The value of the grant is not allowed to exceed the value of the costs being
covered directly by the grant recipients.G/SCM/Q2/EEC/19
Page 32
Preference is given to projects which include collaboration with science base researchers,
larger contractors and/or oil companies.
In a few cases a grant of up to 50 per cent of costs may be awarded when the project can be
identified as a feasibility study likely to lead to th e preparation of a full application.  As above, the
grant cannot exceed the level of the costs covered directly by the grant recipient.
Under the LINK scheme, which encourages direct collaboration between a company and
university-based researchers, companies may receive a grant.  In this case, the limit to the assistance
provided to the companies from this scheme is set by the primary rule that the total funding provided
by public sources to the project participants cannot exceed 50 per cent of the total project costs.  The
Research Councils provide funds for the universities and these payments are included in thecalculation of the overall 50 per cent limit.  The grant from the DTI scheme would not exceed the
difference between the Research Council funding a nd the 50 per cent limit.  Companies are required
to cover at least 25 per cent of their own costs.  Again the DTI grant cannot exceed the applicant’s
own expenditure.
Scottish Enterprise
Q19. How does Scottish Enterprise determine th e total amount and type of assistance (i.e.,
grant, loan, guarantees) each project receives?
Reply
Scottish Enterprise (SE) determines the total amount and type of assistance (and indeed
whether to offer assistance at all) only after a detailed appraisal of any proposal.  The rules governing
such appraisals are laid down by the Scottish Executive in SE’s Management Statement and Manualof Project and Programme Rules.  These rules incorporate all the current EC limits governing State
aid.  The rules are supplemented by SE’s internal Project Development Guidance laying out best
practice in appraisal.  Project papers are then scrutinised by the SE Board and the Scottish Executive.
Full appraisal will cover issues including strategic fit, a market appraisal, an options appraisal, the
viability of project partners, a risk assessment, a sustainable development appraisal, an exit strategy if
appropriate and the arrangements for the monitoring and evaluation of the project.
Single Regeneration Budget
Q20. How is the total amount and type of assistance (i.e., grant, loan, guarantees) each project
receives determined under this programme?
Reply
The Single Regeneration Budget (SRB) is a flexible programme.  The schemes it supports can
have a mix of objectives which may include: the promotion of sustainable regeneration, improving
and protecting the environment and infrastructure, including housing; and supporting and promotinggrowth in local economies and businesses.
Annual bidding rounds are used to select schemes to receive SRB funding.  Successful
schemes will include one or more projects, the objectives of these projects will be determined by local
needs and priorities (which will influence the type of assistance provided). SRB assistance consists
mainly of grant aid but may be used to provide loan s, for example, to small businesses (subject to EC
restrictions on state aids).G/SCM/Q2/EEC/19
Page 33
A full appraisal of each project is required to be undertaken which includes assessing
expenditure for value-for-money. Although there are no requirements for matching funding, any
support provided by the SRB should be limited to the minimum necessary for the project to proceed.
Projects must be formally approved before any expenditure is incurred.
Small Firms Loan Guarantee Scheme
Q21. What business activities and what types of small businesses are eligible for loan
guarantees under this programme?
Reply
A wide range of business activities are eligible for support under the Small Firms Loan
Guarantee Scheme. A business activity is eligible unless it is listed under the activities where
restrictions apply.
The activities where restrictions apply are:The activities of a business must be commercial  and “commercial activity” means any activity
carried on with the object and intention  of making a profit and which, in the opinion of the lender, at the
date of agreeing to make the loan available, suff icient to generate enough income from such activity to
repay the loan. In the case of an applicant which ha s made it known to the lender that it receives income
from sources other than its commercial activity, the lender must be of the opinion that at the time of
agreeing to make the loan available, more than 50 per cent of its income will come from the commercial
activity.
Agriculture and horticulture - Loans for the agriculture and horticulture sectors are available,
but there are restrictions; Guidance should be sought  from the DTI Loan Guarantee Section in all cases;
No loans can be approved under the Small Loans Arrangement;
Authors, music composers and cert ain other own-account artists  - including self employed
artists, authors, composers, playwrights, musicians, actors, theatrical companies etc. are not eligible.
Commercial and graphic artists are eligible.
