WORLD TRADE  
ORGANIZATION  G/SCM/Q4/KNA/6 
16 October 2006 
 (06-4975) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
PROCEDURES FOR EXTENSIONS UNDER  
ARTICLE 27.4 OF THE AGREEMENT ON SUBSIDIES  
AND COUNTERVAILING MEASURES 
 
Replies to Questions Posed by CANADA1;  COLOMBIA2; 
JAPAN3;  PERU4 and the UNITED STATES5 
 
 
 The following communication, dated 12 October 2006, is being circulated at the request of the Delegation of St. Kitts and Nevis. 
 
_______________ 
 
 CANADA
 
 
Q1. Recalling that the objective of G/SCM/39 was to provide an extension of the transition 
period for the progressive elimination of export subsidy programmes of a number of Members, as called for in Article 27.4 of the SCM Agreement, we would ask the proponents of G/SCM/W/535 and G/SCM/W/537 to inform the Committee on Subsidies and Countervailing 
Measures of the individual efforts, if any, they  have undertaken to gradually bring these export 
subsidy programmes into conformity with their WTO obligations.   
 
Reply
 
  St Kitts and Nevis has instituted a monitori ng mechanism with responsibility for reviewing 
whether the companies which benefit from th e Fiscal Incentives Act have reached export 
competitiveness in any given product. To this point , non of the monitored firms have achieved export 
competitiveness.    St. Kitts and Nevis is of the view that document G/SCM/39 contains only a fast track 
procedure to approve extensions  under Article 27.4 of the ASCM. This document neither reduces nor 
does it increase the rights and obligations under the ASCM.  Therefore, neither document G/SCM/39 nor Article 27.4 of the ASCM provide for a progressi ve elimination of export subsidy programmes.  
  Moreover, Article 27.4 mentions a “progressive” elimination in the first sentence which refers 
to the phase-out of the export subsidies within th e eight-year period mentioned in Article 27.2(b), a 
condition that is completely different to tho se regarding the subsidies programmes at issue. 
                                                     
 
1 G/SCM/Q4/KNA/2 
2 G/SCM/Q4/KNA/1 
3 G/SCM/Q4/KNA/4 
4 G/SCM/Q4/KNA/5 
5 G/SCM/Q4/KNA/3/Rev.1 G/SCM/Q4/KNA/6 
Page 2  
 
  Additionally, it is clear from the language in Article  27.4, that such “progressive elimination” is not 
mandatory. In consequence, St. Kitts and Nevis is no t aware of any obligation directed at the gradual 
phasing out of these export subsidy programmes.    In addition, St. Kitts and Nevis considers th at its export subsidy programmes are fully in 
compliance with its WTO obligations. As a matter of fact, the current extensions have been granted to 
St. Kitts and Nevis in accordance to Article 27.4 a nd under the procedures and conditions set forth in 
document G/SCM/39.   Nevertheless, St. Kitts and Nevis has been  undertaking efforts to phase out its export 
subsidies programmes. In this view, St. Kitts and Nevis has along side some of the proponents to 
G/SCM/W/535, undertaken analytical work at a regional level directed at addressing the issue or export subsidies. Additionally, St. Kitts and Nevis w ould be pleased to answer further questions that 
Canada may have during the course of the discussions before the Committee.  
   Q2. Could the proponents of both documents also explain how further extension of this 
phase-out period would ensure that these efforts a re finally successfully undertaken in order to 
avoid a similar situation at the end of any ne w extended phase-out period for certain export 
subsidy programmes?  
 
Reply
 
 
 The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1(e) of 
G/SCM/39. The view of the proponents is to conti nue benefiting from the extension throughout 2018, 
based on their special economic, financial and de velopment needs.  Therefore, the rights and 
obligations contained in document G/SCM/39 an d Article 27.4 of the ASCM would remain 
unchanged. 
  An additional extension under Article 27.4 of  the Agreement on Subsidies and Countervailing 
Measures would allow for the beneficiaries to re ach export competitiveness which would in turn 
allow for St Kitts and Nevis to achieve its economic and develo pmental objectives.  
 
