RESTRICTED
WORLD TRADE G/SCM/Q2/PAK/6
30May1997
ORGANIZATION(97-2274)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Replies toQuestions posed byARGENTINA1,
theEUROPEAN COMMUNITY2,JAPAN3andtheUNITED STATES4
Regarding theNewandFullNotification ofPAKISTAN5
Thefollowing communication, dated 27May1997, hasbeenreceived from thePermanent
Mission ofPakistan.
_______________
QUESTION RAISED BYARGENTINA
Could Pakistan specify whatthesubsidy programmes granted toelectricity andtoindustry
consist of,inaccordance withArticle 25.3oftheSubsidies Agreement (form ofsubsidy, purpose,
duration, statistical data, etc.)?
QUESTION RAISED BYTHE EUROPEAN COMMUNITY
Pakistan notified fourprogrammes which areavailable toPakistani industries. However,
thenotification islimited tothetotalexpenditure under eachprogramme. TheCommunity requests
afullnotification ofeachprogramme using thenotification format.
QUESTIONS RAISED BYJAPAN
- Dotheprogrammeswhichareincludedin"II.Industry"constituteanyprohibitedsubsidies
within themeaning ofArticle 3oftheSCM Agreement?
- That being thecase, could Pakistan explain ifthere isanyplan tophase outthe
programmes?
- Thatnotbeing thecase, could Pakistan explain thereason andprovide details ofeligibility
foreachprogramme?
QUESTION RAISED BYTHE UNITED STATES
Pakistan hasprovided monetary values foranumber ofsubsidy programmes, buthas
notprovided "sufficiently specific" information, asrequired under Article 25.3oftheWTO
Agreement onSubsidies andCountervailing Measures (e.g., information ontheform ofsubsidy,
1G/SCM/Q2/PAK/3,2G/SCM/Q2/PAK/2,3G/SCM/Q2/PAK/5,4G/SCM/Q2/PAK/4,5G/SCM/N/3/PAK.G/SCM/Q2/PAK/6
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subsidy perunit, policy objectives, andduration ofprogrammes). WillPakistan notify this
information?
Answer
InpursuanceofArticleXVI:1oftheGATT1994andArticle25.1oftheAgreementonSubsidies
andCountervailing Measures, Pakistan hasnotified thefollowing programmes intheinterest of
transparency. Pakistan believes thatthese programmes arenotsubsidies inthespecific sense. The
briefdescription ofeachofthese programmes isgiven below:
I. Agriculture
Subsidies onwheat
Wheat isastaple dietinPakistan. TheGovernment, therefore, intervenes tostabilize wheat
prices. There aretwomajor objectives ofsuchinterventions: (i)toprotect wheat farmers against
seasonal price fluctuations, and(ii)tosupply wheat toconsumers atrelatively lowprices. The
Government fixesthesupport price ofwheat eachyear. Thesupport price isaminimum guaranteed
price. However, theproducers arefreetoselltheirwheat inthelocalopenmarket. TheGovernment
agencies procure wheat fromproducers attheminimum guaranteed priceandincurincidental expenses.
TheGovernment agencies thenmake releases totheflourmillsatissueprice. Theissuepriceisbelow
thecostprice oftheGovernment. Hence thedifferential between thecostprice andtheissue price
isborne bytheFederal budget. Thisprogramme isjustified onthegrounds thatthewideprevalence
ofpoverty andmalnutrition makes atargeted subsidy difficult. Theonlywayistokeeptheprice of
wheat aslowascanbefiscally helped. TheGovernment plans tophase outthisprogramme overa
reasonable period oftime.
Subsidies onfertilizers andagricultural credit
Fertilizers areacostly input andthusrequires substantial outlays. Themajority ofPakistani
farmer ownsmallholdings oflessthanfivehectares andareresource poor. They hardly haveenough
cashtobuyfertilizers andhence theyarereluctant tousecostly fertilizers. Inorder therefore to
encourage fertilizer consumption inanadequate quantity, thesubsidy onphosphatic fertilizer ispaid.
However, thesubsidy onureafertilizers hasbeeneliminated andthesubsidy onphosphatic fertilizer
willbephased outinthefiscal year1996-97.
Thebudgetary subsidy onagricultural loans wasstarted in1991. Itis,infact,awaiver of
interest/mark-up toborrowers inorder toprovide relief intheevent ofanatural calamity andcannot
becategorized asasubsidy inthespecific sense.
Subsidies onelectricity
Thisprogramme cannot bedefined asabudgetary subsidy. Itisarevenue foregone. Itarises
fromthefactthatthetariff onelectricity supplied toagricultural tubewells isrelatively lowcompared
withother sectors oftheeconomy. Itiscalculated using thedifference between theweighted average
rateofelectricity supplied toagricultural tubewells andtheother sectors oftheeconomy.G/SCM/Q2/PAK/6
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II. Industry
Utility Stores Corporation ofPakistan
Thisprogramme denotes thedifferential ofmark-up paidbytheMinistry ofFinance tothe
Utility Stores Corporation andcannot beconstrued asasubsidy. Themain purpose ofthepayment
ofthedifferential mark-up totheUtility Stores Corporation bytheMinistry ofFinance istohelpthe
Corporation initsexpansion andmodernization programmes.