Banking, finance and associated services - any activity that involves granting of finance or a
financial service to clients is ineligible, such as  banks, deposit takers, building societies; companies
involved in granting loans, mortga ges, hire purchase or credit serv ices; mortgage brokers; venture
capitalists; seedcorn finance companies; stock brokers. Accountants; auditors; management service
companies, such as bookkeeping firms; tax advisors;  management consultants; business advisors and
companies that lend support to sm all firms on financial matters wit hout actually s upplying funds are
eligible .
Betting and gambling  - all betting shops, totalisers, casinos, lotteries, bingo halls and
amusement halls are ineligible.
Catering  - Licensed and unlicensed restaurants, cafes, snack bars and tea rooms, take-away
food shops, licensed clubs, including night clubs, canteens, caterers, licensed bars and public houses not
offering accommodation are ineligible. Public houses wh ere a brewery or drinks supplier owns or leases
the premises, gives financial support, has any control or offers any incentive to the applicant to stock
their product are not eligible, irrespective of whether accommodation is on offer. (Licensed and
unlicensed hotels, motels, guesthouses and bed & breakfasts, pubs offering accommodation, caravan
and camping sites and other short-stay accommodati on, youth hostels, holiday centres and villages and
self catering holiday accommodation are eligible) .G/SCM/Q2/EEC/19
Page 34
Coal   -  Mining and extraction of coal and lignite and the manufacture of solid fuel, including
coke, is ineligible. Cleaning, sizing and grading of coal, unle ss done by a coal producer or a company
wholly or substantially owned by a producer is eligible.  Also ineligible is the manufacture of mining
equipment sold to a coal producer at a subsidised price
Commission agents - those primarily engaged in acting as intermediaries between sellers and
buyers or in conducting business on another company's behalf are not eligible. The type of activity
excluded is one where the agent merely puts a seller in contact with a buyer without buying and reselling
the product themselves and without adding value of th e product or service. Fees are usually taken as a
proportion of the business passing through e.g. self-employed sales agents. It is not intended to exclude
all businesses that earn money from commissions, but only those who act as agents for a single principal
or single group of companies. Firms which provide a business service to a range of clients but take their
fee as a proportion of the business passing through, such as employment agencies, are eligible.
Education - only businesses offering courses that lead to vocational qualifications and skills
(i.e. those skills and qualifications directly usable in a job) are eligible.  All other forms of education,
including Nursery Schools which offer a curriculum of  lessons, piano tuition, and musical tuition are not
eligible. Day schools and playgroups for young children which do not offer lessons are eligible, as is
sports coaching.
Fisheries and Aquaculture -  consideration will be given to applications in respect of capital
investment in premises and eq uipment and vessel modernisation. Loans for operating costs (day-to-
day running costs), advertising brand products, vessel construction and purchase of a vessel, or
equipment that would lead to an increase in fish ing effort are not eligible. Guidance should be sought
from the DTI Loan Guarantee Section in all cases. No loans can be approved under the Small Loans
Arrangement.
Forestry - all activities connected with the cultivation of trees and maintenance of forests for
commercial use, including tree nurseries are not eligible. The processing of felled timber in saw mills is
eligible provided that the operation is not just part of a wider forestry activity.
Hairdressing and beauty parlours - including barbers, manicurists, public, sauna and Turkish
baths are not eligible. Gymnasia and similar establishments wher e these activities are an integral but
minor aspect of the business are eligible.
House and estate agents - including land and property surveyors, valuers, rent collectors, estate
managers and accommodation agencies are not eligible.
Insurance and associated services - companies and societies primarily engaged in transacting
all types of insurance business, including brokers and agents are not eligible.
Libraries, museums, art a nd other display galleries - including botanical gardens and
privately owned galleries that display art for sale, but  where a commission is taken if a sale is made are
not eligible. Zoos, leisure and heritage parks where craft or "life" exhibits are involved are eligible.
Medical and health services and veterinary services -  all activities where registered and
unregistered medical, other health care or veterinary personnel use their skills to treat patients are not
eligible. Rest or Convalescent homes where the care prov ided does not necessitate the use of specialist
medical skills and where medical help is brought in  from outside when needed are eligible. Nursing
homes where medical care is not the major activity are also eligible. Fitness and health clinics and firms
offering health advice are eligible where they do not depend on the input of qualified medical staff.G/SCM/Q2/EEC/19
Page 35
Motor vehicle repair and servicing - including painting and body repair are not eligible. Also,
anti-rust treatment, auto electrical repairs and servi ce, car wash and valeting and exhaust fitting are not
eligible.
