RESTRICTED  WORLD TRADE  
ORGANIZATION  G/SCM/M/59 
17 April 2007 
 
 (07-1546) 
Committee on Subsidies  
and Countervailing Measures  
 
 
 
MINUTES OF THE SPECIAL MEETING  
HELD ON 26 OCTOBER 2006 
 
Chairperson:  Mr. Keiya Iida (Japan) 
 
 
1. The Committee on Subsidies and Countervailing M easures (the "Committee") held a special 
meeting on 26 October 2006.  The purpose of the spec ial meeting, as set forth in WTO/AIR/2915, was 
to review the 2005 new and full subsidy notificati ons of Armenia;  China;  Hong Kong, China;  
Korea;  New Zealand;  Qatar;  European Commun ities (Spain);  Switzerland;  Thailand and Turkey. 
2. The Chairperson  recalled that at its meeting of 14  April 2005 the Committee had adopted 
procedures for the review of 2005 new and full subsidy notifications.1  Under these procedures, the 
2005 new and full subsidy notifications were to be reviewed in three sp ecial meetings to be held in 
conjunction with the regular meeting of the Comm ittee in October 2005, April 2006 and, if necessary, 
Autumn 2006.  Thus, the present meeting was the thir d in that series of meetings.  The procedures 
adopted in April 2005 provided that only subsidy no tifications distributed in all three working 
languages not less than seventeen weeks before a meeti ng may be reviewed at that meeting.  Pursuant 
to this provision, the Committee had before it ten su bsidy notifications.  Another key feature of the 
procedures adopted in April 2005 was that the review  of the subsidy notifica tions was to be conducted 
on the basis of written questions and answers provide d before the meeting.  Written questions on the 
subsidy notifications on the agenda of the presen t meeting were to have been submitted to the 
Member concerned and to the Secretariat by 24 July  2006 and written answers to such questions were 
to have been submitted by 25 September 2006.  
3. The Committee then proceeded to examine the te n notifications that were on the agenda of 
this meeting in the order in which they had b een listed in the airgram convening the meeting.  
4. With respect to the notification of Armenia  (G/SCM/N/123/ARM), on which no written 
questions had been received, the Chairperson propo sed that the Committee take note, and conclude its 
review of this notification.  It was so agreed .  
5. With respect to the notification of China  (G/SCM/N/123/CHN), the Chairperson  noted that 
written questions had been submitted by the de legations of the European Communities, Japan, 
Canada, the United States, Turkey, Australia and Mexico.2  Unfortunately no written replies had as 
yet been received from China, and the Chairper son noted that the procedures adopted by the 
Committee in G/SCM/117 provided that where written  replies were not provided in advance of the 
meeting, the delegation in question wo uld respond orally at that meeting. 
6. The delegate of China  thanked Members for the questions communicated to China with 
respect to its new and full subsidy notification subm itted in April 2006.  He was aware that Members 
                                                      
