G/C/W/705
30 October 2014
(14-6312)  Page: 1/6
Council for Trade in Goods  Original: English
 
REQUEST FOR A WAIVER RELATING TO THE TRANSITIONAL PERIOD FOR THE 
ELIMINATION OF THE EXPORT SUBSIDY PROGRAM OF JORDAN 
The following submission, dated 27 October 2014, is being circulated at the request of the 
Delegation of Jordan. 
 
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 Pursuant to Article IX of the Marrakesh Agreem ent Establishing the World Trade Organization, 
Jordan hereby submits a request for a waiver to ex tend after the year 2015 the transitional period 
for the elimination of the Jordan Export Subsidy Program which in accordance with Article 27.4 of 
the Agreement on Subsidies and Countervailing Measures (SCM Agreement) and following the procedures for continuation of extension of this period, as adopted by the General Council Decision 
(WT/L/691 on 27 July 2007) which in turn granted an  extension of the transition period pursuant 
to Article 27.4 of the SCM Agreement program till the end of 2015.  
1  PURPOSE AND CIRCUMSTANCES OF THE REQUEST 
Background In compliance with the "procedures for continuation of extensions pursuant to Article 27.4 of the 
SCM Agreement of the transition period under Ar ticle 27.2(b) of the SCM Agreement for certain 
developing countries" (document WT/L/691), and with reference to document G/SCM/39 Jordan 
was granted an extension for the elimination of export subsidy program which take the form of partial or total exemption from income tax of profits generated from certain exports. 
 
Jordan was granted an extension for its export subsidy program not later than 31 December 2015, with no requests for extension beyond those foreseen pursuant to this Decision (WT/L/691, 
27 July 2007). 
 The decision was made in recognition that Jordan is a developing country Member, whose share of world merchandise export trade was not greater th an 0.10 per cent, and the total Gross National 
Income for the year 2000–as published by the Wo rld Bank–was at or below US$20 billion, and was 
eligible to request an extension pursuant to Article 27.4 of the SCM Agreement.  
The main rationale for introducing this export subsidy program in Jordan was to offset the negative 
effects of the 1991 Gulf war and the loss of Jordan's  main trading partner–Iraq–, and to stimulate 
export performance and to promote exports to no n-traditional markets. The program contributed 
to a temporary recovery of the Jordan economic performance. 
 Beneficiaries and Trade Effects 
Domestic industrial companies exporting local products are entitled to benefit from this program. 
 
In the year 2013, the value of exports entitl ed for exemption was US$6,822,142,342 while the 
approximate calculated value of exemption amounted for US$98,238,849. The income tax relief in 
the preceding years amounted to US$86,206,563 in 2012, US$62,152,260 in 2011 and to 
US$59,782,222 in 2010.  
These figures indicate that the program supported beneficiaries' efforts to explore more export 
opportunities. However, the total amount of exemption implies that the income tax relief still has a G/C/W/705 
 
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  minimal effect on Jordan's international trade, real izing that Jordan is a developing country with a 
share not more than 0.1% of world's export trade. Moreover, this exemption amount is negligible compared to Jordan's Net Public Debt (internal and external) which reached to US$27billion in 2013 (80% of GDP). 
 
2  JUSTIFICATION 
Jordan requests this waiver of extending the tran sitional period of the export subsidy program for 
additional 7 years after 2015 to help the country in reducing the implications of regional and 
international circumstances, to stimulate private sector investments, and to maximize the capabilities of the industrial sector to adjust with current and future challenges. In light of the reform measures taken by the government and infrastructure projects including alternative gas 
supplies, it is foreseen that the situation may ease optimistically only from 2018 onwards. 
 The industrial sector is a main pillar of the Jordanian economy contributing to almost a quarter of 
the GDP, in addition to its connection with many other economic sectors such as services and 
agriculture, absorbing a significant part of the la bour force, providing them also opportunities for 
education and training. Industrial exports constitute around 90% of the total goods exports of the 
country. 
 Jordan has to deal with major economic, financial,  and political challenges as well as development 
needs that can be summarized as follows: 
 
1.  The unprecedented regional volatility, continuing negative consequences of the global 
financial crisis and the accompanying crisis in the Eurozone greatly affected the 
Jordanian economy. The GDP has recorded a growth rate of 2.8% in 2013 compared to a 
growth rate of 2.7% in 2012; nevertheless, this registered growth rate is still modest compared to its levels during the period 2000-2008, which amounted to an average of 
about 6.6% per annum. 
 
