WORLD TRADE  
ORGANIZATION  G/SCM/Q4/GTM/5 
11 October 2006 
 (06-4882) 
Committee on Subsidies and 
Countervailing Measures Original:   Spanish 
 
 
PROCEDURES FOR EXTENSIONS UNDER ARTICLE 27.4 
OF THE AGREEMENT ON SUBSIDIES AND 
COUNTERVAILING MEASURES 
 
Replies by GUATEMALA to Questions Posed by CANADA1;  COLOMBIA2; 
JAPAN3 and PERU4 Regarding Documents G/SCM/W/535 and  
G/SCM/W/537 and Addenda  
   The following communication, dated 6 October 2006, is being circulated at the request of the 
delegation of Guatemala. 
  
_______________ 
 
 CANADA
 
 Canada refers to documents G/SCM/W/535 da ted 12 April 2006, which was sponsored by 
14Members and co-sponsored by Guatemala in G/SCM/W/535/add.1, and G/SCM/W/537, a communication from Panama dated 23 June 2006, whic h was co-sponsored by Costa Rica and Jordan 
in G/SCM/W/537/Add.1 and Add.2 respectively.  Canada would like to submit the following 
questions to all proponents of the aforementioned documents. 
 
Question 1
 
 
 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. 
 Response
 
  Guatemala is of the opinion that document G/ SCM/39 only contains procedures for approving 
extensions under Article 27.4 of the Agreem ent on Subsidies and Countervailing Measures 
(SCM Agreement).  Moreover, Guatemala c onsiders that neither document G/SCM/39 nor 
Article 27.4 of the SCM Agreement provides for the progressive  elimination of export subsidy 
programmes. 
                                                     
 
1 G/SCM/Q4/GTM/2. 
2 G/SCM/Q4/GTM/1. 
3 G/SCM/Q4/GTM/3. 
4 G/SCM/Q4/GTM/4. G/SCM/Q4/GTM/5 
Page 2  
 
  Article 27.4 mentions "progressive" elimina tion in the first sentence relating to the 
elimination of export subsidies within the eight-y ear period mentioned in Article 27.3 (b) [sic].  
However, this is a condition completely different  from those relating to the subsidy programmes in 
question.  Moreover, it is clear from the language of  Article 27.4 that such "progressive elimination" 
is not mandatory. 
  At the same time, Guatemala considers that  its export subsidy programmes are fully in 
conformity with its WTO obligations. As a matter of  fact, the current extensions were granted to 
Guatemala in accordance with Article 27.4 of the SCM Agreement and under the procedures and 
conditions established in document G/SCM/39. 
  The above notwithstanding, Guatemala has ma de various efforts to eliminate its export 
subsidy programmes.  This informa tion is available in its replies to questions posed by Members in 
previous years, which can be found in the document series G/SCM/Q3. 
 
 Finally, Guatemala is at Canada's disposal to answer any other question that might arise in the 
course of the discussions before the Committee.  
Question 2
 
 
 Could the proponents of both documents al so 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 new extended phase-out period for certain export subsidy programmes? 
 Response
 
  The documents containing the proposals in question are aimed solely at amending paragraph 1(e) of document G/SCM/39.  Therefore, the rights and obligations contained in document G/SCM/39 and in Article 27.4 of the WTO Agre ement on Subsidies and Countervailing Measures 
(SCM Agreement) would be left unchanged. 
 
 Consequently, with regard to the question asked  by Canada, Guatemala will take the relevant 
decision at the opportune moment, based on its specif ic financial, economic and development needs, 
in accordance with the procedures and time frame la id down in the above-mentioned provisions.  As a 
Member of the WTO, Guatemala has designed its development strategies to address these needs with 
a view to using trade promotion as a means of reduc ing poverty and thus achieving fruitful integration 
into the world economy.  However, these objectiv es can only be attained with the support and 
cooperation of the entire membership of the WTO.  
Question 3
 
 
 Recalling that the previous extension of th e 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? 
 
Response
 
 
 Article 27.4 of the SCM Agreement provides that  "[i]f a developing country Member deems it 
necessary to apply such subsidies beyond the 8-year pe riod, it shall not later than one year before the 
expiry of this period enter into consultation w ith the Committee, which will determine whether an 
extension of this period is justified, after ex amining all the relevant  economic, financial and 
development needs of the developing country Member in question".  G/SCM/Q4/GTM/5 
 Page 3 
 
 
  Members that deemed it necessary to apply export subsidies beyond the above-mentioned 
eight-year period on account of their particular ch aracteristics and needs re quested extensions under 
this provision and in accordance with document G/SC M/39, the latter, which resulted from the Doha 
negotiations, having established e xpedited procedures for facilitating the extension approval process. 
 
