WORLD TRADE  
ORGANIZATION  G/SCM/Q2/EEC/65 
22 October 2010 
 (10-5499) 
Committee on Subsidies and 
Countervailing Measures Original:   English/ 
 Spanish 
 
 
 
SUBSIDIES 
 
Replies to the Questions Posed by AUSTRALIA1 Regarding the New and Full  
Subsidies Notifications of the EUROPEAN UNION2 
 
  The following communication, dated 12 October 2010, is being circulated at the request of the delegation of the European Union.  
_______________ 
 
 
European Union
 
 
Question 
 
Aid to the Coal Industry  
 
 According to EU notification and Council Regulation (EC) No. 1407/2002, the aid may 
not cause prices for EU coal to be lower than th ose for coal from third countries.  Can the EU 
please provide details of the eligibility criteria and guidelines for expenditure under this 
programme, and details of the aid provided under the heading 'other' in the notification?  How does the EU ensure that the aid does not cause EU coal to be lower priced than third country 
coal?  What is the effect of the aid on the c oal and related markets (e.g. coke production and 
steel)? 
 Reply
 
  Council Regulation (EC) No. 1407/2002 on State aid to the coal industry distinguishes 
three types of aid:  
• Production aid (either aid for the reduction of activity
3 or aid for accessing coal 
reserves) 
• Investment aid 
• Aid to cover exceptional costs (this corresponds to the heading "other" in the tables of 
the notification) 
 
                                                      
1 G/SCM/Q2/EEC/60. 
2 G/SCM/N/186/EEC, G/SCM/N/186/EEC/Add.13, G/SCM/N/186/EEC/Add.14, G/SCM/N/186/EEC/ 
Add.25 and G/SCM/N/186/EEC/Add.27. 
3 Only until 31/12/2007. G/SCM/Q2/EEC/65 
Page 2  
 
   A Member State must notify the intended aid measure to the Commission and may not 
implement it until it is authorized by the Commission.   The Regulation specifies that production aid
 must be degressive and must not exceed the 
difference between the foreseeable production costs a nd the foreseeable revenue and the aid may not 
cause delivered prices for EU coal to be lower than those for coal of a similar quality from third 
countries.  In their notification, the Member States must provide the Commission with data on 
estimated production costs and revenues as well as to show which mechanisms w ill be used to ensure 
that the subsidized coal is not sold at a price be low the price of imported coal of the same quality.  
The Commission may compare these data with the data on the prices of coal imported from 
third countries which it collects from all Member States. 
  Investment aid
 is aid intended to cover initial investme nt costs.  The notifying Member State 
must show to the Commission that the aid does not  cause delivered prices for EU coal to be lower 
than those for coal of a similar quality from thir d countries.  The aid may not exceed 30 per cent of 
the total costs of the relevant investment project  and may not be cumulated with production aid. 
  Aid to cover exceptional costs
 is aid granted to undertakings which carry out or have carried 
out a coal mining-related activity and enables them to cover costs arisen during restructuring, but 
which are not related to current production, such as costs related to the environmental rehabilitation of 
former coal mining sites, early retirement schemes or re-training costs of former staff. 
 
 For all aid categories, the Regulation specifies that the aid must not lead to any distortion of competition on the electricity market, the market for combined heat and electricity production, the coke production market and the steel market.  
 Note that Regulation 1407/2002 expires at  the end of 2010.  The Commission services are 
currently assessing whether other legisla tive options would be appropriate. 
 
Italy
 
 
Question 1 
 
Extraordinary intervention in the South of  Italy (Ministry of University and Research ) 
 
 This programme is intended to provide aid to entrepreneurial activities in 
disadvantaged areas.  The subsidy is provided through a grant and soft loan.  In 2007, total 
disbursements under the grant were €22,743,720. 36 and under the soft loan were €826,849.75.  
In 2008, total disbursements under the grant we re €3,042,964.54 and under the soft loan were 
€2,161,469.48. 
 
 Can Italy please provide details of the elig ibility criteria and guidelines for expenditure 
under this programme? 
 
