. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/W/431
12 March 2001
(01-1175)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
IMPLEMENTATION-RELATED ISSUES REFERRED TO THE COMMITTEE
IN THE GENERAL COUNCIL'S DECISION OF 15 DECEMBER 2000
Discussion Paper Submitted by Cuba, Do minican Republic, Egypt, Honduras, India,
Indonesia, Malaysia, Pakistan, Tanzania, Uganda and Zimbabwe
The following communication, dated 9 March 2001, has been received jointly from the
Permanent Missions of Cuba, the Dominican Republ ic, Egypt, Honduras, India, Indonesia, Malaysia,
Pakistan, Tanzania, Uganda and Zimbabwe.
_______________
Technical Paper on the Proposal regarding Article 27.6 of the SCM Agreement and the
possibility to establish export competitiveness on  the basis of  a period longer than two years
1. We are grateful to the Chairman of the WTO Committee on Subsidies and Countervailing
Measures for inviting concrete written submissions on the issues regarding Article 27.6 of the SCM
Agreement.  We look forward to the following proposal to be given immediate and favorable
consideration by the Committee in order to address the genuine concerns of the developing countries
to strengthen their industrial sectors.
2. Article 27.6 of the SCM Agreement provides for that “Export Competitiveness in a product
exists if a developing country Member’s exports of that product have reached a share of at least
3.25 per cent in world trade of that product for two consecutive calendar years”.  Such a “competitive
need test” shall be based on either the notification by the developing country member having reached
export competitiveness, or a computation undertaken by the WTO Secretariat at the request of anyMember.  For this purpose, a product is defined as a section heading of the HS (i.e. four-figure
number).
3. Nevertheless, the period of two years established in paragraph 6 of Article 27 of the SCM
Agreement, is not sufficient to determine the export competitiveness of a developing country,
specially in view of the volatility of the internationa l market (i.e. international financial crisis, raise of
the prices of petroleum, etc.) and the vulnerability of  the developing countries to external  influences,
such as natural disasters.  It is necessary to extend this period to 5 years, which would  be a reasonable
time frame to guarantee that a developing country has reach a situation of export competitiveness in a
given product.
4. Besides,  there is no explicit provision in the Agreement for automatic inclusion if later on the
export share of a country falls below the 3.25 per cent level, such as the situation in which the East
Asian countries that have experienced due to the financial crisis. There should be an automatic
inclusion provision so as to enable developing countries to reintroduce export subsidy once the share
of their export of a product decreases to a level below 3.25 per cent in world trade of that product.G/SCM/W/431
Page 2
5. Finally, the Committee shall propose to the General Council to reach an Understanding based
on paragraph 2 of Article IX of the Marrakesh Agreement establishing the World Trade Organization,
in order to take into account the above concerns.
Draft Decision
Understanding on Article 27
of the Agreement on Subsidies and Countervailing Measures
Decision of []
The General Council,
Having  regard to paragraph 2 of Article IX of the Marrakech Agreement establishing the World Trade
Organization;
Taking into account paragraph 8 and 9(a)(i) of the Geneva Ministerial Declaration; the General
Council Decision of 3 May 2000; and the General Council Decision of 22 June 2000;
Considering  that developing countries do at times need  to provide subsidies to encourage the growth
and export potential of their domestic industries;
Considering  that the Committee on Subsidies and Countervailing measures concluded that the period
of two years established in the paragraph 6 of Article 27 of the Agreement on Subsidies and
Countervailing Measures is not sufficient to de termine the export competitiveness of a developing
country, specially in view of the volatility of the international market;
Considering that the Committee on Subsidies and Countervailing measures concluded that there
should be a provision for automatic inclusion so as to enable developing countries to reintroduce
export subsidy once the share of their export of a product decreases to a level below 3.25 per cent in
world trade of that product.
Decides the following understanding:
1. The Period established in the paragraph 6 of Article 27 shall be deemed to be 5 consecutive
years.
2. Developing Countries shall be allowed to reintroduce export subsidies to a given product once
their share of the exports of that product decreases to a level below 3.25 per cent in world trade.
3. Members hereby agree to fully and faithfully adhere to this understanding.
__________