WORLD TRADE
ORGANIZATIONG/STR/W/39
13 February 2003
(03-0927)
Working Party on
State Trading Enterprises
NOTIFICATION OF STATE TRADING ENTERPRISES
Note by the Chairman
1. Members will recall that during the last regular meeting of the Working Party on State
Trading Enterprises, held on 19 November 2002, when dealing with agenda item B - Review of New
and Full and Updating Notifications Submitted by  Members Under G/STR/N/3 to 8, I expressed the
view that the situation regarding notifications by Members was of great concern as it seemed that the
situation might seriously undermine the ability of the Working Party to carry out one of its mainfunction, namely the review of Members' notifications, in the light of which the Council for Trade in
Goods may make recommendations with regard to the adequacy of notifications and the need for
further information to be provided.
1
2. As compliance with the notification obligations continues to be extremely poor and seems to
be deteriorating with every new cycle of notifications, I noted that the Working Party was now in asituation in which the vast majority of Members, including some of the major trading countries, have
not made a new and full notification under the requests that were issued in 1998
2 and 20013  Even if
Members were complying with their notification obligations, it seemed that it was in many instances
done with a significant delay.  Furthermore, the tardiness of the notifications, when they were made,
greatly reduced the usefulness of the information notified and might remove any incentives for those
few Members who do notify on time, to continue to do so.
3. I also noted another development of concern, in that either no questions or only a very limited
number of questions were asked, regarding those noti fications that were submitted.  This development
could only be interpreted either as Members being satisfied with the inform ation provided in the
notification, or Members not having the required level of interest in the notification review process.
4. Members will also recall that the problem of compliance with notification obligations is not
unique to the area of state trading enterprises and that Ministers, in the context of the SingaporeMinisterial Meeting of 1996, directed relevant bodies to "take appropriate steps to promote full
compliance while considering practical proposals for simplifying the notification process."
4
5. It was in light of these developments, and with the Singapore Ministerial Declaration in mind,
that I suggested that the Working Party undertake a process of identifying the problems with
compliance with the notification obligations and exploring possible options to address the issue, andthat the informal meeting of the Working Party on 18 February 2003 was convened, as a first step in
the process.
                                                     
1 G/STR/M/12.
2 G/STR/N/4.
3 G/STR/N/7.
4 WT/MIN(96)/DEC.G/STR/W/39
Page 2
6. In order to facilitate the discussions at the informal meeting scheduled for Tuesday,
18 February 2003, I have drafted this note, on my own responsibility.
I. THE NOTIFICATION OBLIGATION OF MEMBERS REGARDING STATE
TRADING ENTERPRISES
7. As Members are aware, one of the main goals of  the rules regarding state trading enterprises
first in GATT 1947, and subsequently in the WTO, was, and still is, to ensure transparency in the
activities of Member's state trading enterprises.  Accordingly, the obligation to notify state trading
enterprises can be found in Article XVII:4 of GATT 1994, and in paragraph 1 of the Understanding
on the Interpretation of Article XVII of GATT 1994 (the Understanding).  All Members of the WTO
are therefore subject to this notification obligation.  However, the specific rules regarding the
notification process were not elaborated upon in the GATT 1994 or the Understanding, but have been
laid out in different decisions by the GATT Contracting Parties and the WTO Members.  Theperiodicity of the notifications was first set forth in a decision by the GATT Contracting Parties
adopted on 9 November 1962.
5  In terms of this decision, Contacting Parties were to submit new and
full responses to a state trading questionnaire every third year, with updating notifications to be
submitted in the intervening years.
8. Following the adoption of the Marrakesh Agreement Establishing the WTO and the adoption
of the Understanding on the Interpretation of Article XVII of the GATT 1994, the Working Party on
State Trading Enterprises (the Working Party) was set up with the principal task of reviewing the
notifications on state trading.  The Council for Trade in Goods decided to continue the periodicity of
notifications decided in 1962, and set a deadline of 30 June 1995 for submission of the first state
trading enterprise notification under the WTO.6  Therefore, new and full notifications were first
required from Members in 1995 and, subsequently, every third year thereafter, while updating
notifications are to be made in the intervening y ears.  Regarding the format for the notification, the
Understanding mandated the Working Party to review  the questionnaire format that was then in use
and which was adopted by the Contracting Parties on 24 May 1960.7  This questionnaire format was
used until the proposed revised questionnaire was submitted to and adopted by the Council for Tradein Goods on 2 April 1998.
8  This revised questionnaire is still in use today.
II. CURRENT STATE OF NOTIFICATIONS
9. The following table illustrates in a very graphic manner the status of notifications and how it
has been progressively deteriorating throughout the years:
                                                     