Owning and dealing in real estate - land and estate owners, property investment companies
and those that derive their income from owning and le tting property are not eligible, as is any dealing in
land or property for speculative gain. Building firms who buy land or property to develop or refurbish it
and who employ the building wor kers themselves are eligible.  Businesses that buy land or property and
then employ sub-contract firms to do the work  are property developers and are not eligible.
Postal services - postal services charging less than £1.00 for each item carried are not eligible.
The pick-up, transport and delivery of letters and ma il-type parcels and packages by courier, parcel and
messenger service, charging a minimum of £1.00 for each item carried, is eligible.
Professional sports players and sporting organisations - including organisations which
promote sport in general are not eligible. Sports instruction and sports facilities are eligible.
Public administration, national defence and compulsory social security - all publicly owned
bodies and companies are not eligible.
Retail - defined as the sale of goods to consumers (including other businesses) - including
food, confectioners, tobacconists, newsagents, off-li cences, dispensing and other chemists, clothing,
electrical goods, floor coverings, footwear and leather goods, furnishing fabrics, household textiles,
household goods, hardware (including DIY stores), ironmongery, motor vehicles and parts, filling
stations, books, stationery, office supplies, dispensi ng opticians, florists, garden centres, jewellers,
photographic goods, second-hand goods, sports goods, toys , credit traders, department stores, mail order
and other specialised retail distribution are not eligible.
Shipbuilding  - the building, repair and conversion of sp ecified categories of ships is ineligible.
These ships are defined as any metal-hulled vessel which is self-propelled and self navigable, of over
100 Gross Registered Tons and designed for the carriage  of passengers, cargo and for work at sea.  Tugs
of over 365 Kilowatt are similarly excluded.  Other categories of ships and boats are eligible.
Steel  - Manufacture of basic iron and steel products and ferro-alloys, as defined by the terms of
the ECSC Treaty, is ineligible.
Ticket and Travel agents - all agents who act as intermediaries between the holiday maker and
the travel/holiday provider are not eligible. Those companies who provide or  "manufacture" the travel or
holiday, rather than booking places on it, such as tour operators are eligible.
Transport - All forms of road (including taxi and cab hire), rail, water and air transport
(including those run as tourist attractions and living museums) are ineligible. See “Postal Services” for
Courier Operators.
To be eligible for assistance under the Scheme the turnover of the business, in the 12 months
immediately prior to their applying for a loan, must have been £3 million or less in the case of
manufacturers or £1.5 million or less for other sectors.
Q22. How are the 70 per cent and 85 per cent loan guarantee levels determined for each
project?G/SCM/Q2/EEC/19
Page 36
Reply
A guarantee level of 70 per cent on loans of up to £100,000 is available for start-ups and those
businesses that have traded for less than two years at the time of application for a loan. The guarantee
rises to 85 per cent and the maximum loan rises to  £250,000 for businesses that have traded for two
years or more at the time of application for a loan.
UK Coal R&D Programme
Q23. How is the level for eligible resea rch costs determined for each project?
Reply
The UK government is supporting research and development into the development of cleaner
coal technologies for advanced power generation.  Some R&D work is also being supported to
examine the potential of coal bed methane and underground coal gasification technologies to exploit
the energy in UK coal reserves.  The work is being undertaken in UK universities and by industry.Some collaborative international work is also being undertaken under the auspices of the International
Energy Agency and under bilateral agreements with the USA and China.
The level for eligible research costs for each pr oject is determined within the ceiling given by
the Community framework for R&D aid.  The aid intensity (i.e. aid as a percentage of eligible costs)for the programme as a whole is 20 per cent.  The maximum level of grant is set at 50 per cent even if
more aid would be allowable under that agreed for the Community framework on R&D in certain
circumstances.  Projects are recruited through an annual call process and proposals peer reviewed by a
technical advisory committee.  The committee a nd the programme managers for the programme
advise the Department on whether the research costs are appropriate.  The results of completed R&Dare published an widely disseminated.”
UK New and Renewable Energy Programme
Q24. How is the level for eligible costs determined for each project?
Reply
The DTI New and Renewable Energy Progra mme was established to stimulate the
development of new and renewable energy sources wherever they have the prospect of being
economically attractive and environmentally acceptable.
