RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/USA/21
10 May 1999
(99-1914)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by the EUROPEAN COMMUNITY1 and CHILE2
Regarding the New and Full Notification of the UNITED STATES3
The following communication, dated 30 April 1999, has been received from the Permanent
Mission of the United States.
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ADDITIONAL QUESTIONS FROM THE EUROPEAN COMMUNITY
On page 71 of the above notification, four subsidy programmes have been notified by
the State of Washington:  Fuel R&D (sales and use tax), Industrial Machinery and Equipment(sales and use tax), Industrial Machinery and Equipment (property tax), Industrial Fuels and
Raw Materials (property tax).
The Community would like to know why the following specific subsidies granted by
Washington State have not been notified in accordance with Article 25.
1. High Technology Business and Occupation Tax Credit Programme
The Department of Revenue offers a tax credit of up to $2 million for businesses that
perform research and development in selected  high technology areas. These are advanced
computing, advanced materials, biotechnology, electronic device technology and environmental
technology.
2. High Technology Sales and Use Tax Deferral/Exemption
Firms which start new R&D in the above area s, or which expand existing activity, are
eligible for a sales and use tax deferral or exemption.
3. Distressed Area Sales and Use Tax Deferral/Exemption
Certain firms which locate in specific geogr aphical areas are entitled to a deferral or
exemption of sales and use tax.
                                                     
1 G/SCM/Q2/USA/18 & G/SCM/Q2/USA/14
2 G/SCM/Q2/USA/19
3 G/SCM/N/38/USAG/SCM/Q2/USA/21
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4. Distressed Area Business and Occupation Tax Credit
Certain firms which locate in specific ge ographical areas are entitled to $2,000 credit
against Business and Occupation Tax for each new employment position created.
5. Washington State Job Skills Programme
Under this programme, the state covers half the cost of employee training in certain
firms.
Reply
These programmes were not included in the US notification because they had not come to our
attention in the course of our information-gathering or, possibly, because they formed part of - or
were earlier or later iterations of - programmes which were notified or others which were examined
and determined not to be within the scope of notification.  Assuming that such programmes exist and
are structured on the basis of the above descriptions, the United States would agree that at least someappear to warrant notification, e.g., those identified under items 3 and 4, and, potentially, items 1 and
2.  The Washington State Job Skills Programme might also warrant notification, but we would need to
learn more about the criteria governing the provision of such assistance.  The United States will
endeavour to look further into these activities with a view to including them in our 1999 updating
notification, if appropriate.
QUESTIONS FROM THE EUROPEAN COMMUNITY
In its replies to questions from the Europe an Community, circulated in G/SCM/Q2/USA/20 of
7 April, the United States indicated that it was still looking into the status of certain programmes
which had been included in previous US notifications under Article 25 of the Agreement, but for
which the relevant information had not been identifi ed in sufficient time to include in conjunction with
other notified programmes submitted for the new and full notification due in 1998
(G/SCM/N/38/USA).  The United States hereby prov ides, according to the agreed notification format,
additional information on certain programme s that had been reported in previous notifications.
ENERGY AND FUELS
Title: Ion Transport Membrane Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
This programme is focused on the development of mixed conducting dense ceramic
membranes for the production of high purity oxygen, the partial oxidation of natural gas to synthesis
gas, and the separation of hydrogen from shifted synthesis gas to make clean fuels.
Background and authority
The programme is administered by The US De partment of Energy’s (DOE’s) Office of Fossil
Energy’s Federal Energy Technology Center.  Legislative authority for the programme derives fromG/SCM/Q2/USA/21
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the Federal Nonnuclear Energy Research and Development of Act of 1974 and section 1302 of the
Energy Policy Act of 1992.
Form
Participation in the programme is largely accomplished through cooperative agreements and
Field Work Proposals (FWP).
To whom and how assistance is provided
In addition to direct support of National Laboratories, cooperative agreements resulting from
both competitive and non-competitive procurement procedures have been signed with consortiaconsisting of major industrial organizations, universities, small business, and non-profit institutions.