1 Document G/SCM/117 of 26 April 2005.  
2 Documents G/SCM/Q2/CHN/16-22. G/SCM/M/59 
Page 2  
 
  were anxious to have an overview of the subsidies in that country and China itself had been keen to 
finalize such a notification in order to clarify its position.  Practical difficulties and limitations had made the submission of this subsidy notification only possible earlier in the year, and he assured 
Members that they would have China's full co-opera tion on this issue.  He reiterated that although 
China was not in a position to provide written answer s to Members' questions in the meeting, written 
responses would be provided to the Members and the Committee once these ha d been finalized in 
capital. 
7. In a preliminary response to the question of  transparency and the completeness of the 
notification, the delegate of China stated that hi s country believed that its notification was complete 
based on the information gathered on subsidies mainta ined at the central government level.  Studies 
had been carried out in China's information-gath ering process over the past few years concerning the 
fundamental resources of subsidi es i.e. central government expend iture, as well as the government 
revenues foregone in China's tax re gime.  These results had then been  analysed in accordance with the 
definition of "subsidy" in the SCM Agreement .  The information gathered was thorough enough for 
China to produce a complete and comprehensive notification.  However, he did understand that 
Members were concerned as to the completeness of the notification.  He clarified that the notification 
covered subsidies which were in place only during the period 2001-2004.  New subsidies introduced 
after 2005 were not included in the submission, but w ould be reported in China's future notifications.  
An example of this was contained in paragraph 52 of the questions from the United States regarding 
the subsidy to China Petroleum and Chemical Corpor ation, the SINOPEC.  He stressed the fact that 
subsidies was technically a difficult issue not only fo r China, but for all Members, in view of the 
many different interpretations of the definition and coverage of the SCM Agreement .  China believed 
the issue of completeness to be a systemic issue for all Members. 
8. Another point on which some Members had request ed clarification concerned the duration of 
specific subsidies.  For most of the notified subs idies, the duration was from a certain year to the 
present, meaning that the legislation granting the subs idy did not specify the end-date.  In cases where 
a specific end-date was mentioned in the notification,  this was the end-date provided in the legislation 
granting the subsidy, resulting in the subsidy termin ating at the end-date, as in the case of the Refund 
of Import VAT of Raw Copper Materials.  Another possibility was that the old legislation would be 
replaced to enable the subsidy to be extended, either  exactly as it was or with some adjustment.  China 
would include this kind of extended su bsidy in its future notifications. 
9. The delegate of China also wished to point out  that China's notification covered subsidies of 
the central government.  With regard to subsidi es on a local government level, China was discussing 
internally how to gather information in an effi cient and effective way.  This would entail the 
education of local officials on the SCM Agreement  in a more in-depth and technical approach.  He 
stated that generally local governments had no right to grant provincial tax policies and moreover that 
with enhanced communications between the central and local governments regarding WTO 
disciplines on subsidies, local governments were increasingly aware of the prohibited areas with 
respect to their subsidies.  China had checked in formally with some local governments prior to the 
meeting on one or two subsidies me ntioned in Members' questions.  Responses from the Government 
of Nigbo City, for example, indicated that the subs idy identified by the delegation of the United States 
as Export Contingent Aid for Textile E xporters had already been abolished. 
10. With regard to Members' questions or co mments concerning China's banking sector and its 
on-going reform process, the delegate of China re iterated the position of his Government in this 
respect that reform measures taken by the Chinese Government in the banking sector were not subsidies as defined by the SCM Agreement .  Concerning questions on credit policies, the delegate of 
China wanted to clarify that with the continuing reform in the financial sector over a number of years, 
commercial banks in China had long been operati ng on commercial terms and considerations.  The 
Government did own shares of some of these commer cial banks, however its role in these banks was  G/SCM/M/59 
 Page 3 
 