2.  In a bid to finance its increasing expenses and budget deficit, the government adopted 
austerity measures in terms of cutting back fuel subsidies and freezing public 
recruitment. Nonetheless, the Net Public debt (internal and external) has recorded an 
increase of 4.5% by the end of 2013 to reach US$27billion (80% of GDP). 
 
3.  Jordan Economy was able to maintain the inflation rate (average consumer prices) 
within acceptable levels in 2013. The inflation as measured by the relative change in the average index for consumer prices has registered 5.6% in 2013 compared to 4.7% in 
2012. The increase in inflation rate was a result of, among other factors, the 
liberalization of prices of oil derivatives noting the sharp increase of oil world prices, which in turn raised the domestic prices of electricity and transportation. 
 
4.  The unemployment rate in 2013 has increased by 0.4% to record 12.6%.This 
unemployment rate comes in light of the structural imbalances in the labour market on the one hand, and low-paid foreign workers spreading in large number of jobs created in 
economy on the other hand. 
 
5.  In the past few years, Jordan hosted seve ral influxes of refug ees from neighbouring 
countries, mainly from Iraq and Syria, which had a negative impact on the national 
budget and infrastructure. With Syrian citizens residing in the country exceeding 1.4 million, including refugees, the financial burden on the economy amounted to around US$2.1 billion in 2013 and is expect ed to hit US$3.2 billion in 2014. The burden 
strained the infrastructure, education, heal th, water, food and other sectors. Syrian 
labour force is also pushing into the job market traditionally reserved to Jordanians and thus reduces job opportunities for locals. 
 
6.  Jordan's trade with Arab countries constitutes more than 50% of its total external trade. 
Jordan's Exports to Arab countries represented around 57% in 2013 and 52% in 2012 
relative to the total domestic exports. 
 
7.  To this effect, the instability in the region as a result of the political situation in many 
Arab countries had severe impacts on the trade performance of Jordan while threatening G/C/W/705 
 
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  the loss of traditional markets for Jordanian exports as well as of losing other significant 
markets. The trade deficit has significantly increased from US$9.2 billion in 2008 to reach US$14.4 billion in 2013. 
 
8.  From the bilateral perspective, the Jordan ian-Syrian trade amounts to around 10% of 
Jordan's total trade with Arab countries. The partial closing of the northern border had a significant negative impact on the Jordanian economy by virtue of geographical location. 
In 2013, Jordanian exports to Syria decrease d by 32% compared to 2012, while imports 
from Syria remained stable. 
 
9.  Furthermore, the northern border was the privileged gateway for Jordan's exports to 
other strategic markets such as the EU and Turkey. Because of the ongoing crisis in 
Syria, transportation costs drastically increased on Jordan's industry for both imports and exports due to longer alternatives or different transportation routes. In many cases, 
no more viable transportation alternatives exist apart sea and airfreight. 
 
10. Bilateral trade with Iraq has been negatively affected due to the security conditions in 
the country, and because Jordan's eastern borders are being temporarily locked, the 
Jordanian exports are expected to be negatively affected. 
 
11. Moreover, the disruption of the Egyptian gas supplies that was used by industries and 
for energy generation has very negative impacts on Jordan economy as a whole. 
Jordan's trade deficit rose unprecedentedly due to the rise in the bill of energy imported from global markets. Consequently, the government was forced to use more expensive 
diesel and heavy fuel for electricity generation instead of the cheaper gas, which 
drastically raised the price of electricity. 
 