 Although not desired at this point, St. Kitts and Nevis would take a decision on the possibility 
of a further request based on the financial, econom ic and development needs and in accordance with 
the procedures and timeli nes established in the provisions me ntioned above.  As a WTO Member, 
St. Kitts and Nevis has designed its development strategies to address these needs with a view to 
utilising trade promotion as a tool for poverty reduc tion and achieving a beneficial integration into the 
world economy. 
  
Q3. Recalling that the previous extension of the phase-out period for certain export subsidy 
programmes was for an additional period of 6 years, could the proponents of both documents explain the rationale for a proposed extension of 11 years?    
Reply
 
  St Kitts and Nevis has requested an extensi on of 11 years to fully realise its financial, 
economic and development ambitions.  The Fede ration continues to face a number of economic 
challenges such as the closure of the 300-year-old s ugar industry.  This has been coupled with the 
ongoing challenge of geographical isol ation along with the concentrati on of exports on a narrow range 
of commodities and markets, hence the incentive prog ramme is needed to encourage investment to 
promote the much-needed diversification of the economy.   G/SCM/Q4/KNA/6 
 Page 3 
 
 
   Article 27.4 of ASCM provides that “if a de veloping country Member deems it necessary to 
apply … [export] subsidies beyond the 8-year period [mentioned in article 27.2(b)], it shall not later 
than one year before the expiry of this period en ter into consultation with the Committee, which will 
determine whether an extension of this period is ju stified, after examining all the relevant economic, 
financial and development needs of the developing country Member in question. If the Committee 
determines that the extension is justified, the de veloping country Member c oncerned shall hold annual 
consultations with the Committee to determine th e necessity of maintaining the subsidies.”  
 
 Members that deemed it was necessary to apply export subsidies, due to their particular 
characteristics and needs, requested extensions under this provision as well as according to the 
outcome of the negotiations in Doha contained in document G/SCM/39 . G/SCM/39 provides for 
fast-track procedures for the approval of the ex tensions. Members inter ested in obtaining these 
benefits have been required to meet criteria n ecessary to justify approval from the Committee in order 
to maintain their export subsidies. In fact, these criteria are based on the economic, financial and 
development needs of the beneficiary Members.  
 
 In this regard and in accordance with the above-mentioned provisions, the Committee granted 
to a group of Members the authority to maintain export subsidies during a specific period subject to two ‘transparency’ and ‘standstill’ commitments.   As provided in document G/SCM/39, the author ity granted to the beneficiary Members is 
valid until the end of 2007. After this date, th ese Members have either the possibility to seek a 
continuation of the extension, pursuant to Article 27.4 of the ASCM, or still have the final two years 
referred to in the last sentence of such Article.   St. Kitts and Nevis, based on national private sector consultation and analysis has concluded 
that it is necessary to request a new extension based on the economical, financial and development 
needs. In the case of St. Kitts and Nevis, it is a ve rifiable fact that the main export industry has 
collapsed even while export subsidies have been provide d. To this end, the conditions that existed and 
justified the extension in 2001 persist. The e xport subsidy programme has proved an effective 
instrument in attraction of foreign direct invest ment, export base diversification and job creation. 
 
 The choice of the suggested date of 2018 should  be read in the light of the discussions that 
had taken place before the adoption of SCM/G/SCM/39.  At that time, the proponents of this document 
had already expressed their needs and the reasons to eliminate their programmes over a long enough 
timeframe, possibly extending over 20 years.
6  
 
 In this regard, St. Kitts and Nevis is convin ced that a new extension will foster the export 
sectors and contribute to lift our people out of poverty. The three programmes that [country] has notified have had a very positive impact in a smal l country with a very limited export base and a 
miniscule participation in world trade.  They have been instrumental to foster and diversify the export 
sector towards the production of manufactured  goods, reducing the dependence on agricultural 
commodities and the negative impacts suffered due to th e plunge of international prices during the last 
years.  Needless to say, the spillover effects of job creation, transfer of technology and know-how, as 
well as poverty reduction have been remarkable.   However, these positive effects still are not enough. Members should bear in mind that 
St. Kitts and Nevis still has a small and vulnerable economy. In the case of St. Kitts and Nevis, not a 
single manufactured product has reached export comp etitiveness at an international level. On the 
other hand, St. Kitts and Nevis shares a microscopic share of world exports.  
                                                     