Reply  
  Article 1, section 2 of the Law 488/92 "Ordin ary intervention regulation for depressed areas" 
was implemented by the Ministerial Decree 629/19 97 (published in the Official Gazette number 21 
dated 03/02/1998). 
  Ministerial Decree 629/1997 describes procedural arrangements to finance the implementation of research projects and research centres within the competences of the Ministry of  G/SCM/Q2/EEC/65 
 Page 3 
 
 
  University and Research.  The subsidies aimed at developing research projects in less developed areas 
in southern Italy.   Ministerial Decree 629/97 expired in 2001 an d it has been replaced by  the Law No. 297/99, 
entitled "Reorganisation of the regulations and the streamlining of procedures to support scientific and 
technological research, for the dissemination of  technologies and Researcher mobility".  The 
legislation  became operational on 17 February 2001 by Mini sterial Decree of 8 August 2000, No. 593. 
  Ministerial Decree 593/00 provides facilities fo r industrial research projects proposed by 
enterprises in partnership with Universities, to  create new high technology business ventures.  The 
Law provides incentives for less developed areas in southe rn Italy.  Concerning the type of financing, 
this can be capital subsidies and loans.   Subsidies are subjected to a call for interest.  It means that, on the basis of available financial 
resources, subsidies are granted to enterprises wh ich submit an application to the Ministry of 
University and Research to carry out research programmes. 
  Following the procedures described in the Mi nisterial Decree 593/00 and according to the 
criteria set in the call for interest, the Ministry w ill draw up a ranking list for the applicants.  Subsidies 
are paid on that basis.  Payments are made every six months, based on the progress of the investment research programmes. 
 
Question 2 
 
Extraordinary intervention in the South of  Italy (Ministry of Economic Development)
 
 
 This programme is intended to provide aid to entrepreneurial activities in disadvantaged areas.  The subsidy is provided in  the form of a grant.  In 2007, €315.12 million 
was granted.  In 2008, €171.95 million was granted. 
 
 Can Italy please provide details of the elig ibility criteria and guidelines for expenditure 
under this programme? 
 
Reply
 
  Law No. 488/92, provides aid to entrepreneurial activities in the disadvant aged areas in form 
of grants.  The last re-financing of this law dates back to 2006, whose terms were closed on 
15 September 2006;  currently there are no new interventions. 
  Law 488/92 is directed to industry, commerce and tourism sector.   In particular, the subsidies are paid to fina nce investments ensured by:  new firms or the 
setting-up of a new establishment;  the extension of  an existing establishment;  the re-engineering or 
the re-conversion or the diversifica tion of the output of an establishm ent into new additional products;  
a fundamental change in the overall production process of an existing establishment;  the transfer of 
local unit.   Eligibility criteria are the e xpenditures in capital goods like:  land acquisition, building works 
(housing), infrastructure, machinery-plants and equipment, computer software and patents. 
  Beneficiaries are enterprises (including individual ones) which invest in some sectors (or subsectors or activities), provided that, by observing the existing planning and law constraints, they G/SCM/Q2/EEC/65 
Page 4  
 
  have full availability of buildings where the investme nt programme is implemented at the expiry date 
for submitting the application.   Investment programmes can be financed whether they involve a total eligible expenditure not 
exceeding €50 million.  These programmes cannot be less than €1 million, subject to the capacity of 
local governments (regions) to modify the previous amount within the following limits: 
 
• From €150,000 to €1,000,000 for service activities; 
• from €400,000 to €1,500,000 for industry. 
 The subsidies granted will be in the form of capital subsidy and aid in form of subsidized 
interest rate.  
 The intensity of subsidy is in relation to th e size of the firm and to the geographic area. 
  Subsidies are subjected to a call procedure.  It  means that, on the basis of available financial 
resources, subsidies are ensured to the enterprises wh ich presenting an application at the Ministry of 
Economic Development want to realize investment  programmes.  The Ministry will define, in 
conformity with some national regulations, criteria to  classify the enterprises to  have a ranking list.  
On that basis subsidies are paid.   Payments will be made in 2-3 stages in relation to the progress of the investment programme.  
 
Ireland
 
 
Question 1 
 
Scheme of grant aid for the development of the organic sector - off farm  
 
 This programme is intended to facilitate th e development of the organic sector so as to 
ensure a regular supply of high-quality organic produce to the market.  The scheme provides financial assistance in respect of approved invest ment/development projects, including the sale 
of organic products as part of a wider organic  operation.  The grant aid is payable at 40 per 
cent of the eligible cost.  The maximum subs idy payable for off-farm investment is €500,000. 
 
 Can Ireland please provide details of the to tal cost of the programme for 2007 and 2008 
and the major products supported? 
 