12. The persistent rising of world commodity prices, especially oil and food has had 
consequential impact on production cost of Jordan's industry and depressingly affected Jordan's exports competitiveness. The drastic increase in oil prices and its persistent fluctuations afterward have in addition led to a slower activity for small and 
medium-sized enterprises that also suffered from trade liberalization and the incident of 
the financial crisis. On the other hand, the energy pricing policy in some producing and exporting countries in addition to the volatility of the price of raw materials in global 
markets had led to the inability of domestic industry, specifically small and medium 
sized enterprises, to compete fairly, and ca u s e d  s o m e  i n d u s t r i e s  t o  s h u t  d o w n  t h e i r  
factories, and for others to move abroad. As from January 2013, 1080 factories were 
shut down; and almost 14 thousand employees were left jobless. 
 3  BENEFITS FROM THE EXTENS ION OF THE PROGRAM AFTER 2015 
1. Supporting small and medium-sized enterprises (SMEs), noting that the exports of 
large industries such as phosphate, potash, and cement are excluded from the 
benefits of the program. 
 
2. Complementing the government efforts in helping productive sectors, specifically 
SMEs, to integrate with the global economy. 
 
3. Expanding export prospects for Jordanian goods and allowing more opportunities 
accessing foreign markets. 
 
4. Enabling and reinforcing the domestic industry to respond positively to the current 
difficult situations and multitude of challenges of political and economic nature in the 
region. 
 
5. Maintaining the program's positive effects for SMEs by enabling Jordanian exports to 
regain a certain competitive ground and to find new markets while maintaining the existing ones, and not limiting trade market s available only to free trade agreements 
concluded between Jordan and other partners. 
 
6. Attracting investments in the industrial SME sector by maintaining these investment 
incentives to enable producers and investors to open new markets and promote job G/C/W/705 
 
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  creation and specifically the SMEs, to play a key role in the economic development 
process and to attain more resilience at the exposure to global markets. 
 4  SCOPE OF THE REQUEST 
The requested waiver is limited in scope to exte nding the transitional period for 7 years after 
2015, to provide the SMEs in Jordan–excluding larg e industries–the opportunity to deal with the 
unprecedented difficult situation and challenges of political and economic nature in the region. 
 
5  CONCLUSION 
In light of the exceptional circumstances explained above and the expiry of the Jordan's Partial or 
Total Exemption from Income Tax for Profits on Certain Export on 31 December 2015, Jordan 
requests a waiver on the basis of Article IX.3 of the WTO Agreement from its obligations of the 
transition period under Article 27.2(b) of the SCM Agreement and continuation of extensions pursuant to Article 27.4 of the SCM Agreement in  accordance with Annex A of the Draft Waiver 
Decision attached hereto until 31 December 2023. 
 Jordan requests that the General Council gives this application for a waiver expeditious and 
favourable consideration. 
 
_______________ G/C/W/705 
 
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  ANNEX 1 
DRAFT DECISION ON WAIVER CONCERNING THE EXTENSIONS PROVIDED FOR IN 
ARTICLE 27.4 AND ARTICLE 27.2(B) OF THE AGREEMENT ON SUBSIDIES AND 
COUNTERVAILING MEASURES OF  THE TRANSITION PERIOD 
FOR THE ELIMINATION OF EXPO RT SUBSIDIES OF JORDAN 
DRAFT WAIVER DECISION OF [….] 20141 
The General Council, 
 
 Conducting  the function of the Ministerial Confer ence in the interval between meetings 
pursuant to paragraph 2 of Article IV in accordan ce with Article IV: 1 of the Marrakesh Agreement 
Establishing the World Trade Organization (the "WTO Agreement"); 
 
Having  regard to paragraphs 3 and 4 of Articl e IX of the WTO Agreement, the Guiding 
Principles to be followed in considering applications for Waivers adopted on 1 November 1956, and 
the Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs 
and Trade 1994;  
 Recalling  that the Members of the Committee on Subsidies and Countervailing Measures 
("SCM Committee" or "Committee"), as directed by the Ministerial Conference
2 have granted, 
pursuant to the procedures set forth in document G/SCM/39, extensions pursuant to Article 27.4 of the SCM Agreement of the transition period und er Article 27.2(b) of the SCM Agreement for the 
elimination of export subsidies, in respect of certain programs of certain developing country 
Members;  
 Recalling  that, in recognition of the economic, financial and development needs, as well as 
the capacity and administrative constraints, of certain Developing Country Members in implementing their commitments pursuant to the SCM Agreement in respect of the elimination of 
export subsidies, the General Council has adopted, as set forth in document WT/L/961 on 
27 July 2007, procedures for continuation of extensions pursuant to Article 27.4 of the SCM Agreement of the transition period under Ar ticle 27.2(b) of the SCM Agreement for certain 
Developing Country Members up to 31 December 2013 with a final two-year phase-out period 
which shall end not later than 31 December 2015; 
 