 
6 See G/SCM/38 G/SCM/Q4/KNA/6 
Page 4  
 
   Moreover, one should take into account that th e process of globalization entails the possibility 
of a non-optimal insertion of small and vulnerable ec onomies in the international markets, due to their 
size and endogenous constraints.  Therefore, adequate  measures have to be incorporated into the 
multilateral trading regime in order to assist countries like St. Kitts and Nevis to reap tangible benefits 
from trade. 
  
 Foreign direct investment in the form of new manufacturing plants and service providers is the key answer for developing our exports and benef iting from trade liberalization.  It is clear that 
export subsidies continue to contribute to attraction of foreign direct investment to small markets like 
those of the SVEs and particularly St. Kitts and Nevis. In light of this, St. Kitts and Nevis is 
convinced that trade is a tool to achieve sustai nable development and that poverty reduction is a 
natural result of job creation.  In our case, the only real possibility to create the quantity of jobs needed to lift our population out of poverty is through foreign direct investment and the expansion of the export base.  We need to grow-out of under-performing commodities to the production of value-added goods. 
  
 As explained earlier, the proposal of extens ion seeks a longer transitional period, under the 
same conditions as have been negotiated under the Uruguay Round Agreements and subsequently 
during the Doha Ministerial Conference.  One of th e main reasons is the underdevelopment that still 
plagues St. Kitts and Nevis.   
 Not only do the subsidy programmes contribute to the implementation of policy objectives 
such as industrialization, diversification and employm ent, but they also encourage imports - at duty 
free or reduced tariff levels – of raw materials and inputs originating in developed and other 
developing countries, thereby contributing po sitively to the multilateral trading system. 
 
 Most of the proponents are heavily dependent on exports of either agricultural products or 
services, but none of the proponents has yet an established broad and strong manufacturing base. At best, some of the proponents rely on a very limite d number of products of little value added, such as 
minerals, wood products or clothi ng. While these sectors or products have so far constituted the main 
source of income and growth for the SVEs, they could not in any case be seen as an exclusive option 
within a safe development strategy. 
  
 In this sense, policies that promote econo mic diversification, and particularly the 
industrialization of the SVEs, have a strategic role to  play in reducing the vulnerability that affects the 
proponents. This is the context in which the subsidy programmes were designed and are being 
implemented. While they are not the only policy instrument in the proponents’ diversification 
strategy, they certainly constitute one of the ma in elements of these strategies and have proved 
instrumental in fostering an embryonic diversification process.   In consequence, Members should take into acc ount that the new extension is being required 
based on the relevant economic, financial and devel opment needs of the beneficiaries. These needs 
remain practically the same as they were shown to justify the extension and the fast track procedures 
in 2001. The proposed date of 2018 is consistent with the discussions that had taken place before the 
adoption of SCM/G/SCM/39. At that time, the propo nents of this document had already expressed the 
reasons and the needs to eliminate their progr ammes over a long enough timeframe, possibly 
extending over 20 years. By definition, a developm ent strategy cannot yield the desired results over 
the short run. Consequently, to ensure that devel oping countries are able to fully integrate and obtain 
real benefits from the multilateral trading system, development strategies have to be designed for the 
medium and long term.   Furthermore, as proponents, we are convinced that our special needs would justify the extension operationally similar to that agreed in G/SCM/39.  G/SCM/Q4/KNA/6 
 Page 5 
 
 
   The proponents of this extension look forwar d to working with inte rested WTO Members in 
order to clarify any data regarding our economic, fi nancial and development needs.  We all, as WTO 
Members, share the responsibility of utilizing trad e liberalization to redu ce poverty and have positive 
impacts in our economies.  This is a good opportunity to work together.  G/SCM/Q4/KNA/6 
Page 6  
 
   
COLOMBIA
 
 
Q1. In the case of each of the programmes, pl ease provide the most up-to-date information 
available regarding the number of beneficiary enterprises. 
 Reply
 
  Sixty-two companies benefit from the Fiscal Incentives Act . The vast majority of firms 
which benefit from the Act are in the manufacturing and agro-processing sectors.   
 