Eligible costs for projects which are supported under the New and Renewable Energy
Programme are costs which are directly and necessarily incurred in carrying out the project and
comprise some or all of the following: staff costs, overheads, consumables, capital equipment,
consultancies and sub-contracts, travel and subsistence and other costs.
The specific level of support complies with the requirements of the European Community’s
Framework for State Aid for Research and Developmen t.  Within that framework the level of support
for any individual project is determined by the DTI, based upon the recommendation of an advisory
committee or of the Energy Technology Support Unit (ETSU), the Department’s contractor.
Information generated by the programme is widely disseminated.G/SCM/Q2/EEC/19
Page 37
Use of Discretionary Resources by Training and Enterprise Councils (TECs) In Wales
Q25. How is the total amount and type of assistance (i.e., grant, loan) each project receives
determined under this programme?
Reply
TECs use their discretionary resources to provide training to support local objectives.  These
objectives are focused upon promoting the diversification of economic activity in areas of Wales
which have been subject to high levels of structural unemployment and social deprivation for many
years as a result of the decline of the traditional industries of coal mining, steel production and hill
farming.  Assistance is provided to both indi genous enterprises and inward investors often in
conjunction with other forms of assistance from other agencies and, of course, subject to national
Government expenditure limits and EC regional aid ceilings.  Within this, TECs specialise in support
for training or retraining programmes, particularly where this helps to reduce unemployment.
The TECs are required to use these resources solely on training, education and enterprise
support activities which further the objectives of their agreed Corporate and Business Plans.  The
level of aid to be provided is decided by individual TEC Boards, within the resources available to
them.  It is dependent upon the type of project which is to be assisted and the TEC’s priorities for their
area.  Utilisation of the funds is subject to agreement with the National Assembly for Wales.  In many
cases assistance provided by the TECs will not constitute aid since the prime beneficiaries will beindividuals and not companies.  Assistance is characteristically  grant payment made on evidence of
planned activity having been undertaken.
Within assisted areas, aid is provided to firms of any size within EC regional aid ceilings.
Outside assisted areas assistance is restricted to businesses which fall within the EC guidelines onstate aids to SMEs and the aid ceilings set out in that guidance.  Where aid is provided from more than
one TEC and/or as part of a package of assistance from a number of sources the National Assembly
for Wales ensures that cumulative support does not exceed EC aid ceilings.
Fisheries Subsidies
Q26. Please provide the background and the authority that authorizes the following
programmes:
* Grants Towards the Acquisition of Freshwater Fishing Vessels and Engines (NI)
* Grants Towards Fish Farming (Northern Ireland)
* Highland Prospect Limited: Fish Processing and Fish Farming Loans
* Highland Opportunity Limited: Fishing Vessel, Fish Processing and Fish Farming
Loans
* Safety Improvements on Fishing Vessels
* The Borders Enterprise Fisheries Aid Programme
Reply
1. Grants Towards the Acquisition of Freshw ater Fishing Vessels and Engines (NI)
The purpose of the aid is to encourage the modernisation of the freshwater fishing fleet and to
sustain the local boat building industry.  In 1998/99 the amount of aid totalled £10,000.  The
programme is operated by the Department of Agricu lture for Northern Ireland.  Statutory authority is
given by the Fishing Vessels (Grants) Act (Northern Ireland) 1967 and subordinate legislation.G/SCM/Q2/EEC/19
Page 38
2. Grants Towards Fish Farming (Northern Ireland)
The purpose of the aid is to encourage the establishment of fish farms and hatcheries which
supply fish for the table. The scheme assists the trout and salmon farming industry and encourages the
development of mariculture, e.g. oysters and mussels.   In 1998/99 the amount of aid totalled £97,500.
The programme is operated by the Department of  Agriculture for Northern Ireland.  Statutory
authority is given by the Fish  Industry Act (N orthern Ireland) 1972 and subordinate legislation.
3. Highland Prospect Limited: Fish Processing and Fish Farming Loans
The purpose of the aid is to assist the limited financial capacity of SMEs trading as fish
processing and fish farms, thereby supporting sustainable regional development opportunities and
related employment, particularly in peripheral locations.  In 1998/99 the amount of aid totalled about£235,000.  The programme is operated by Highland Prospect Limited, a Company wholly owned and
managed by The Highland Council.