Noting  that Jordan has been fulfilling its obligations and commitments in respect to the 
General Council decision contained in document WT/L/961 submitted to the SCM Committee 
annual notifications regarding its export subsidy program
3; 
 
 Noting  the proposal submitted by Jordan to further extend the procedures contained in 
G/SCM/394; and G/WT/L/691 for Jordan uniquely; 
 
Recognizing  Jordan's needs to mitigate the challenges arising from the global financial crisis 
and the recent political and economic instabilities in the region, which have severe impacts on the 
industrial sector and the trade performance of Jordan while threatening the loss of traditional markets of Jordanian exports as well as of losing other significant markets; 
 
Noting  that the industrial sector has also been si gnificantly affected by the sharp increase of 
energy prices as well as imported raw materials, which led to a decrease in the overall value added 
of the sector, a slowdown in its growth rates and a reduction of the size of its workforce; 
 
                                               
1 Adopted in accordance with the Decision-Makin g Procedures under Articles IX and XII of the 
WTO Agreement agreed by the General Council on 15 November 1995 (WT/L/93). 
2 Ministerial Decision on Implementation-Related Issues and Concerns, (WT/MIN(01)/17), 
paragraph 10.6. 
3 See documents: G/SCM/N/275/JOR, G/SCM/N/253/JOR, G/SCM/N/243/JOR, G/SCM/N/220/JOR, 
G/SCM/N/226/JOR, G/SCM/N/211/JOR, G/SCM/N/186/JOR, G/SCM/N/192/JOR, G/SCM/N/155/JOR/Suppl.1, 
G/SCM/N/177/JOR, G/SCM/N/155/JOR, G/SCM/N/160/JOR, G/SCM/N/146/JOR, G/SCM/N/123/JOR, 
G/SCM/N/128/JOR, G/SCM/N/114/JOR, G/SCM/N/95/JOR/Suppl.1, G/SCM/N/99/JOR, G/SCM/N/71/JOR. 
4 See documents G/SCM/W/535 and G/SCM/W/537 and addenda. G/C/W/705 
 
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  Noting  the financial burden of hosting 1.4 million Syrian citizens residing in the country 
which amounted to around US$2.1 billion in 2013 and is expected to hit US$3.2 billion in 2014. 
The burden strained the infrastructure, education, health, water, food and labour market;  
Realizing  that the extension of the program is expected to support Jordan's efforts and 
policies to address unemployment and poverty which both registered constant increases;  
Noting  that, in light of the reform measures ta ken by Jordan and infrastructure projects 
including alternative gas supplies, that foreseen the situation may ease optimistically only from 2018 onwards;  
Considering  that Jordan requests this waiver of extending the transitional period of the 
export subsidy program for additional 7 years after 2015 to help the country in reducing the implications of regional and international circumstances, to stimulate private sector investments, 
and to maximize the capabilities of the industrial sector to adjust with current and future 
challenges;  
In light of the above consideration , Jordan find itself in a need to request a further extension 
for the period set out in document WT/L/691 no later than 31 December 2023, with no requests for extension beyond those fores een pursuant to this Decision; 
 
Decides , 
 
1.  Jordan is granted a waiver from its phase-out obligation set out in Article 27.4 of the 
Agreement on Subsidies and Countervailing Measures until 31 December 2023; 
 
2.  There shall be an annual review of this waiver by the General Council to determine 
whether the exceptional circumstances justifying this waiver still exist and whether the 
terms and conditions herein have been met. On the basis of this annual review, following a recommendation by the Committee on Subsidies and Countervailing Measures, the General Council may modify or terminate this waiver; 
 
3.  Jordan shall provide, for transparency purposes, a yearly notification to the Committee 
on Subsidies and Countervailing Measures regarding this waiver; 
 
4.  This decision does not affect Members' rights as set out in the understanding in respect 
of Waivers Obligations under the General Agreement on Tariffs and Trade 1994. 
 
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