 
  purely of a shareholder as defined in the Company Law of the People's Republic of China.  There was 
no government interference in the independent op eration of these banks.  Credit policies of the 
government were now reflected by the monetary policies and there were no government credit 
policies that would direct commercial banks to pr ovide loans to certain sectors or enterprises at 
conditions not feasible under commercial considerations. 
11. The delegate of China then turned to some of the notified subsidies which were deemed, 
according to the questions received, to be prohib ited subsidies, either contingent upon export or 
concerning the purchase of domestically-made products.  China had held bilate ral consultations with 
the United States on these subsidies.  The consultations also included  the discussion of other subsidies 
which the United States believed should have been  included in the notification.  As had been 
explained bilaterally to the United States, these othe r subsidies were either not applicable any longer 
or had already been revised, reformed or terminat ed and for these reasons they had not been included 
in the notification.  Details of these subsidies w ould be provided later in China's written responses. 
12. One category of the so-called prohibited subsidies mentioned in the notification was the 
preferential tax policies for foreign-invested enterp rises whose products were exported.  The delegate 
of China reported that these policies were part of the overall preferential tax policies China had 
formulated in the mid-80s and early 90s to attract  foreign investment, and that they benefited only 
foreign-invested enterprises.  These policies were  well-known and had been in place for many years, 
and had been the subject of discussion during th e accession negotiations.  He then referred Members 
to the fact that these subsidies were not included in  Annex 5(b) to the Accession Protocol of China, 
which specifically identified those WTO-inconsis tent subsidies that China should eliminate upon 
accession.  Consequently, China did not unders tand the arguments that these well-known policies 
should suddenly have become WTO prohibited subsidies.   
13. The second category was the preferential tax polici es that were deemed by some Members to 
encourage the purchase of domestically-made products.  However, these preferential tax policies had been introduced for domestic products only becau se there was an earlier policy which had already 
granted tax and tariff exemption to the same kind  of imported products.  Furthermore, Chinese 
domestic products were not on an equal footing when competing with imported products, because 
under the existing tax regime the VAT in China was production-based, rather than consumption-
based, as found in most countries.  Therefore these tax policies, aimed at equalizing the tax burden between domestic and importe d products rather than import substi tution, were not inconsistent with 
the WTO rules. 
14. He stated that the last issue was on the ques tion of whether China could provide the total 
amount of the foregone tax revenue on the subsidies in  the form of preferential tax policies.  He 
reported that unfortunately China was not able to pr ovide this figure because currently there was no 
system in place to gather statistics in this connection. 
15. The delegate of the United States
 thanked China for the submission of it first subsidy 
notification.  He was disappointed that China ha d not provided written answers to questions from the 
United States and other Members, as required by th e Committee's obligations.  This was likely to 
hinder further discussion of China's notified progra mmes and undermined the purpose of Article 25 of 
the SCM Agreement  to increase the transparency in respect of government subsidy programmes.  He 
noted that several programmes notifie d by China were prohibited under the SCM Agreement  and even 
though they had not been notified in the course of  the accession, China still had an obligation to 
terminate all of its prohibited subsidies.  He asked  if China could explain its plans to terminate its 
prohibited subsidy programmes and indicate a spec ific date when the written answers would be 
submitted. G/SCM/M/59 
Page 4  
 
  16. On the subject of the bilateral consultations w ith China, he stated that the United States was 
still very concerned about the prohibited export su bsidies and sought their immediate withdrawal.  
Paragraphs 173 and 174 of the Working Party Report  of China's Accession made it very clear that 
some Members considered China's Annex 5 to be  incomplete and that a number of subsidies, 
including prohibited export subsidies, had not been reported. 
17. The delegate of Turkey
 thanked China for its detailed explan ations and stated that Turkey was 
looking forward to receiving written replies from China in due course. 
18. The delegate of Canada  also thanked China for its first subsidy notification.  Canada had 
submitted a number of questions concerning several  notified subsidies which appeared to be 
prohibited.  He reiterated the concerns expressed by the delegate of the United States and stated that 
he would like to see these subsidies withdrawn as soon as possible. 
19. The delegate of Japan  stated that he appreciated the e fforts that China had made with its 
notification, and he considered that this first notification after China's accession to the WTO would 
contribute to the transparency of its subsidy regime.  He stated that Japan had submitted questions of a 
systemic nature on the notification, but unfortunate ly had not yet received a reply from China.  He 
hoped that China would be in a position to respond as soon as possible. 
20. The delegate of the European Communities  thanked China for its notification, but said that he 
was disappointed that no written replies had been recei ved to date.  He hoped that the replies would be 
submitted in good time to allow a meaningful discussi on at the next meeting of the Committee.  He 
expressed serious concerns on many of the subsid ies and hoped that these would very quickly be 
brought into line with the relevant obligations under the SCM Agreement . 
21. The delegate of Australia  thanked the Chinese delegati on for its general comments and 
acknowledged the practical difficulties encountered by  China.  He added that follow-up questions 
were a way of adding to the completeness of Memb ers' notifications, and that Australia was looking 
forward to receiving written answers to its questions as soon as possible. 
22. The delegate of Mexico  stated that he was looking forward to receiving written replies of a 
specific and clear nature to Mexico's questions , and he thanked the Chinese delegation for its 
notification. 
23. The delegate of China  thanked Members for their interest  in China's notification.  He 
apologized that China had not able to provide wr itten responses at the meeting due to the heavy 
workload involved, in particular the large amount of translation work.  Members would have China's 
full co-operation, and his country would try its best to provide written responses to enable a 
meaningful discussion at the next meeting of the Committee. 
24. In conclusion, the Chairperson  stated that China was eviden tly making efforts to provide 
written answers, and he asked if the Committee could agree to continue its discussions of China's new 
and full subsidy notification at the next meeting, schedul ed to be held in April next year.  This was so 
agreed . 
25. Turning to the 2005 new and full subsidy notification of Hong Kong, China , as circulated in 
document G/SCM/N/123/HKG, the Chairperson stated that no questions had been received.  The 
Committee therefore concluded  its review of this notification.  G/SCM/M/59 
 Page 5 
 