4. Highland Opportunity Limited: Fishing Vessel,  Fish Processing and Fish Farming Loans
The purpose of the aid is  to assist the limited financial capacity of SMEs trading as fishing
vessels, fish processing and fish farms, thereby supporting sustainable regional developmentopportunities and related employment, particularly in peripheral locations. In 1998/99 the amount of
aid totalled £68,000.  The programme is operated by Highland Opportunity Limited, the Enterprise
Trust for Highland Region.
5. Safety Improvements on Fishing Vessels
The purpose of the aid is to enable applicants to  install essential safety equipment in order to
obtain a Maritime and Coastguard Agency safety certificate.  In 1998/99 the amount of aid totalled
£305,000.  The programme is operated by the Sea Fish Industry Authority on behalf of  UK Fisheries
Ministers. Statutory authority is given by the Fisheries Act 1981 and subordinate legislation.
6. The Borders Enterprise Fisheries Aid Programme
The purpose of the aid is to provide the requisite level of matching member state to allow
eligible projects to be considered for aid under the  EU PESCA Initiative.  The Programme was set upto address specific issues within the local industry - product quality is the issue currently being
supported.  Assistance is available for:
Schemes which will improve the quality of all aspects of the fish industry  including fish
handling, grading, selling and processing.
Finding new markets for fish products, the fish processing industry and services provided by
ancillary trades.Studies into the opportunities for the fishing of new species; the potential for  increasing
shellfish production; the future prospects of the fishing industry etc.
Support schemes for trade promotions, marketing, exhibition and events etc.
Educational initiatives aimed at maintaining the supply of the labour force and increasing
the awareness of the opportunity for employment in the fishing industry in the context ofenterprise awareness training.
Support to assist firms in accessing the capital market for investment purposes.
Small scale infrastructure projects in support of the fishing sector.G/SCM/Q2/EEC/19
Page 39
In 1998/99 the amount of aid totalled £5,000.  The programme is operated by Scottish Borders
Enterprise. Statutory authority is given by the Enterprise and New Towns (Scotland) Act 1990.
Industrial Development Board- Selective Financial Assistance
Q27. How is the total amount and type of assi stance (i.e., grant, loan, shares) each project
receives determined under this programme?
Reply
Selective Financial Assistance (SFA) is the principal scheme of assistance operated by the
Industrial Development Board for Northern Ireland (IDB ).  It is a State Aid approved by the European
Commission.
A company seeking support from IDB for an investment project – whether a new inward
investment or an expansion of an existing operation in NI - is required to prepare a detailed business
plan.  This is subjected to a comprehensive evaluation by IDB and, where appropriate, an offer ofassistance is made which may incorporate a number of the various forms of support which fall within
the overall SFA scheme.
The type of assistance offered will be determined by the nature of the project and will be
individually negotiated with the company concerned, as will the level of support proposed by IDB.  Inevery case, in pursuing these negotiations IDB will seek to ensure that the assistance offered is the
minimum required to secure the project, thereby representing the greatest value for money in relation
to public funds.
The Borders Enterprise Fisheries Aid Programme
Q28. How is the total amount and type of assistance (i.e., grant, loan) each project receives
determined under this programme?
Reply
Proposals will be considered on their merit a nd on the fit with EU, PESCA (See Page 55 of
the EC’s new and full notification)and State Aid criteria.  The aim is to improve quality and add value
and, to fit with conservation measures, proposals must not increase fishing effort.
A limit of £40,000 was agreed for this programme.  Aid will be in the form of grants or loans,
the level being variable.  To date only a small proportion, around £5,000 in grant, has been utilised.This has been in support of a PESCA-funded scheme  to assist local vessel owners and processors to
improve quality of produce through modifications t o, and introduction of, equipment on vessels and in
processors’ premises.
We are also aware of the following programmes and measures in the United Kingdom
that may meet the notification requirements referenced above.  Please explain why the
European Communities/Government of the Unit ed Kingdom determined that the following
measures or activities did not fall within the notification requirements of GATT Article XVI:1
and Article 25.5 of the Agreement on Subsidies and Countervailing Measures.  Please provide
full notifications of the programmes listed.