5 BISD 11S/58.
6 G/C/M/1.
7 BISD 9S/184-185.
8 G/STR/3.G/STR/W/39
Page 3
Notification Notifying
Members9Total number of
Members for the
period10Percentage of
notifying Members
New and Full Notification
(1995)
G/STR/N/159 108 55%
Updating Notification
(1996)
G/STR/N/232 108 30%
Updating Notification
(1997)
G/STR/N/333 108 31%
New and Full Notification
(1998)
G/STR/N/449 117 42%
Updating Notification
(1999)
G/STR/N/543 119 36%
Updating  Notification
(2000)
G/STR/N/640 124 32%
New and Full Notification
(2001)
G/STR/N/743 127 34%
Updating Notification
(2002)
G/STR/N/824 129 19%
10. The above table clearly shows a serious decline in compliance with the notification obligation
affecting new and full notifications and to a greater extent updating notifications.  With regard to new
and full notifications for the 1995 notification period, 55 per cent of Members complied with the
notification obligation.  This number declined to 42 per cent for the second round of new and full
notifications for 1998, and further declined to only 34 per cent in the latest round of new and fullnotifications in 2001.  Regarding updating notifications, compliance has never been very good and
has further deteriorated to the point that less than a fifth of the WTO Members have complied with
this obligation for the latest period.  Moreover, since the above table reflects the total number of
notifications for a particular period, no matter when it was notified, it fails to show the amount of late
notifications for a given period.
                                                     
9 The numerator and denominator used here reflect the fact that, for each notification obligation, the
European Communities submits a single notification that covers all 15 Member States.  The total membership of
the WTO (145 as of this note) includes the European Communities plus the 15 Member States.
10 See footnote 9 supra .G/STR/W/39
Page 4
11. The only conclusion one can reasonably reach, is that the notification obligation is being
honoured in a less than satisfactory manner by Members regarding state trading enterprises.
III. DISCUSSION POINTS
12. In light of the above, it might be prudent for the Working Party to consider possible options to
address this serious issue.  In order to facilitate its discussions and to stimulate debate, the WorkingParty might wish to discuss the following options, which are only indicative and not exhaustive, and
submitted on the Chairman's own responsibility.
(a) Review of the Questionnaire Format
As the current format has been in use by the Working Party since 1998, and seeing that it did
not result in an increase in the number of notifications compared to the number of
notifications when the 1960 format was used, Members might wish to reconsider improvingthe format itself.  If any Member or Members are experiencing any problems with the current
format, it might be helpful to the discussions if they could bring it to the attention of the
Working Party.  Likewise, if Members have any proposals on how the Questionnaire could be
improved, they are encouraged to do so during the informal meeting.
(b) Review of the Periodicity of Notification
Another option which the Working Party might wish to discuss, is reviewing the periodicity
of notifications.
In this context, the recent developments in the Committee on Subsidies and Countervailing
Measures, which was faced with a similar problem, might be relevant.
The Agreement on Subsidies and Countervailing Measures (SCM Agreement) contemplates a
system of subsidies notifications similar to that in place for notification of Article XVII state
trading enterprises.  Article 26 of the SCM Agreement provides that "[T]he [SCM]
Committee shall examine new and full notifications submitted under paragraph 1 of
Article XVI of GATT 1994 and paragraph 1 of Article 25 of this Agreement at specialsessions held every third year.  Notifications submitted in the intervening years (updating
notifications) shall be examined at each regular meeting of the Committee."
11  In 2001 the
SCM Committee faced with the problem of a lack of full compliance with subsidy
notification obligations, and after having disc ussed the issue on various occasions during
meetings of the SCM Committee and the Working Party on Subsidy Notifications, found a
solution in the form of a statement by the Chairman and a decision adopted by the SCM
Committee on 31 May 2001.12  In the Chairman's statement it was indicated that priority will
be given to the submission of new and full notifications every two years, and a de-
emphasizing of the review of the annual updating notifications in the alternative year.  At the
time when these actions were taken the Chairman also stated that the SCM Committee would
review in 2003 whether an intensified effort in respect of the new and full notifications was
effective in improving compliance.
It should be noted that, as stated above, the SCM Agreement contains a specific legal
provision regarding the periodicity of notifications in Article 26, and which could therefore
                                                     
11 This provision codifies into the SCMA the periodicity of notifications decided by the GATT
Contracting Parties in the 9 November 1962 Decision which covered both subsidy notifications under
Article XVI and state trading notifications under Article XVII.
12 G/SCM/M/30.G/STR/W/39
Page 5
not be changed.  The solution to the problem was therefore to de-emphasize the notification
obligation in the alternative year.  In the case of the state trading enterprises, no such a legal
provision exists, as the periodicity of notifications was not laid down in Article XVII of
GATT 1994 or in the Understanding, but derives from a decision of the Contacting Parties to
the GATT, which was subsequently carried over into the WTO by a decision of the Councilfor Trade in Goods.
13  Moreover, the decision of the Council for Trade in Goods provides that
"with respect to all future notifications, the Working Party itself would decide what deadlines
were appropriate."  Therefore, it appears that in  the context of the periodicity and deadlines for
notifications of state trading enterprises, the Working Party has considerable more leeway than
the SCM Committee to develop a solution to which may be conducive to an improvement in
compliance with the notification obligation.  A recommendation by the Working Party on the
periodicity of notifications could then be submitted for adoption by the Council for Trade inGoods.
__________
                                                     
13 G/C/M/1.