 
  26. Concerning the 2005 new and full notification of Korea,  contained in document 
G/SCM/N/123/KOR, the Chairperson noted that wr itten questions had been submitted by Turkey3 and 
that Korea had duly responded.4   
27. The delegate of Turkey  thanked Korea for its responses and as there were no further 
comments or questions raised, the Committee concluded  its review of the notification of Korea. 
28. The 2005 new and full notification of New Zealand  had been circulated in document 
G/SCM/N/123/NZL.  No written questions had been received, and the Committee therefore concluded  
its review of this notification. 
29. The next notification to be reviewed was that of Qatar , contained in document 
G/SCM/N/123/QAT.  As no questions had been received, the Committee concluded  its review of this 
notification. 
30. The Committee then turned to the 2005 new a nd full subsidy notification of the European 
Communities with respect to Spain.5  The United States had submitted written questions on this 
notification and the European Communities had duly replied.6   
31. The delegate of the United States  thanked the EC for the replies received.  As there were no 
further questions or comments, the Committee concluded  its review of this notification. 
32. The Chairperson  then took up the notification of Switzerland  contained in document 
G/SCM/N/123/CHE.  There were no further comments ma de or questions raised on this notification.  
The Committee thus concluded  its review of the notification of Switzerland. 
33. The next notification to be reviewed was that of Thailand , contained in document 
G/SCM/N/123/THA and Corr.1.  The delegation of Turkey had submitted written questions on this 
notification and Thailand had duly replied.7  As there were no further comments or questions raised 
on this notification, the Committee concluded  its review of the notification of Thailand. 
34. The final notification to be reviewed unde r this agenda items was that of Turkey , contained in 
document G/SCM/N/123/TUR and Add.1.  There were  no further comments or questions raised, and 
the Committee therefore concluded  its review of the notification of Turkey. 
35. Turning to Agenda Item 3, the Committee reverted to the 2005 new and full subsidy 
notifications that had already been discussed at the previous special meeting but on which the Committee had subsequently received questions from the United States. 
36. The delegate of the United States
 wanted to express his general appreciation to all the 
countries that answered the United Stat es' questions under this agenda item. 
37. The 2005 new and full subsidy notification of Australia was circulated in document 
G/SCM/N/123/AUS/Rev.1.  The United States had s ubmitted written questions on this notification 
                                                      
3 G/SCM/Q2/KOR/26 & Corr.1. 
4 G/SCM/Q2/KOR/27. 
5 At the meeting in April, the Committee had consid ered the 2005 new and full subsidy notification of 
the European Communities, except for that part of the notification relating to Spain, which had not been 
translated in all three work ing languages 17 weeks before the date of the meeting. 
6 G/SCM/Q2/EEC/50 and G/SCM/Q2/EEC/51. 
7 G/SCM/Q2/THA/16 and G/SCM/Q2/THA/17. G/SCM/M/59 
Page 6  
 