 Thus, Members interested in obtaining these concessions had to meet certain requirements and criteria that justified the approval of their expor t subsidies and, accordingl y, in conformity with 
the above-mentioned legal provisions, the Committe e authorized a group of Members to maintain 
their export subsidies for a specific period of time, s ubject to the usual conditions of transparency and 
standstill. 
  As stated in document G/SCM/39, the author ity granted to the beneficiary Members will 
remain in force up to the end of 2007.  Thereafte r, these Members may request the continuation of the 
extension in accordance with Article 27.4 of the SC M Agreement or make use of the final two years 
provided for in that provision for phasing out the subsidies. 
  In view of the above, Guatemala, together w ith the other beneficiaries of the extensions, 
considers it necessary to request a further extension based on its ec onomic, financial and development 
needs.  In fact, all the beneficiar y countries can show that  the conditions that existed and justified the 
extension in 2001 continue to exist, despite the fact  that the export subsidies have had quite a positive 
effect in terms of attracting foreign investme nt, diversifying the export base and generating 
employment.   Thus, the choice of 2018 in the proposal should be considered in the light of the discussions that took place prior to the adoption of document G/SCM/39.  At that time, the proponents of the 
document gave a reasoned explanation of the need  to phase out their export subsidy programmes over 
a fairly long period of time, possibly as much as 20 years.
5 
  Guatemala is convinced that the extension re quested would continue to stimulate the export 
sector and would help lift thousands of Guatemalan s out of poverty.  The three programmes that 
Guatemala has notified have had quite a favourable im pact in a country that is not only small but has 
only a very limited industrial export base and a mi nimal share of world trade.  These programmes 
have been instrumental in promoting and divers ifying the export sector with a view to producing 
manufactured goods and thereby reducing Guatem ala's dependence on basic agricultural products, 
which are constantly exposed to the adverse effect s of sharp falls in international prices, not to 
mention the direct effects on job creation, the transfer of technology and know-how and poverty 
reduction, which in all these respects have been remarkable. 
  However, these favourable eff ects have still not been enough. Members must bear in mind 
that Guatemala still has a small and vulnerable econom y.  To mention just a few of the facts that 
could be cited in support of th is observation, Members will find that not a single Guatemalan 
manufactured product is yet competitive at internati onal level.  Indeed, Guatemala's share of total 
exports of manufactured produc ts is only 0.012 per cent.
6  Moreover, despite the fact that the 
industrial sector accounts for almost 40 per cent of domestic production, Guatemala still depends to a 
large extent on the agricultural sector whose products have little valued added and are at the mercy of 
unstable international prices.  For the information of Members, of the 10 main export products only 3 
are industrial manufactures: 2 of these are articles of apparel and clothing accessories for men and 
women, and the other is technically specified rubbe r.  In 2005, in value terms, these three products 
were worth 147 million dollars.7  Hence, it is obvious that Guatemala's programmes are not distorting 
                                                      
5 See document G/SCM/38. 
6 Profile of Guatemala, World Trade Organization. 
7 Database of the Secretariat of Central American Economic Integration (SIECA). G/SCM/Q4/GTM/5 
Page 4  
 