Amount
The amount budgeted for this programme in fiscal year 1998 was $4.6 million.
Duration
Various smaller projects have been underway since 1992 that have led to the larger
development efforts currently in progress.  The projects consist of various phases with key decisionpoints regarding continuation with subsequent phases.  Continuation of the projects is contingent upon
ongoing annual appropriations by the US Congress and the successful completion of each phase by
the R&D teams.
Trade effects
Because of the high technical and economic risks associated with the development of these
membranes, it is not possible at this time to determine what, if any, trade effects may result from this
programme.
Title: The Advanced Turbine System Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
Gas turbines are used to drive electrical generators, in cogeneration systems or as mechanical
drives for large pumps or other devices requiring big prime movers.  The goal of the Advanced
Turbine System programme is to develop and demonstrate several ultra-high efficiency andenvironmentally safe turbine systems for manufacturing and utility industry applications.  These
systems will be significantly more efficient than current engines while cutting exhaust emissions
dramatically.  They will produce electricity costing 10 per cent less at the bus bar (i.e. prior to
transmission).  Advancements in engine system and component design will be integrated with the use
of advanced materials and military aircraft technology.  The efficiency goal for the utility class gasturbine is 60 per cent (from 54 per cent in 1992) fo r combined cycle; for the industrial turbine, an
improvement of 15 per cent (from the high 20 per cent range) is sought over current models.
Emissions of nitrous oxides, carbon monoxide and unburned hydrocarbons are to be reduced to less
than 10 parts per million, compared to current levels of typically 50 or more parts per million.G/SCM/Q2/USA/21
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Reliability, maintenance and availability factors - of primary concern to purchasers - are to be
equivalent to or exceed current standards.
Background and authority
The Advanced Turbine System programme is administered jointly by DOE’s Office of
Energy Efficiency and Renewable Energy and the Office of Fossil Energy.  Its legislative authority
stems from Title XXI, Section 2112 of the Energy Policy Act of 1992.
Form
Grants and cooperative agreements resulting from a competitive procurement process.
To whom and how assistance is provided
Participation in the programme is determined through a system of competitive procurements
involving turbine manufacturers with domestic operations and their suppliers, universities, researchinstitutes and national laboratories.
Amount
The amount budgeted for the fiscal year 1998 totalled $45 million.
Duration
This programme was launched in 1992, and is expected to be completed by the year 2000.
Trade effects
In light of the scope and nature of the R&D activities being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
Title: The Coal Research and Development Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The general policy objective of this programme is to accelerate the commercialization of
clean coal technologies that will enable the use of coal as a secure, low-cost domestic energy source
while meeting environmental quality requirements.  The various kinds of technologies beingresearched under this programme involve coal liquefaction, heat engines, magnetohydrodynamics,
control technology, coal preparation, fuel cells, surface coal gasification and underground coal
gasification.
Background and authority
The programme is administered by the DOE’s Office of Fossil Energy.  Legislative authority
for the programme stems from Title XIII of the Energy Policy Act of 1992.G/SCM/Q2/USA/21
Page 5
Form
Participation in the programme is achieved larg ely through contractual agreements involving
the transfer of funds and/or cost-sharing agreements pooling financial and in-kind resources by the
government and industry partners.
To whom and how assistance is provided
Assistance is provided through a competitive procurement system which has involved
equipment manufacturers and developers (including foreign companies); utilities, architecture and
engineering companies; environmental companies; and nine universities.
Amount
The amount budgeted in fiscal year 1998 for this programme came to $107.4 million.
Duration
The programme predates the establishment of the DOE in 1978 and, while it is not subject to
any fixed completion date, its continuation is cont ingent upon ongoing annual appropriations by the
Congress.
Trade effects
It is not possible to determine what, if any, trade effects may ever result from the transfer of
technology effectuated under this programme.
Title: The Fuel Cell for Stationary Applications Programme
Period covered by the notification
The period covered is the fiscal year 1998.