Q29. Regional Development Grants- Under Industry Act of 1972 and Industry Development
Act of 1982.G/SCM/Q2/EEC/19
Page 40
Reply
Regional Development Grants are no longer in existence; the scheme ended on
31 March 1988.
Q30. National Loan Fund-section 3 of the Iron and Steel Act of 1981
Reply
The National Loan Fund is the channel through which pass all the UK Government’s borrowing
requirements, and as such is not an individual aid scheme.G/SCM/Q2/EEC/19
Page 41
ANNEX to EC section, question 4
Full text of Regulation 2085/93
COUNCIL REGULATION (EEC) No 2085/93
of 20 July 1993amending Regulation (EEC) No 4256/88 laying dow n provisions for implementing Regulation (EEC)
No 2052/88 as regards the European Agricultural Guidance and Guarantee Fund (EAGGF) Guidance
Section
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community, and in particular
Article 43 thereof,
Having regard to the proposal from the Commission
1,
Having regard to the opinion of the European Parliament2,
Having regard to the opinion of the Economic and Social Committee3,
Whereas the Council adopted Regulation (EEC) No 2081/934 amending Regulation (EEC)
No 2052/88 on the tasks of the Structural Funds and their effectiveness and on co-ordination of their
activities between themselves and with the operations of the European Investment Bank and the otherexisting financial instruments
5;
Whereas the Council adopted Regulation (EEC) No 2082/936 amending Regulation (EEC)
No 4253/88 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards co-
ordination of the activities of the different Structural Funds between themselves and with the
operations of the European Investment Bank and the other existing financial instruments7;
Whereas, as a result of the amendments to the aforementioned Regulations and to take account of the
experience acquired, Council Regulation (EEC) No 4256/88 of 19 December 1988 laying down
provisions for implementing Regulation (EEC) No 2052/88 as regards the European Agricultural
Guidance and Guarantee Fund (EAGGF) Guidance Section8 should be amended;
Whereas the accompanying measures for agri-environment, afforestation and early retirement adoptedunder the reform of the common agricultural policy (CAP) are to be financed in future by the EAGGF
Guarantee Section;
Whereas the list of measures eligible under Objectives 1 and 5(b) should be revised on the basis of
experience and having regard to the need for rural development to be based also on non-agricultural
activities and on multiple activities by farmers of either sex, to reverse the trend towards the economic
and social decline and depopulation of the countryside, strengthening, in particular, measures to
promote local products and non-polluting forms of agriculture, horticulture and livestock-farming,prevent natural disasters, renovate villages and protect and conserve the rural heritage;
Whereas, within the context of its contribution to achieving Objective 1 and Objective 5(b) the Fund
should be able to finance measures for sustainable development of the rural environment, including
developing and strengthening agricultural and fore stry structures which use methods and techniques
that respect the environment; whereas the Fund should also be able to finance the encouragement oftourist and craft investments, including the improvement of living accommodation on agricultural
holdings and in the countryside;
Whereas the scope of Article 8 of Regulation (EEC) No 4256/88 should be extended to incorporate
rural development more effectively in measures carried out under that Article and to strengthen
measures relating to information and the dissemination of knowledge;
                                                     
1 OJ No C 131, 11. 5. 1993, p. 6.
2 Opinion delivered on 14 July 1993 (not yet published in the Official Journal).
3 OJ No C 201, 26. 7. 1993, p. 52.
4 See page 5 of this Official Journal.
5 OJ No L 185, 15. 7. 1988, p. 9.
6 See page 20 of this Official Journal.
7 OJ No L 374, 31. 12. 1988, p. 1.
8 OJ No L 374, 31. 12. 1988, p. 25.G/SCM/Q2/EEC/19
Page 42
Whereas measures relating to the fisheries sector are the subject of a specific regulation and no longer
fall within the scope of this Regulation,
HAS ADOPTED THIS REGULATION:
Article 1
Articles 1 to 11 of Regulation (EEC) No 4256/88 are hereby replaced by the following:"Article 1
1. The Guidance Section of the European Agricultural Guidance and Guarantee Fund, (hereinafter
called & the Fund , ), may finance measures for performing the tasks referred to in Article 3 (3) of
Regulation (EEC) No 2052/88 in order to attain Objectives 1, 5(a) and 5(b) as set out in Article 1 of
that Regulation, with the exception of measures under Objective 5(a) which concern fisheries
structures, in accordance with the criteria and objectives set out in this Regulation.
2. The conditions and criteria laid down in Regulation (EEC) No 4253/88 shall apply to measuresfinanced under this Regulation, unless this Regulation of provisions adopted under Article 2(1)
thereof specify otherwise.