Reply
 
 
 The total amount paid under the scheme in 2007 was €258,308.90.  In 2008 the total amount 
paid under the scheme was €386,879.74.  In both years eight projects were funded respectively.   The projects funded under the scheme were to  improve and develop facilities in premises 
used for the sale of organic products as part of a wider organic operation, such as: 
 
• Catering equipment, computer racking and shelving 
• Cold Storage room and associated building works 
• Baking oven  G/SCM/Q2/EEC/65 
 Page 5 
 
 
  • Organic bottling line 
• Food portioning machine for organic production 
• Packaging, filling and heat sealing machine for organic yoghurt production 
• Mobile freezer 
• Automatic drinkers and feeders for poultry houses 
• Retail refrigeration and building works 
• Retail refrigerated display case 
• Mobile drainage tables and shelving for organic cheese production 
• Salt Mixer industrial dish washer 
• Multimold ladles for organic cheese production 
• Refrigeration bulk milk tank and building works for organic cheese production 
 The products that would therefore benefit fro m this scheme would be mainly dairy (cheese 
and yogurt production) poultry and beef production.  
 Only 1 per cent of the total utilizable agri cultural land area (UAA) is used in organic 
production in Ireland.  As a conseque nce, the aid that is being provided in the organic sector is not 
considered to have any impact on trade.  
Question 2 
 
Unnotified subsidies:  Support to the Pharmaceutical Sector
 
 
 We note that Ireland has not provided any notification of subsidies paid to the 
pharmaceutical sector.  The IDA Ireland Investme nt Promotion Agency website provides that 
"IDA may provide financial support to [pharmaceu tical] companies wishing to locate in Ireland 
...  The unique characteristics of any proposed project will determine the incentive package 
available ...  IDA evaluates potential projects thro ugh a process of negotiation ...  The type of 
grants that are available include;  Employment Grants, R&D Grants, Training Grants, Capital 
Grants".  [http://www.idaireland.com/business- in-ireland/life-sciences-pharmaceuti/why/] 
 
 The Enterprise Europe Network website page  on the Pharmaceutical Sector in Ireland 
also provides that Ireland has recently introduced a new R&D Tax Credit, designed to encourage companies to undertake new and/or addi tional R&D activity in Ireland, which covers 
wages, related overheads, plant/machinery, and buildings. [http://www.sligochamber.com/admin/browser/a rchive_library/factsheet%20the%20pharmace
utical%20sector%20in%20Ireland%202.pdf] 
 
 Can Ireland please provide details of all s ubsidies provided to the pharmaceutical sector 
and pharmaceutical companies in 2007 and 2008 , including by the IDA Ireland Investment 
Promotion Agency?  Can Ireland please provide details of the eligibility criteria and guidelines G/SCM/Q2/EEC/65 
Page 6  
 
  for expenditure for the programmes that provided these subsidies?  Can Ireland please provide 
details of the eligibility criteria and guidelines for the R&D Tax Credit? 
 
Reply
 
 
 Neither the IDA nor Ireland has a specific subsid y in place for the pharmaceutical sector.  All 
sectors are eligible for grant aid for projects that comply with State Aids.  Details of schemes are 
available on the website of this Department (www.deti.ie).   As for the R & D tax credit, this is not restrict ed to pharmaceuticals.  Rather it is open to all 
companies undertaking R&D activities. 
  The R&D tax credit scheme was introduced in Finance Act 2004.  It is open to any company 
undertaking R&D activities.  
 The scheme is covered under sections 766 and 766A of the Taxes Consolidation Act, 1997. 
  Finance Act 2004 introduced a 20 per cent tax credit for incremental
 expenditure on R&D as 
compared to qualifying R&D expenditure in a base year (2003).  Use of the base year 2003 has been 
made permanent under the scheme.  Expenditure on qualifying R&D in 2003 is the base against which 
increased R&D expenditure in any subsequent year is measured for the purpose of the tax credit. 
 
 The tax credit was increased from 20 per cent to  25 per cent in Budget 2009 in respect of 
accounting periods commencing on or after 1 January 2009.   The credit can be offset against a company's Corporation Tax liability for the year the 
expenditure occurred and any unused credit can be carried forward indefinitely against the 
Corporation Tax liability for subsequent accounting periods of the company until it is used up. 
 
Spain
 
 
Question 1 
 
Aid to job creation projects in mining areas  
 
 This programme is inte nded to promote regional de velopment through aid for 
investment projects that help to reduce the depe ndency on coal mining of the areas concerned. 
 
 Can Spain please provide details of the elig ibility criteria and guidelines for expenditure 
under this programme? 
 