trade but, on the contrary, as will be appreciated  from what follows, are having a positive and 
important impact on the Guatemalan population.   Guatemala's economically active population numbers about 5 million
8, of whom, in 2004, 
only 199,701 were employed in the industrial sector (about 4 per cent of the total).9  Of these jobs in 
the industrial sector, 73.5 per cent were in textiles and clothing.  Taking into account the fact that the 
textiles and clothing sector is one of the sectors to benefit most from the programmes in question 
(approximately 46 per cent of the beneficiaries are in this sector), and the fact that 70 per cent of the textiles and clothing companies are of foreign origin, Guatemala has no doubt that its programmes have contributed to the development of its indust rial sector and to the well-being of thousands of 
Guatemalan families by providing them with decent j obs.  It should also be borne in mind that these 
figures relate only to the jobs directly generated a nd not to jobs that depend indirectly on the sector, 
such as printing services, transport, packi ng, laundries, office equipment, etc. 
  In short, these programmes are contributing to the development of Guatemalan industry 
while, at the same time, not having any prejudicial  effects either on the importing countries or on 
competitor countries, given the minimal market share of Guatemalan exports and the lack of diversification of the export base.   Moreover, it should be remembered that globali zation can also entail the less than optimal 
integration of small, vulnerable economies into th e international markets because of their size and 
endemic liabilities.  Therefore, appropriate measures  should be incorporated in the multilateral trading 
regime so that countries such as Gu atemala can be helped to derive tangible benefits from trade.  The 
promises of trade liberalization and development s hould be a common objective of the membership of 
the WTO as a whole.  
 On the other hand, the laissez-faire  model would appear to be incompatible with the 
experience of newly industrialized countries and emer ging economies.  In fact, the constant changes 
in world conditions have forced the small, vulnerable economies to face up to the reality of imperfect competition in an imperfect world.   Thus, Guatemala is convinced that trade is a means of achieving sustainable development and 
that poverty reduction is a natural outcome of job crea tion.  In the case of Guatemala, one of the best 
real opportunities for creating the number of jobs n eeded to lift the population out of poverty is to 
attract foreign investment and to encourage dom estic investment with a view to expanding the 
industrial export base.  It is necessary to gr ow and move away from poorly performing basic 
agricultural goods with little value added in or der to produce more profitable industrial goods. 
 
 Guatemala's current three pr ogrammes have proved to be effective means of achieving its 
objectives.  Admittedly, they are not the only measures that are needed but they have been invaluable 
and have served their purpose in recent years.   As already explained, the extension proposal calls for a longer transition period, on the same 
conditions as were negotiated under the Uruguay Round Agreements and, subsequently, at the Doha 
Ministerial Conference.  One of the main reasons is the poverty that still affects 56 per cent of the 
population (6.4 million Guatemalans), of whom 15.7 per cent are living on less than one US dollar a day
10, which means that these human beings have not even enough to afford two meals a day. 
 
 At the same time, not only are the programmes notified contributing to the implementation of 
trade policy objectives such as industrialization, diversification and employment, they are also 
                                                      
8 National Statistics Institute of Guatemala, data for 2004. 
9 Labour Statistics Directorate, Gu atemalan Ministry of Labour. 
10 National Statistics Institute of Guatemala, data for 2004.  G/SCM/Q4/GTM/5 
 Page 5 
 
 
encouraging imports (at zero or reduced tariff rates)  of raw materials from developed and developing 
countries, thereby making a positive contribution to the multilateral trading system.   On the other hand, the elimination of Guat emala's programmes in 2009 would only place at 
risk the economic and social contributions they ha ve generated.  Thus, Members should bear in mind 
that the extension requested in the above-mentioned documents is  based on the ec onomic, financial 
and social needs of the proponents.  Indeed, if Members compare the present data with those 
contained in the documents submitted at the time as ju stification for the current extension, they will 
find that these needs are practically iden tical to those that existed in 2001. 
 
 Moreover, the proposed date of  2018 is consistent with the discussions that took place prior to 
the adoption of document G/SCM/39.  At that ti me, the proponents of the document gave a reasoned 
explanation of the need to phase out the subsidies over a period of at least 20 years.  By definition, a development strategy cannot produce the expected resu lts from one day to the next.  In fact, it is not 
possible to go through the process of attracting and encouraging domestic and foreign investment, 
installing industries, and beginning to penetrate other markets and straightaway arrive at the level of 
competitiveness necessary for proper integration in th e multilateral context.  Furthermore, it should be 
taken into account that many of the factors involve d in attracting and promoting investment do not 
depend solely and exclusively on these programmes.  These many other factors depend on issues relating to education, health and welfare, which, in their turn, are directly related to economic and 
financial well-being.  Without wishing to appear repetitious, this economic a nd financial well-being 
can be achieved, among other things, through measur es such as those whose extension Guatemala is 
requesting.   Consequently, to ensure that Guatemala has the capacity to integrate fully and derive real 
benefits from the multilateral trading system, its development strategies must be designed for the 
medium and long term. 
  In addition, as a proponent, Guatemala is convi nced that its special needs would justify a 
request based on annual consultations, in accordan ce with Article 27.4.  However, in terms of 
attracting foreign investment, that would not conve y a positive message of certainty and, on top of 
that, consideration should be given to the limite d institutional capacity of the Government of 
Guatemala to respond quickly and effectively to Memb ers' questions.  This is a condition that would 
place an excessive burden on the civil service while diverting the limited institutional resources also 
needed in other areas of implementation of Guat emala's obligations under the multilateral trading 
system.  
 Guatemala is grateful for the interest in this  proposal and looks forward to working closely 
together with interested Members, with a view to providing any additional information they may 
require concerning the country's particular economic , financial and development needs.  Moreover, 
Guatemala would like to thank Members in advance for the solidarity and support they may provide 
in bringing to a favourable conclusion the process initiated by the proposal in question. 
 