TITLE I
Speeding up the adjustment of agricultural structures in the framework of the reform of the common
agricultural policy(Objective 5(a))
Article 2
1. The Fund may finance common measures decided on by the Council in accordance with the
procedure provided for in the third subparagraph of Article 43 (2) of the Treaty, in order to speed up
the adjustment of agricultural structures, in particular in the framework of the reform of the commonagricultural policy.
2. The common measures referred to in paragraph 1 may concern in particular:
where their financing is not provided for under the EAGGF Guarantee Section, market policy
accompanying measures contributing to re-establishing balance between production and market
capacity,
• measures to support farm incomes and to maintain viable agricultural communities in
mountain, hill or less-favoured areas by means of agricultural aid such as compensation forpermanent natural handicaps,
• concrete measures to encourage the installation of young farmers of either sex,
• measures to improve the efficiency of the structures of holdings, especially investments aimed
at reducing production costs, promoting quality, improving the living and working conditionsof farmers of either sex and of their spouses whose major activity is on the farm, promoting
the diversification of their activities, including the production of non-food agriculturalproduce, improving animal health conditions, livestock-farming hygiene and animal welfare,
as well as preserving and improving the natural environment,
• measures to improve the marketing, including the marketing of produce at the farm, and the
processing of agricultural and forestry products, and to encourage the establishment ofproducers' associations,
• measures to encourage assistance to farmers of either sex and for the creation of groupings
with a view to improving production conditions.
3. The common measures which are applicable at present in the field covered by this Title shall
remain in force until they are adjusted pursuant to Article 11a.
TITLE II
Promoting rural development and the structural adjustment of regions whose development is lagging
behind
(Objective 1)
Article 31. Within the context of its contribution to achieving Objective 1 referred to in Article 1 of Regulation
(EEC) No 2052/88, the Fund may finance measures for sustainable development of the ruralG/SCM/Q2/EEC/19
Page 43
environment, including developing and strengthening agricultural and forestry structures, and for
maintaining, enhancing and restoring the landscape.
2. Fund assistance for regions designated under Objective 1 shall comprise, in particular, measures
intended to deal with the backwardness of agricultural structures.
Article 4Fund assistance for the measures referred to in Article 5 shall in the main take the form of operational
programmes, including an integrated approach, and global grants.
Article 5
Financial assistance by the Fund may, in addition to the measures provided for in Article 2, relate in
particular to the following measures:
(a) the conversion, diversification, reorientation and adjustment of production potential, including the
production of non-food agricultural products;(b) promotion, quality labelling and investment for quality local or regional agricultural and forestry
products;
(c) if their financing is not ensured by the ERDF in a Community support framework and while
respecting the tasks of the Funds as set out in Article 3 (3) of Regulation (EEC) No 2052/88:
- the development and improvement of rural infrastructure linked to agricultural and forestrydevelopment,
- measures to achieve diversification, especially those providing multiple activities or alternative
incomes for farmers of either sex,
- the renovation and development of villages and the protection and conservation of the rural heritage;
(d) re-parcelling, in conditions compatible with preservation of the countryside and the naturalenvironment of farming and forestry holdings, and associated work, in compliance with the legislation
of the Member State;
(e) individual or collective land or pasture improvement;
(f) irrigation, including the renovation and improvement of irrigation networks and small reservoirs
with a particular view to a more rational use of water; the creation of collective irrigation works fromexisting main channels and the creation of small irrigation systems not supplied from collective
networks; and the renovation and improvement of drainage systems;
(g) encouragement for tourist and craft inve stment, including the improvement of living
accommodation on agricultural holdings;
(h) restoring agricultural and forestry production potential damaged by natural disasters, and the
introduction of appropriate prevention instruments, especially in the outermost areas particularly at
risk from such disasters;(i) where their financing is not provided for under the accompanying measures adopted under the
reform of the common agricultural policy;
- the development and exploitation of woodla nds under the conditions laid down by Council
Regulation (EEC) No 1610/89 of 29 May 1989 laying down provisions for implementing Regulation
(EEC) No 4256/88 as regards the scheme to develop and optimally utilise woodlands in rural areas inthe Community
9,
- protection of the environment, maintenance of the countryside and restoration of landscapes;
(j) development of agricultural and forestry advisory services and improvement of agricultural and
forestry vocational training;
(k) financial engineering measures for agricultural and forestry businesses and for businesses for theprocessing and marketing of agricultural and forestry products;
(l) measures in the area of agricultural and forestry technological research and development.