  and Australia had responded accordingly.
8  There were no further questions or comments, and the 
Committee therefore concluded  its review of this notification. 
38. The 2005 new and full subsidy notification of Brazil  was circulated in document 
G/SCM/N/123/BRA.  Written questions had been received from the United States, and Brazil had duly responded.
9  There were no further questions or  comments, and the Committee therefore 
concluded  its review of this notification. 
39. The 2005 new and full subsidy notification of  Canada was circulated in document 
G/SCM/N/123/CAN.  Written questions had been r eceived from the United States, and Canada had 
submitted its written responses.10  There were no further questions or comments, and the Committee 
therefore concluded  its review of this notification. 
40. Turning to the 2005 new and full subsidy notif ication of Chinese Taipei contained in 
document G/SCM/N/123/TPKM, written questions ha d been received from the United States, and 
Chinese Taipei had duly responded.11 
41. The delegate of the United States  thanked Chinese Taipei for th eir responses and stated that 
he had a follow-up question concerning the Manage ment of Fish Markets and Market Products 
Programme.  He wanted to know if Chinese Taipei co uld elaborate on why it felt that the construction 
of fish markets came under the general in frastructure exception under Article 1 of the SCM 
Agreement . 
42. The delegate of Chinese Taipei  stated that in this particular case the fish markets were 
considered as a wholesale and retail market for fish and other products and therefore were, as such, an 
integral part of the fishery supply chain.  Furt hermore, the policy purpose of this subsidy was to 
provide a public service that ensured that fish  products met the necessary health and sanitary 
requirements.  The question of infrastructure was an issue currently being discussed in the fishery 
discussions under the Rules negotiations, and that if a consensus regarding the definition of 
"infrastructure" was achieved, Chinese Taipei would go along with that decision and review the status 
of its fish markets in the light of any new agreement. 
43. The Committee took note  of the statements made. 
44. Turning to the 2005 new and full subsidy notification of the European Communities 
contained in document G/SCM/N/123/EEC and adde nda, written questions had been received from 
the United States to which the EC had responded.12  As no further comments or questions were raised 
during the meeting, the Committee concluded  its review of the notification. 
45. The last notification under this ag enda item was that of Singapore , as contained in document 
G/SCM/N/123/SGP.  Written questions had been re ceived from the United States and circulated in 
document G/SCM/Q2/SGP/11.  The Chairperson  stated that as the Committee had not yet received 
written replies he would ask the delegate of Si ngapore to respond orally to the questions, in 
accordance with the procedures adopted by the Committee. 
46. The delegate of Singapore  stated that he had received instructions from capital that Singapore 
would require a bit more time to respond to the questions, but that he would like to assure the 
                                                      
8 G/SCM/Q2/AUS/28 and G/SCM/Q2/AUS/29. 
9 G/SCM/Q2/BRA/15 and G/SCM/Q2/BRA/16. 
10 G/SCM/Q2/CAN/22 & Corr.1 and G/SCM/Q2/CAN/23. 
11 G/SCM/Q2/TPKM/6 and G/SCM/Q2/TPKM/7. 
12 G/SCM/Q2/EEC/50 and G/SCM/Q2/EEC/51.  G/SCM/M/59 
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  United States and the Committee th at the replies would be submitted in good time before the next 
meeting.13 
47. The Chairperson  stated that the written answers pr omised by Singapore and China would 
enable the Committee to have a meaningf ul discussion at its next meeting. 
48. He reported that the procedures adopted in April 2005 provided for review of the 2005 new 
and full subsidy notifications at three special meetings in Autumn 2005, and Spring and Autumn 
2006.  According to these procedures, therefore, this  would have been the last special session to 
review the subsidy notifications.  He noted, however , that there were some 2005 notifications that had 
recently been circulated and had not yet been re viewed, and that not all delegations had actually 
submitted their 2005 new and full s ubsidy notifications, including the United States.  He therefore 
believed that it was appropriate to pr ovide for another opportunity to revert to this topic.  He stated 
that he intended to consult informally with de legations to see how best this could be organized. 
49. The meeting was adjourned . 
__________ 
 
 
                                                      
13 See document G/SCM/Q2/SGP/12.