Q2. Please explain why, under the above programmes, which have been in place for over ten 
years. It is still not possible to di smantle the prohibited subsidies. 
 
Reply
 
 
 St Kitts and Nevis is the smallest member St ate of the WTO, with an approximate population 
of 48,000 persons.  Consequent on its small populat ion size and domestic market, St. Kitts and Nevis 
has not been able to achieve economies of scale in a number of export sectors, therefore, the need for 
credible investment promotion legislation such as the Fiscal Incentives Act of 1974 has been integral 
to the general economic development of the coun try.  The Fiscal Incentive Act has acted as a 
counterweight to the vulnerability associated with small and vulnerable economies.   
  The much needed incentives have played a leading role in attracting foreign direct investment 
while promoting local entrepreneurship, both of which have made a subs tantial impact on the 
economy.  The fact remains that St. Kitts and Nevis and Nevis continues to face a number of 
challenges which characterise SVEs, including an exceptional high degree of openness to external 
economic developments in relation to trade and cap ital flows, along with a concentration of exports 
on a narrow range of commodities and markets.  Th erefore, the Government has seen it as necessary 
to keep the Fiscal Incentives Act in  place and to seek a further extension to effectuate comprehensive 
economic growth and stability.  
 
Q3. The basis for requesting the extension is that St. Kitts and Nevis is a small, vulnerable 
economy which suffers from the combined effect of  diseconomies of scale caused by small size of 
its economy and administration and by its physical isolation. If the above distorting factors are 
not brought under control before 2018, would there be a request for a new extension for the 
phasing out of the prohibited subsidies? Please explain why these characteristics of St. Kitts and 
Nevis’ economy prevent the country from comp lying fully and satisfactorily with the WTO 
export subsidy disciplines . 
 Reply
 
  The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1 (e) of 
G/SCM//39. The view of the proponents is to conti nue benefiting from the extension throughout 2018. 
Therefore, the rights and obligations contained in  document G/SCM/39 and Article 27.4 of the ASCM 
would remain unchanged.    Assuming that Colombia is referring to “d istortion factors” as meaning the “relevant 
economic, financial and social needs” provided for in  Article 27.4 of ASCM, please note that St. Kitts 
and Nevis will take a prudent decision on whether an additional request for and extension will be 
made, based on needs and in accordance with th e procedures and timelines established in the 
provisions mentioned above.   G/SCM/Q4/KNA/6 
 Page 7 
 
 
   St. Kitts and Nevis has not sought any additio nal extension (past 2018) under Article 27.4 of 
the Agreement on Subsidies and Countervailing Measures.  Although the challenges which have 
necessitated the need for the Fiscal  Incentives Act have remained a primary hindrance to economic 
development, it would be premat ure to predict whether these obs tacles would continue to be 
paramount in 2018.  This does not take away from th e fact that St. Kitts and Nevis will undertake a 
wide-ranging evaluation of the FIA with the inte ntion of assessing its viability and measuring its 
feasibility to the overall economy.   In addition, St. Kitts and Nevis is of the vi ew that, its programmes are fully compliant with 
the Article 27.4 provisions of the SCM agreement which enshrines special and differential treatment 
in the ASCM, as well as conformity with the pro cedures in G/SCM/39. The five programmes are fully 
and satisfactorily in compliance with these relevant WTO disciplines. However, there are important reasons why St. Kitts and Nevis has not been in a position to eliminate its export subsidies and these 
are explained below in question 4.   Q4. Please explain why the situation which has prompted the request for an extension calls 
for allowing the granting of prohibited subsidies until 2018 and not earlier.  
Reply
 
  Article 27.4 of ASCM provides that “if a de veloping country Member deems it necessary to 
apply … [export] subsidies beyond the 8-year period [mentioned in article 27.2(b)], it shall not later 
than one year before the expiry of this period en ter into consultation with the Committee, which will 
determine whether an extension of this period is ju stified, after examining all the relevant economic, 
financial and development needs of the developing country Member in question. If the Committee 
determines that the extension is justified, the de veloping country Member c oncerned shall hold annual 
consultations with the Committee to determine the necessity of maintaining the subsidies.” 
   
