WORLD TRADE  
ORGANIZATION  TN/RL/W/191 
16 November 2005 
 (05-5390) 
Negotiating Group on Rules Original:   English 
  
 
SPECIFICITY 
 
Paper from Brazil
 
  
 The following communication, dated 15 November 2005, is being circulated at the request of 
the Delegation of Brazil.  
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I. INTRODUCTION 
 
1. This communication addresses the “specificity” provisions of pertinent paragraphs of 
Article 2 of the WTO Agreement on Subsidies and Countervailing Measures  (“ASCM”), which 
establish that only the subsidies that are specific to an enterprise or industry, or group of enterprises or 
industries, can be considered to fall within the c overage of the Agreement.  The ASCM grants the 
necessary discretion to panels and the investigating authority in making this specificity determination 
in order to maintain the flexib ility necessary to address the wide spectrum of factual circumstances 
that arise in different cases.  
2. This paper, in part, comments on Canada’s  communication on specificity (TN/RL/GEN/6) 
which proposes to codify additional disciplines regarding the application of the specificity 
requirement.  We reserve the right to submit further communications on the issues in this paper as well as other aspects of Part I of the ASCM. 
 
II. COMMENTS ON CANADA’S PROPOSED AMENDMENTS 
 
A. “E
NTERPRISE ,” “INDUSTRY ,” AND “GROUP ” 
 3. In its communication on specificity, Canada proposes as Amendment 1 that the phrase “in 
accordance with international standard industrial classification and ” be added to Article 2.4 of the 
ASCM so that the text is amended to read as follows: 
 
“Any determination of specificity u nder the provisions of this Article 
shall be in accordance with in ternational standard industrial 
classification and  clearly substantiated on the basis of positive 
evidence.” 
 4. In particular, Canada states that the added te xt would serve to reference the United Nations 
International Standard Industrial Cl assification of All Economic Activities (ISIC). 
  
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 5. Brazil considers that the suggested reference could be construed as an excessively strong 
restriction on the ability of the investigating auth ority or panel to rely on the most appropriate 
evidence in each case to de termine the scope of the enterprise or industry, or group of enterprises or 
industries.  While it may be reasonable for an inv estigating authority or WTO dispute settlement panel 
to reference the United Nations ISIC as one evid entiary source in making the determination of 
enterprise or industry, such reference should not be codified and, thus, required as the sole source for 
assessing  the wide and general availability, or not, of the subsidy.    6. More specifically, the current text already requi res that the determination of specificity be 
“clearly substantiated on the basis of positive evidence. ”  We think that Canada’s proposed text could 
be interpreted as a restriction on the sources of positive evidence that may be considered. 
 7. Furthermore, there may be instances where an i ndustry or enterprise, or group of enterprises 
or industries, does not fall clearly within one of the categories defined in the United Nations ISIC.  
For example, subsidies may be conferred on a range  of enterprises, such as a consortium of unrelated 
companies, for the purpose of researching, devel oping, and/or producing a particular product.  
Depending on the product concerned, these enterp rises may come from vastly different industry 
sectors that do not fit clearly into neighbouring United Nations ISIC classifications.  8. Finally, the United Nations ISIC classifications  might not be applicable in instances where 
particular enterprises, industries, or groups of ente rprises or industries do not fall clearly within one of 
the rigid United Nations ISIC classifications.  It should be also discussed whether it would be 
appropriate to bind WTO Members to revised classi fications that are adopted to address new industry 
sectors and activities.  9. For the reasons explained above, Brazil does not  agree with the proposed amendment to the 
text of Article 2.4. 
 B. D
E FACTO SPECIFICITY  
 
1. Canada’s proposed Amendment 2 
 10. In its communication, Canada proposes that Ar ticle 2.1(c) of the ASCM be amended to 
expressly confirm that the mere existence of any of  the four factors does not automatically establish 
specificity, but rather that the “totality of the facts” must be considered.  Specifically, Canada 
suggests that the following sentence -- “These factors shall be evaluated based on the totality of the 
facts, and no one or several of them can necessarily give decisive guidance.”  -- be added between the 
second and third sentence of Article 2.1(c). 
 11. Canada’s proposal could be interp reted to restrain the discreti on of panels and investigating 
authorities from making a specificity determination based  on one factor alone.  Nothing in the text of 
Article 2.1(c) requires a finding of specificity b ased on only one factor.  Conversely, however, there 
may be circumstances where the existence of a singl e factor could be a sufficient basis upon which to 
base such a finding. 
 12. Furthermore, Article 2.1(c) provides that if th ere are reasons to believe the subsidy may in 
fact be specific, “other factors may be considered” (emphasis added).  The use of the word “may” as 
opposed to “shall” indicates that a formulistic eval uation of all four factors in all cases was not 
intended by the drafters.  
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 13. In fact, in applying Article 2.1(c), some pa nels have considered all four factors.  See, e.g., 
European Communities - Countervailing Measures On  Dynamic Random Access Memory Chips From 
Korea , WT/DS299/R, Report of the Panel, adop ted 3 August 2005, at para. 7.230 (“Having 
considered all four factors mentioned in Article 2.1 of the SCM  Agreement  for de facto  specificity. . . 
.”). 
 
14. Finally, Brazil deems that Canada’s proposed  text could add a substantial degree of 
uncertainty regarding what an investigating author ity or a WTO panel must consider by introducing 
the expression “the totality of the facts”.  Would th e authority or panel be required to affirmatively 
investigate each and every fact pl aced before it?  Brazil agrees that investigating authorities and WTO 
panels should consider reasonable explanations and other evidence of non-specificity, but this seems 
to be a clear obligation in the current text and the related provisions regarding the obligations of 
authorities and WTO panels in conducting their assessments.   15. In light of the reasons explained above, Braz il considers that no amendment to the text of 
Article 2.1(c) should be introduced. 
 
2. Canada’s proposed Amendment 3 
 
16. Canada proposes that a footnote be added to  the end of the phrase “the granting of 
disproportionately large amounts of subsidy to certa in enterprises” in Articl e 2.1(c) of the ASCM 
requiring that disproportionality be determined w ith reference to a “relevant objective benchmark, 
such as the relative importance of recipient industr ies, in terms of production value, within the 
jurisdiction of the granting authority.”  17. Although it is reasonable for panel or investig ating authority to use a relevant objective 
benchmark to determine whether the amount of a su bsidy is disproportionate, explicitly defining such 
benchmark would unnecessarily limit panels and inves tigating authorities in their assessment of the 
facts.  There is simply no basis to assume that th is enumerated test would be appropriate, much less 
determinative, in all factual circumstances.  For instance, such a benchmark would blind the panel’s 
or the investigating authorities’ specificity analysis  of cases of targeted building of a greenfield plant 
within a given jurisdiction.   
 
18. Accordingly, Brazil considers that the proposed footnote to Article 2.1(c) should not be 
introduced.  
 
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