Reply  
 
 As explained in Spain's notification G/SCM/N/186/EEC/Add.25 , all the  details are set forth 
in Ministerial Order ITC/1044/2007 of 12 April, adopting the regulatory basis for aid for job creation business projects that promote the alternative de velopment of mining areas, for the period 2007-2012 
(Official Journal of 20 April 2007).  http://www.mityc.gob.es/PortalAyudas/carbon /normativa/Bases/Proyectos%20empresariales%
20generadores%20de%20empleo/OrdenITC_1044_2007.pdf) 
  G/SCM/Q2/EEC/65 
 Page 7 
 
 
  Location: 
  The projects must be located in mining regi ons.  Municipalities are classified as follows: 
 
(a) Group 1: Mining municipalities heavily affected by the restructuring of coal mining. 
(b) Group 2: Municipalities affected by the restructuring of mining, adjacent to those in 
Group 1. 
(c) Group 3: Other municipalities forming the territory established in the Ministerial 
Order of 17 December 2001. 
Type of project: 
 
 Aid may be granted to projects relating to econom ic activities that are eligible to receive aid 
under current domestic and Community legislation, with the exception of:  1. Projects relating to the coal industry, the steel and textile fibre industries (defined in 
Annexes B and D of the Multisectoral Framework on Regional Aid for Large Investment 
Projects) and the shipping industry.  Nor is aid granted to companies in difficulty, in 
accordance with the Community Guidelines on State Aid for Rescuing and Restructuring 
Firms in Difficulty (Official Journal of the European Union C 244 of 1 October 2004). 
 2. Projects relating to the fisheries sector, including aquaculture, and to the electricity 
production and transport sectors. 
 3. Projects relating to the services sector, except fo r industrial business services, health care, and 
activities relating to rural tourism, leisure a nd the environment.  Bars, restaurants, car 
dealerships, dry-cleaners, professional o ffices and consultancy services are excluded. 
 
4. Projects involving activities relating to the produc tion of the products listed in Annex I of the 
Treaty establishing the European Community. 
 Requirements:  
 The minimum investment is €240,000.  A minimum of three jobs must be created. 
 Amount of aid:   Group 1 municipalities may be granted up to 100 per cent of the maximum level of aid 
established by the European Commission in the Eur opean Commission-approved regional aid map.  
Group 2 municipalities may receive up to 50 per cent of the maximum amount stated.  Group 3 municipalities may receive up to 25 per cent of the maximum admissible level.  
Question 2  
 
Aid for coal mining
 
 
 This programme is intended to cover the difference between coal mining costs and coal 
sales revenues.  Non-repayable subsidies are granted to coal-mining companies whose production costs exceed their sales revenue.  In 2007 and 2008, €85,302,800  was granted to State 
enterprises to cover losses.  In 2007, €284,321,4 20 was granted to private enterprises to cover G/SCM/Q2/EEC/65 
Page 8  
 
  losses and in 2008, €266,500,000 was granted to private enterprises to cover losses.  Costs related 
to closure (social and technical costs) are also subsidized. 
 
 Can Spain please provide details on the extent  to which coal produced by the recipients 
of the aid provided by this programme is expo rted?  Can Spain please provide the number of 
State enterprises who received aid to cover losses (2007 and 2008 figures), the number of private 
enterprises who received aid to  cover losses (2007 and 2008 figures), the number of State 
enterprises who received aid for the social costs of the closure of mining operations and early 
retirement (2007 and 2008 figures), the number of  State enterprises who received aid for the 
technical costs of the closure of mining operati ons and early retirement (2007 and 2008 figures), 
the number of private enterprises who received aid for the social costs of the closure of mining 
operations and early retirement (2007 and 2008 figures), and the number of private enterprises who received aid for the technical costs of the cl osure of mining operations and early retirement 
(2007 and 2008 figures)? 
 Replies
 
2.1 Can Spain please provide details on the extent  to which coal produced by the recipients 
of the aid provided by this programme is exported? 
 
Reply  
 
 Spain does not export any of this coal.  It is  consumed wholly within the domestic market. 
 
2.2 Can Spain please provide the number of State enterprises who received aid to cover 
losses (2007 and 2008 figures)? 
 Reply
 
  The only State enterprise to receive aid was HUNOSA.  
2.3 Can Spain please provide the number of private enterprises who received aid to cover 
losses (2007 and 2008 figures)? 
 
Reply
 
  In 2007, 27 enterprises received this ty pe of aid.  In 2008, there were 16. 
 2.4 Can Spain please provide the number of Stat e enterprises who received aid for the social 
costs of the closure of mining operations and early retirement (2007 and 2008 figures)? 
 
Reply
 
  Only one State mining enterprise, HUNOSA, receives aid for early retirement and closure 
costs. 
 