 Members that deemed it was necessary to apply export subsidies, due to their particular 
characteristics and needs, requested extensions under this provision as well as according to the 
outcome of the negotiations in Doha contained in document G/SCM/39 . G/SCM/39 provides for 
fast-track procedures for the approval of the ex tensions. Members inter ested in obtaining these 
benefits have been required to meet criteria n ecessary to justify approval from the Committee in order 
to maintain their export subsidies. In fact, these criteria are based on the economic, financial and 
development needs of the beneficiary Members.    In this regard and in accordance with the above-mentioned provisions, the Committee granted 
to a group of Members the authority to maintain export subsidies during a specific period subject to 
two ‘transparency’ and ‘standstill’ commitments.   As provided in document G/SCM/39, the author ity granted to the beneficiary Members is 
valid until the end of 2007. After this date, th ese Members have either the possibility to seek a 
continuation of the extension, pursuant to Article 27.4 of the ASCM, or still have the final two years 
referred to in the last sentence of such Article. 
  St. Kitts and Nevis, based on national private sector consultation and analysis has concluded 
that it is necessary to request a new extension based on the economical, financial and development 
needs. In the case of St. Kitts and Nevis, it is a ve rifiable fact that the main export industry has 
collapsed even while export subsidies have been provide d. To this end, the conditions that existed and 
justified the extension in 2001 persist. The e xport subsidy programme has proved an effective 
instrument in attraction of foreign direct invest ment, export base diversification and job creation. 
 G/SCM/Q4/KNA/6 
Page 8  
 
   The choice of the suggested date of 2018 should  be read in the light of the discussions that 
had taken place before the adoption of SCM/G/SCM/39.  At that time, the proponents of this document 
had already expressed their needs and the reasons to eliminate their programmes over a long enough 
timeframe, possibly extending over 20 years.
7  
 
 In this regard, St. Kitts and Nevis is convin ced that a new extension will foster the export 
sectors and contribute to lift our people out of poverty. The three programmes that [country] has notified have had a very positive impact in a smal l country with a very limited export base and a 
miniscule participation in world trade.  They have been instrumental to foster and diversify the export 
sector towards the production of manufactured  goods, reducing the dependence on agricultural 
commodities and the negative impacts suffered due to th e plunge of international prices during the last 
years.  Needless to say, the spillover effects of job creation, transfer of technology and know-how, as 
well as poverty reduction have been remarkable.   However, these positive effects still are not enough. Members should bear in mind that 
St. Kitts and Nevis still has a small and vulnerable economy. In the case of St. Kitts and Nevis, not a 
single manufactured product has reached export comp etitiveness at an international level. On the 
other hand, St. Kitts and Nevis shares a microscopic share of world exports.    Moreover, one should take into account that th e process of globalization entails the possibility 
of a non-optimal insertion of small and vulnerable ec onomies in the international markets, due to their 
size and endogenous constraints.  Therefore, adequate  measures have to be incorporated into the 
multilateral trading regime in order to assist countries like St. Kitts and Nevis to reap tangible benefits 
from trade.    Foreign direct investment in the form of new manufacturing plants and service providers is 
the key answer for developing our exports and benef iting from trade liberalization.  It is clear that 
export subsidies continue to contribute to attraction of foreign direct investment to small markets like 
those of the SVEs and particularly St. Kitts and Nevis. In light of this, St. Kitts and Nevis is 
convinced that trade is a tool to achieve sustai nable development and that poverty reduction is a 
natural result of job creation.  In our case, the only real possibility to create the quantity of jobs needed to lift our population out of poverty is through foreign direct investment and the expansion of 
the export base.  We need to grow-out of under-performing commodities to the production of value-
added goods.   As explained earlier, the proposal of extens ion seeks a longer transitional period, under the 
same conditions as have been negotiated under the Uruguay Round Agreements and subsequently 
during the Doha Ministerial Conference.  One of th e main reasons is the underdevelopment that still 
plagues St. Kitts and Nevis.    Not only do the subsidy programmes contribute to the implementation of policy objectives such as industrialization, diversification and employm ent, but they also encourage imports - at duty 
free or reduced tariff levels – of raw materials and inputs originating in developed and other 
developing countries, thereby contributing po sitively to the multilateral trading system. 
  Most of the proponents are heavily dependent on exports of either agricultural products or 
services, but none of the proponents has yet an established broad and strong manufacturing base. At best, some of the proponents rely on a very limite d number of products of little value added, such as 
minerals, wood products or clothi ng. While these sectors or products have so far constituted the main 
source of income and growth for the SVEs, they could not in any case be seen as an exclusive option 
within a safe development strategy.  
                                                     