Policy objective and/or purpose
The central purpose of the programme is to promote research into and development of fuel
cells which would ultimately lead to industry commercialization of stationary fuel cell power plants.
Background and authority
The programme is administered by the DOE’s Office of Fossil Energy.  Its legislative
authority derives from the Energy Policy Act of 1992.
Form
Programme participation is largely achieved through government/industry cost-shared
cooperative agreements.G/SCM/Q2/USA/21
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To whom and how assistance is provided
Assistance was provided to a variety of major industrial firms within the energy sector
through competitive procurement procedures based on selection factors which address technical
qualifications, commercialization plans and cost-sharing arrangements.
Amount
The amount budgeted for this programme in fiscal year 1998 reached $40.2 million.
Duration
The programme was preexisting as of the establishment of the DOE in 1978, and is projected
to extend until the year 2000.
Trade effects
In light of the scope and nature of the R&D activities being assisted, it is not possible to
determine what, if any, trade effects may ever result from this programme.
QUESTIONS FROM CHILE
In reviewing the US notification, Chile would like to know why the United States has not
notified the following programmes:
- Finance Authority of Maine (FAME): issues Industrial Development Bonds to provide
tax-exempt financing for private businesses within the state.
- FAME: Secondary Market Tax-Exempt Bonds (SMART-E), designed to provide lower
cost financing for the construction of new industrial or manufacturing plants.
- FAME: Maine Veterans Small Business Loan Insurance Programme: Provides
guarantees for up to 85 per cent of private loans.
- FAME: Natural Resources Entrants Guarantee Programme: FAME guarantees up to
90 per cent of the loan amount for business endeavours engaged in producing,
harvesting, manufacturing, processing, storing, packaging, or marketing agricultural,
forestry, fishing, aquaculture, and related goods.
- Bureau of Taxation, Maine Department of Finance: small business investment
companies having business operations primar ily in Maine are exempt from the state's
corporate income tax.
- FAME: Maine Seed Capital Tax Credit Programme: FAME sponsors this programme,
which provides a 30 per cent tax credit to private equity investors in Maine small
businesses.
- Maine Agriculture Marketing Loan Fund: A joint programme of the US Department of
Agriculture and FAME designed to invest a minimum of $6 million in resource based
businesses, including aquaculture.G/SCM/Q2/USA/21
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Reply
The Finance Authority of Maine, or FAME, is the state of Maine's business & higher
education finance agency. FAME was established in 1983 as Maine's business finance agency. In that
role, the Authority is charged with supporting th e start up, expansion and growth plans of Maine's
business community by working closely with Maine's lending community to improve access to capital
as well as to help fill gaps that exist in the state's capital delivery system.
In April of 1990, FAME's mission was significantly expanded when it assumed responsibility
for administering the state's higher education finance programmes.  Through a variety of loan, grant
and scholarship programmes, FAME helps Maine students and families meet the costs associated with
higher education. To aid in this important effort, the Finance Authority of Maine also oversees anextensive outreach and counselling programme that is designed to encourage young people to aspire
to and pursue higher education.
In furtherance of these missions, FAME works closely with the state's higher education,
banking, economic development and business communities in the development and implementation offinancial services and programmes that help to fill gaps that exist in Maine's capital delivery system.
FAME offers a wide array of business assistance programmes, ranging from traditional loan guarantee
programmes for both small and larger businesses, to tax credits for investments that individuals make
in dynamic, growth oriented firms.  The Finance Authority has also established taxable and tax
exempt bond financing programmes that allow strong creditworthy firms in Maine to access capital atfavorable rates and terms.
At the time that the 1998 US notification was being compiled, these activities had not come to
our attention.  While we agree that they merit examination for possible notification, we would also
observe at this stage that many of these programmes (e.g . the bond and small business financing
activities) may well be non-specific within the jurisdic tion of Maine.  The United States will examine
these and any similar programmes which may come to our attention closely as we prepare our
updating notification for 1999.
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