COLOMBIA
 
 
• Law on the Promotion and Development of Export and In-Bond Processing Activities, 
Decree No. 29-89 of the Congress of the Republic of Guatemala; 
 
• Law on Free-Trade Zones, Decree No. 65-89 of the Congress of the Republic of 
Guatemala; 
 
• Basic Law establishing the Free Trade and Industry Zone of Santo Tomás de Castilla, 
Decree No. 22-73 of the Congress of the Republic of Guatemala. 
 G/SCM/Q4/GTM/5 
Page 6  
 
1. The titles of the programmes listed in  document G/SCM/W/535/Add.1 in which 
Guatemala announced its co-sponsorship of document G/SCM/W/535 are not the same those contained in document G/SCM/N/71/GTM.  Does this mean that changes have been made to these programmes?  
 
Response
 
 
 The programmes are still the same.  The di fference is due to the fact that document 
G/SCM/N/71/GTM refers only to the number of the legislative decrees in question, whereas in document G/SCM/W/535/Add.1 both the number and the full name of the decrees are cited.  2. In the case of each of the programmes, please provide the most up-to-date information 
available regarding the number of beneficiary en terprises classified according to industrial 
sector. 
 
Response
 
 
 With respect to Decree 29-89 of the Congr ess of the Republic, the number of beneficiary 
enterprises by industrial sector is indicated below:  
Non-specific activities 1 
Fishing, n.e.s. 1 
Extraction of non-ferrous minerals 2 
Extraction of minerals, n.e.s 1 
Processed fish, crustaceans and other marine products 11 
Textile yarn, fabric and finished goods 24 
Non-clothing textile articles 13 
Knitted fabrics 3 
Manufacture of carpets and rugs 3 
Cordage, ropes 1 
Manufacture of textiles, n.e.s 2 
Manufacture of clothing, excl. footwear 206 
Tanneries and finishing shops 3 
Manufacture of leather and leather su bstitutes, excl. clothing/footwear 5 
Manufacture of footwear, other than of rubber or plastics 3 
Sawmills, planing shops 6 
Manufacture of wood and cork products n.e.s 5 
Manufacture of furniture and fixtures, other than of metal 8 
Manufacture of wood pulp, paper and paperboard 2 
Manufacture of containers and boxe s of paper and paperboard 6 
Manufacture of pulp, paper and paperboard articles n.e.s 3 
Printing, publishing and related industries 9 
Manufacture of basic industrial chem icals, other than fertilizer 9 
Manufacture of fertilizer and pesticides 6 
Manufacture of synthetic resins, plastics and fibres 6 
Manufacture of paints, varnishes and lacquers 4 
Manufacture of pharmaceutical products and medicines 6 
Manufacture of soaps, cleaning agents, perfumes, cosmetics, etc. 8 
Manufacture of chemical products n.e.s. 5 
Manufacture of rubber products n.e.s. 6 
Manufacture of plastic products n.e.s. 23 
Manufacture of pottery, earthenware and porcelain articles 4 
Manufacture of glass and glass products 1 
Manufacture of cement, lime and gypsum 1 
Manufacture of non-metallic mineral products, n.e.s. 3 
Basic iron and steel industries 1 
Basic non-ferrous metal industries 5 
Manufacture of metal furniture and fixtures 4 
Manufacture of structural metal products 5 
Manufacture of metal products n.e.s., excl. machinery and equipment 6 
Manufacture of special industrial machinery and equipment 2  G/SCM/Q4/GTM/5 
 Page 7 
 
 
Manufacture of machinery/equipment n.e. s., other than electrical machinery 3 
Manufacture of radio, TV and communications equipment 1 
Manufacture of electrical apparatus and supplies n.e.s. 2 
Manufacture of transport equipment n.e.s. 1 
Manufacture of clocks and watches 1 
Manufacture of jewellery and related articles 1 
Manufacturing industries, n.e.s. 18 
TOTAL: 450 
  Source:   Industrial Policy Directorate, Ministry of the Economy 
 