 
7 See G/SCM/38  G/SCM/Q4/KNA/6 
 Page 9 
 
 
   
 In this sense, policies that promote econo mic diversification, and particularly the 
industrialization of the SVEs, have a strategic role to  play in reducing the vulnerability that affects the 
proponents. This is the context in which the subsidy programmes were designed and are being 
implemented. While they are not the only policy instrument in the proponents’ diversification 
strategy, they certainly constitute one of the ma in elements of these strategies and have proved 
instrumental in fostering an embryonic diversification process.   In consequence, Members should take into acc ount that the new extension is being required 
based on the relevant economic, financial and devel opment needs of the beneficiaries. These needs 
remain practically the same as they were shown to justify the extension and the fast track procedures 
in 2001. The proposed date of 2018 is consistent with the discussions that had taken place before the 
adoption of SCM/G/SCM/39. At that time, the propo nents of this document had already expressed the 
reasons and the needs to eliminate their progr ammes over a long enough timeframe, possibly 
extending over 20 years. By definition, a developm ent strategy cannot yield the desired results over 
the short run. Consequently, to ensure that devel oping countries are able to fully integrate and obtain 
real benefits from the multilateral trading system, development strategies have to be designed for the 
medium and long term.    Furthermore, as proponents, we are convinced that our special needs would justify the extension operationally similar to that agreed in G/SCM/39. 
 
 The proponents of this extension look forwar d to working with inte rested WTO Members in 
order to clarify any data regarding our economic, fi nancial and development needs.  We all, as WTO 
Members, share the responsibility of utilizing trad e liberalization to redu ce poverty and have positive 
impacts in our economies.  This is a good opportunity to work together. 
 G/SCM/Q4/KNA/6 
Page 10  
 
  JAPAN
 
 
Q1. Please show the reasons why the lengthy exte nsion of 11 years is indispensable uniformly 
for all the export subsidy programmes referred to in the above documents. 
 Reply
 