2.5 Can Spain please provide the number of State enterprises who received aid for the 
technical costs of the closure of mining operations and early retirement (2007 and 2008 figures)? 
 Reply
 
  Same reply as above.   G/SCM/Q2/EEC/65 
 Page 9 
 
 
  2.6 Can Spain please provide the number of private enterprises who received aid for the 
social costs of the closure of mining opera tions and early retirement (2007 and 2008 figures)? 
 
Reply  
 
 In 2007, 27 enterprises were affected.  In 2 008, there were 16.  This is because the early 
retirement plan affects the entire sector.  
2.7 Can Spain please provide the number of private enterprises who received aid for the 
technical costs of the closure of mining operations and early retirement (2007 and 2008 figures)? 
 
Reply
 
  In 2007, two enterprises received aid for tec hnical costs relating to closure.  In 2008, 
two other enterprises received this type of aid.  There is a delay in receiving the aid, as enterprises 
have two years in which to close down their insta llations properly from when they stop production. 
 
Question 3  
 
Shipbuilding subsidies
 
 
 This programme is intended to ensure that  the shipbuilding sector remains competitive, 
in view of the difficult market situation and th e need to encourage yards to make the necessary 
changes to improve competitiveness.  In 2007, €335,500,910 was granted, and in 2008, €98,965,160 was granted. 
 
 What would the EU's share of the world sh ipbuilding market be if these subsidies were 
not paid? 
 
Reply
 
  As explained in document G/SCM/N/186/EEC/Add.25 , the EU has progressively reduced its 
share of the world shipbuilding market;  this shar e, which stood at 16 per cent in 2005, fell to 8 per 
cent in 2006, 6 per cent in 2007 and 2008, and 2.8 per cent in 2009.  It is therefore clear that this aid scheme has not increased the EU's share of the globa l market.  There is no specific data on what the 
share would be if the aid did not exist.  Question 4 
 
Regional economic incentives scheme
 
 
 This programme is intended to prom ote economic development in the most 
disadvantaged areas.  In 2007, the programme disbursed €278,624,672 and in 2008 it disbursed 
€294,999,177.  
 Can Spain please provide details of the elig ibility criteria and guidelines for expenditure 
under this programme? 
 Reply
 
  The eligibility criteria are listed in Title I of  the Regulations giving effect to Law 50/1985, 
approved by Royal Decree 899/2007 of 6 July (Royal Decree 899/2007 of 6 July, approving the 
regional incentive Regulations giving effect to Law 50/1985 of 27 December ).  These Regulations G/SCM/Q2/EEC/65 
Page 10  
 
  meet the conditions of, and are consistent with, th e aid map approved by the European Union for the 
period 2007-2013.   The promotable sectors covered by this aid scheme are defined in the Royal Decrees delimiting the economic promotion areas (Comunitat Valenciana, Castilla y León, Galicia, Aragón, 
Andalucía, Asturias, Cantabria, Murcia, Castilla  la Mancha, Canarias, Extremadura, Ceuta and 
Melilla).  The relevant legislation can be viewed at: http://www.dgfc.sgpg.meh.es/aplweb/menudinam/nor mativas/1Normativa.jsp?dir=/aplweb/menudina
m/normativas/normativa_ir.jsp&ppa=/aplw eb/incenreg/incentivos_regionales.jsp  
 United Kingdom
 
 
Question 
 
Selective financial assistance  
 
 This programme is intended to attract new inward investment and encourage existing 
companies to develop their international comp etitiveness.  The programme pledged £19 million 
in 2007 and £42 million in 2008 and will be in place until 31 December 2013. 
 
 Can the United Kingdom please provide deta ils of the products produced and services 
provided by the recipients of financ ial assistance under this scheme? 
 
Reply  
  Invest NI's Selective Financial Assistance (SFA) Scheme supports investment and/or job 
creation projects undertaken in Northern Irela nd by companies in the manufacturing and 
internationally tradable services sector.  It is ava ilable to indigenous Northern Ireland companies and 
to inward investors in Northern Ireland.   The range products produced and services provide d by recipients of SFA support in 2007 
and 2008 is summarized below in terms of St andard Industrial Classification (SIC) Codes. 
 
Products Produced (Manufacturing
) 
 Food, Drink & Tobacco Clothing & Textiles 
Wood Products 
Paper products, Printing & Publishing Chemicals & Pharmaceuticals Rubber & Plastic Products Glass, Ceramic & Concrete Products 
Fabricated Metal & Metal Finishing 
Non-Electrical Machinery Electrical, Electronic & Optical Equipment Transport Equipment Other Manufactured Products Services Provided
 
 Construction & Construction Services Business & Financial Services 
Software & Computer Services 
Other Services 
 
__________