                                                     
9 OJ No L 165, 15. 6. 1988, p. 3.G/SCM/Q2/EEC/19
Page 44
TITLE III
Promoting rural development in the areas covered by Objective 5(b)
Article 6
Fund assistance for the measures referred to in Article 7 shall in the main take the form of operational
programmes, including an integrated approach, and global grants and cover one or more of themeasures referred to in Article 5.
Article 7
Without prejudice to the particulars referred to in Article 11a (5) of Regulation (EEC) No 2052/88
and Article 5 of Regulation (EEC) No 4253/88, rural development plans shall include an identification
of the problems of agricultural structures at a relevant geographical level. As a general rule, these
plans shall last six years and may be updated annually.
TITLE IVGeneral and transitional provisions
Article 8
In achieving the tasks set out in the second subparagraph of Article 3 (3) and as part of the assistance
referred to in Article 5 (2) (e) of Regulation (EEC) No 2052/88, the Fund may devote up to 1 per cent
of its annual budget to financing:- preparatory, ex ante appraisal, monitoring, ex post evaluation and information measures, including
technical assistance measures and general studies,
- pilot projects for adjusting agricultural and forestry structures and promoting rural development,
- demonstration projects, including projects for developing and exploiting forests and projects for
processing and marketing agricultural products, to show the real possibilities of systems, methods andtechniques of production and management which are in accordance with the objectives of the
common agricultural policy,
- the measures needed for the circulation, at Co mmunity level, of the knowledge, experience and
results of the work on rural development and improving agricultural structures.
Measures implemented on the initiative of the Commission may be financed, exceptionally, at the rateof 100 per cent; those implemented on behalf of the Commission shall be financed at the rate of
100 per cent. For other measures, the rates given in Article 13 of Regulation (EEC) No 2052/88 shall
apply.
Article 9
Where appropriate and through procedures suitable to each policy, Member States shall supply the
Commission with information concerning compliance with Article 7 (1) of Regulation (EEC) No
2052/88.Article 10
Those portions of the sums committed for the granting of assistance in respect of projects decided on
by the Commission before 1 January 1989 under Regulations (EEC) No 17/64
10, (EEC) No 355/7711,
(EEC) No 1760/7812, (EEC) No 269/7913, (EEC) No 1938/8114, (EEC) No 1941/8115, (EEC)
No 1943/8116, (EEC) No 2088/8517 and (EEC) No 3974/8618 which have not been the subject of a
request for final payment by 31 March 1995 shall be automatically released by the Commission by 30
September 1995 at the latest, without prejudice to those projects which are subject to suspension for
judicial reasons.
                                                     
10 OJ No 34, 27. 2. 1964, p. 1586/64.
11 OJ No L 51, 23. 2. 1977, p. 1.
12 OJ No L 204, 28. 7. 1978, p. 78.
13 OJ No L 38, 14. 2. 1979, p. 1.
14 OJ No L 197, 20. 7. 1981, p. 1.
15 OJ No L 197, 20. 7. 1981, p. 13.
16 OJ No L 197, 20. 7. 1981, p. 23.
17 OJ No L 197, 27. 2. 1985, p. 1.
18 OJ No L 370, 30. 12. 1986, p. 9.G/SCM/Q2/EEC/19
Page 45
Article 11
Regulation (EEC) No 729/70, with the exception of Article 1 (1), (2) and (3), shall not apply as
regards the Fund, subject to the implementation of Article 15 of Regulation (EEC) No 2052/88 and
Article 33 of Regulation (EEC) No 4253/88.
Article 11aWithout prejudice to Article 33 of Regulation (EEC) No 4253/88, with a view to achieving the
objectives referred to in Regulation (EEC) No 2052/88 and in the light of the rules laid down by
Regulation (EEC) No 2052/88 and (EEC) No 4253/88 and of this Regulation, the Council, acting on a
proposal from the Commission in accordance with the procedure laid down in Article 43 of the
Treaty, shall decide by 31 December 1993 on the adjustment of the Common measures financed
under Article 2 of this Regulation."
Article 12This Regulation shall enter into force on the third day following its publication in the Official Journal
of the European Communities.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 20 July 1993.
For the CouncilThe President
W. CLAES
__________