  The choice of the suggested date of 2018 should be understood in light of the discussions that 
had taken place in 2000/2001 and led to the adoption of G/SCM/39 (the decision that allowed for the 
current extension). At that time, the proponents of  this G/SCM/39 had expressed concern with respect 
a short extension would not allow time for the n ecessary structural transformation needed to wean 
industry off government subsidies. Specifically, it was suggested that a timeframe of sufficient 
duration, and adequate to allow time for sectoral and macro-economic adjustment was required. In this context, the proponents offered that 20 years w ould be adequate. In light of those discussions and 
taking into account the legitimate fiscal, economic an d development needs of St. Kitts and Nevis, the 
extension proposed in G/SCM/W/535 should be regarded as an appropriate extension.  
  It should be noted that all of St. Kitts a nd Nevis’s programmes generally share the same 
objectives, structure and design. Similarly, the economic imperatives that necessitate such 
intervention, prevail almost uniformly in the ec onomies of other proponents of G/SCM/W/535, hence, 
the rationale of a uniform timeframe is supported by  the similarities that exists between programmes 
and the intended policy effects they aim at. Moreover, all proponents face the same structural 
weaknesses which justify th e proposed extension.  
  Finally, in this regard, it must be acknow ledged that St. Kitts and Nevis, like the other 
proponents of G/SCM/W/535, have suffered the adve rse impacts of multiple external shocks. These 
shocks have setback the realisation of policy outco mes, desired and contemplated in G/SCM/39. The 
combined effects of multiple natural disasters, externalities resultant from September 2001, as they 
relate to tourist arrivals, and the doubling of the wo rld market price for oil have all conspired against 
the fulsome insertion of St. Kitts and Nevis and the other proponents into the global economy. 
  Furthermore, the uncertainty relating to the future of the Doha R ound negotiations and the 
significant transformation in the global trading envi ronment have triggered ne w challenges that will 
require some level of intervention in the domestic sector of small economies to ensure the economic 
survival of domestic producers.  Interested par ties should note that this requested extension by 
St. Kitts and Nevis comes at time of major change s in the global trading environment which have 
worked against the development of the industrial and manufacturing base of the smallest Member of 
the multilateral trading system.
8 More specifically, the Federation of  St. Kitts and Nevis continues to 
grapple with the economic fallout resulting from the closure of its 300-year-old sugar industry.  
  St. Kitts and Nevis has applie d and notified only one programme
. This programme remains at 
the core of St. Kitts and Nevis’s export deve lopment strategy. Notwithstanding the sub-optimal 
performance of this instrument, its maintenance is necessary to offset the negative externalities 
associated with the closure of the sugar industry. Moreover, this programme is critical to engendering 
a more diverse export base and is an essential tool to  lift people out of poverty. For these reasons, it is 
indispensable to have a uniform extension for St. Kitts and Nevis’s e xport subsidy programme.  
 
Q2. Please explain, one by one for each of the export subsidy programmes referred to in the 
above documents, how each of those export subs idy programs are integrated in the development 
strategies of the relevant Me mber, why a further extension beyond 2007 is necessary for its 
                                                      
8 With a population of 48,000 St. Kitts and Nevis has the smallest population of all WTO Member 
States   G/SCM/Q4/KNA/6 
 Page 11 
 
 
  economic and financial needs, and why the extens ion period has to be through to the end of 
2018. 
 
Reply  
 
 As indicated above, St. Kitts and Nevis mainta ins one (1) programme pursuant to Article 27.4 
– the Fiscal Incentives Act, St. Kitts and Nevis of 1974 (FIA).  
 
 The information regarding each of the progra mmes notified by St. Kitts and Nevis, including 
how these programmes are integrated into the devel opment strategies of the country, is available in 
the documents submitted in 2001 to obtain the current  extension.  Furthermore, this information is 
available in each of the annual notifications that  St. Kitts and Nevis has submitted to the Committee 
on Subsidies and Countervailing Measures in compliance with the transparency and standstill obligations.   If the information contained in these o fficial documents is not sufficient, St. Kitts and 
Nevis would be pleased to respond to any further ques tions in the course of the discussions before the 
Committee. 
  As stated above, St. Kitts and Nevis conti nues to face a number of economic challenges such 
as the closure of the 300-year-old sugar industry. Th is, coupled with the concentration of exports on a 
narrow range of commodities and markets, necessita te the utilisation of non-trade distorting subsidy 
measures like the Fiscal Incentives Act of 1974, to encourage investment and to promote the much-
needed diversification of the economy.  
  The Fiscal Incentives Act allows for the granting of tax holidays of up to fifteen (15) years, 
for the manufacture of approved products by approved enterprises.   
 Where an approved enterprise is engaged in a hi ghly capital intensive industry, it may receive 
some benefit for a period of up to 15 years.   The Act also grants import duty exemptions for machinery, equipment and spare parts, 
building material, raw materials and others, as appr opriate, to be used in eligible enterprises.  
 