 With respect to Decree 65-89, at the moment  we have no up-to-date information classified 
according to industrial sector.  However, without prejudice to the subsequent provision of more 
detailed information, the numbers (a nd percentages) of industrial users for each of the country's free 
zones are indicated below: 
 
  
  
INDUSTRIAL USERS 
 FREE ZONE 
TOTAL USERS No. % 
1 CROPA, S.A. 4 1 25% 
2 ZETA LA UNION 56 14 25% 
3 ZOFRATUSA 3 1 33% 
4 ZOFRACRO 86 8 9% 
5 CENT.IND. PARA LA 
EXPORTACION 13 3 23% 
6 EL NARANJO 1 - 0% 
7 EL CACAO 3 - 0% 
8 EL ATLANTICO 3 - 0% 
9 ZOFRACSA 14 4 29% 
10 SADINSA 8 2 25% 
11 TERMINA LC 7 - 0% 
12 INCOISA 6 3 50% 
Source:   Industrial Policy Directorate, Ministry of the Economy 
 
3. Please explain why, under the above progra mmes, which have been in place for over 
ten years, it is still not possible to dismantle the prohibited subsidies.  
Response  
  See response to question 5.  4. The basis for the extension request is that Guatemala is a small, vulnerable economy which suffers from the combined effect of diseco nomies of scale caused by the small size of its 
economy and administration and by its physical isol ation.  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 Guatemala's 
economy prevent the country from complying fully  and satisfactorily with WTO export subsidy 
disciplines. 
 G/SCM/Q4/GTM/5 
Page 8  
 
Response
 
  Document G/SCM/W/535 and document G/SCM/W/535/Add.1 only propose the amendment of paragraph 1(e) of document G/SCM/39.  Ther efore, the rights and obligations contained in 
document G/SCM/39 and in Article 27.4 of th e WTO Agreement on Subsidies and Countervailing 
Measures (SCM Agreement) would be left unchanged. 
  With respect to the possibility of a request  for a new extension after 2018, assuming that 
Colombia is referring to "distorting factors" su ch as Guatemala's "relevant economic, financial and 
development needs" in accordance with Article 27.4 of the SCM Agreement, the reply would be that 
Guatemala will take the appropriate decision at the opportune moment, on the basis of those needs, in 
accordance with the procedures and the time frame laid down in the above-mentioned provisions. 
  Moreover, Guatemala is of the opinion that, as Article 27.4 of the SCM Agreement and document G/SCM/39 are both instruments that provide for special and differential treatment of export 
subsidies, Guatemala's three programmes for whic h an extension was granted in accordance with 
these instruments therefore comply "fully and satis factorily with WTO export subsidy disciplines".  
The above notwithstanding, the reasons why Guat emala has been unable to eliminate its export 
subsidies are explained in detail below in the reply to question 5.  
5. Please explain why the situation giving ri se to the request for extension requires the 
granting of prohibited subsidies until the year 2018, rather than an earlier date.  
Response
 
  Article 27.4 of the SCM Agreement provides that  "[i]f a developing country Member deems it 
necessary to apply such subsidies beyond the 8-year pe riod, it shall not later than one year before the 
expiry of this period enter into consultation w ith the Committee, which will determine whether an 
extension of this period is justified, after ex amining all the relevant  economic, financial and 
development needs of the developing country Member in question".   Members who deemed it necessary to appl y export subsidies beyond the above-mentioned 
eight-year period on account of their particular ch aracteristics and needs re quested extensions under 
this provision and in accordance with document G/SC M/39, the latter, which resulted from the Doha 
negotiations, having established e xpedited procedures for facilitating the extension approval process. 
  Thus, Members interested in obtaining these concessions had to meet certain requirements 
and criteria that justified the approval of their expor t subsidies and, accordingl y, in conformity with 
the above-mentioned legal provisions, the Committe e authorized a group of Members to maintain 
their export subsidies for a specific period of time, s ubject to the usual conditions of transparency and 
standstill.   As stated in document G/SCM/39, the authorit y granted to beneficiary Members will continue 
in force up to the end of 2007.  Thereafter, th ese Members may request the continuation of the 
extension in accordance with Article 27.4 of the SC M Agreement or make use of the final two years 
provided for in that provision for phasing out the subsidies.   In view of the above, Guatemala, together w ith the other beneficiaries of the extensions, 
considers it necessary to request a further extension based on its ec onomic, financial and development 
needs.  In fact, all the beneficiar y countries can show that  the conditions that existed and justified the 
extension in 2001 continue to exist, despite the fact  that the export subsidies have had quite a positive 
effect in terms of attracting foreign investme nt, diversifying the export base, and generating 
employment. 
  G/SCM/Q4/GTM/5 
 Page 9 
 