 The Fiscal Incentives Act No. 17 of 1974 further provides for income tax relief under certain 
circumstances once the tax holid ay period has expired. The relief is contingent on export 
performance. It is granted on the export profits  of an enterprise accruing from the export of its 
approved product. Relief is  provided for non-traditional exports to  all countries; however, in the case 
of exports to Guyana, Jamaica and Trinidad and T obago, the period of relief is of only five years 
immediately following the expiration of the tax holiday period.   
 G/SCM/Q4/KNA/6 
Page 12  
 
   
PERU 
 
Q1. Do the co-sponsors of proposal G/SCM/W/535 intend to extend only the programmes 
which have been notified to date under Ar ticle 27.4 of the Agreement on Subsidies and 
Countervailing Measures and which are included in  Annex A of their Proposal or do they 
intend to include any other export subsidy progr amme which fulfils the criteria set forth under 
2 in document G/SCM/39? 
 
Reply
 
 
 The proposal contained in G/SCM/W/535 a nd G/SCM/W/535/Add.1 refers only to the 
amendment of paragraph 1(e) of G/SCM/39.  Therefore, the intention of the sponsors of 
G/SCM/W/535 is to continue benefiting from th e extension until the end of 2018 based on the 
conditions and activating procedur es specified in G/SCM/39. These conditions and procedures are to 
remain unchanged. This clearly excludes the po ssibility to include additional programmes.  
 
Q2. Under what laws and enabling regulations are the programmes listed in Annex A of the 
proposal implemented?   
Reply
 
 
 The enabling legislation which allows for the implementation of the listed programme is the 
Fiscal Incentives Act No. 17 1976. 
 Q3. What sectors and products benefit from the programmes? 
 
Reply
 
  Currently, 62 firms benefit under the provisions of the Fiscal Incentives Act . The main 
beneficiaries of this facility are firms engage d in the manufacturing and agro-processing sectors.  
 Q4. What amount is disbursed by the Stat e to the programme listed in Annex A? 
 
Reply
 
  Government intervention in support of industr y largely takes the form of revenue forgone. 
While the quantum of contribution is not immediatel y available, work is continuing in Capital to 
generate specific figures with respect to the above.   G/SCM/Q4/KNA/6 
 Page 13 
 
 
  UNITED STATES 
 
Q1. Please describe what efforts St. Kitts and Nevis has made to phase out the programme 
within the extension period that has already been granted, as provided under the “Procedures 
for Extension Under Article 27.4 for Certain Developing Country Members. ”9  Please further 
describe how St. Kitts and Nevis will continue to ensure that the programme will be phased out, 
if an additional extension were granted.   
 
Reply  
 
 St Kitts and Nevis has deployed a monitoring m echanism directed at ascertaining the level of 
performance of firms benefiting from export subsidi es. The specific aim of this mechanism is to 
ascertain whether beneficiaries ha ve reached export competitiveness. 
 
Q2. Please describe changes to the programme since 2001.  Also, please provide any updated 
or revised implementing legislation, and an y relevant amendments, unde r this programme and 
any accompanying regulations and decrees.  
 
Reply  
  There have not been any changes to  the Fiscal Incentives Act since 2001. 
 
Q3. How many beneficiaries of this progr amme were there in 2001?  How many 
beneficiaries are there currently under the prog ramme?  What types of industries currently 
benefit under the programme? 
 Reply
 
  There were 56 companies benefiting from the Fiscal Incentive Act in 2001. There are now 62 companies benefiting form the Fiscal Incentives Act.   The vast majority of industries which benefit 
from the Act are in the manufacturing sector.   
Q4. Did St. Kitts and Nevis undertake any commitments to provide export subsidies to new 
beneficiaries beyond the year 2009?  If so, please indicate the number of such beneficiaries by 
the year in which those commitments extend. 
 
Reply
 
 
 St Kitts and Nevis continues to implement th e Fiscal Incentives Act within the scope of the 
provisions of Article 27.4 of the Agreemen t on Subsidies and Countervailing Measures. 
  
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9 G/SCM/39