 
 Thus, the choice of 2018 in the proposal should be considered in the light of the discussions that took place prior to the adoption of document G/SCM/39.  At that time, the proponents of the 
document gave a reasoned explanation of the need  to phase out their export subsidy programmes over 
a fairly long period of time, possibly as much as 20 years.
11 
 
 Guatemala is convinced that the extension re quested would continue to stimulate the export 
sector and would help thousands of Guatemalans to escape from poverty.  The three programmes that 
Guatemala has notified have had quite a favourable im pact in a country that is not only small but has 
only a very limited industrial export base and a mi nimal share of world trade.  These programmes 
have been instrumental in promoting and divers ifying the export sector with a view to producing 
manufactured goods and thereby reducing Guatem ala's dependence on basic agricultural products, 
which are constantly exposed to the adverse effect s of sharp falls in international prices, not to 
mention the direct effects on job creation, the transfer of technology and know-how and poverty 
reduction, which in all these respects have been remarkable.  
 However, these favourable eff ects have still not been enough. Members must bear in mind 
that Guatemala still has a small and vulnerable econom y.  To mention just a few of the facts that 
could be cited in support of th is observation, Members will find that not a single Guatemalan 
manufactured product is yet competitive at internati onal level.  Indeed, Guatemala's share of total 
exports of manufactured products is only 0.012 per cent.
12  Moreover, despite the fact that the 
industrial sector accounts for almost 40 per cent of domestic production, Guatemala still depends to a 
large extent on the agricultural sector whose products have little valued added and are at the mercy of 
unstable international prices.  For the information of Members, of the 10 main export products only 3 
are industrial manufactures:  2 of these are articl es of apparel and clothing accessories for men and 
women, and the other is technically specified rubbe r.  In 2005, in value terms, these three products 
were worth 147 million dollars.13  Hence, it is obvious that Guatem ala's programmes are not distorting 
trade but, on the contrary, as will be appreciated  from what follows, are having a positive and 
important impact on the Guatemalan population.   Guatemala's economically active population numbers about 5 million
14, of whom, in 2004, 
only 199,701 were employed in the industrial sector (about 4 per cent of the total).15  Of these jobs in 
the industrial sector, 73.5 per cent were in textiles and clothing.  Taking into account the fact that the 
textiles and clothing sector is one of the sectors to benefit most from the programmes in question 
(approximately 46 per cent of the beneficiaries are in this sector), and the fact that 70 per cent of the textiles and clothing companies are of foreign origin, Guatemala has no doubt that its programmes have contributed to the development of its indust rial sector and to the well-being of thousands of 
Guatemalan families by providing them with decent j obs.  It should also be borne in mind that these 
figures relate only to the jobs directly generated a nd not to jobs that depend indirectly on the sector, 
such as printing services, transport, packi ng, laundries, office equipment, etc. 
  In short, these programmes are contributing to the development of Guatemalan industry 
while, at the same time, not having any prejudicial  effects either on the importing countries or on 
competitor countries, given the minimal market share of Guatemalan exports and the lack of 
diversification of the export base. 
  Moreover, it should be remembered that globali zation can also entail the less than optimal 
integration of small, vulnerable economies into th e international markets because of their size and 
endemic liabilities.  Therefore, appropriate measures  should be incorporated in the multilateral trading 
                                                     
 
11 See document G/SCM/38. 
12 Profile of Guatemala, World Trade Organization. 
13 Database of the Secretariat of Central American Economic Integration (SIECA). 
14 National Statistics Institute of Guatemala, data for 2004. 
15 Labour Statistics Directorate, Gu atemalan Ministry of Labour. G/SCM/Q4/GTM/5 
Page 10  
 
regime so that countries such as Gu atemala can be helped to derive tangible benefits from trade.  The 
promises of trade liberalization and development s hould be a common objective of the membership of 
the WTO as a whole.   On the other hand, the laissez-faire  model would appear to be incompatible with the 
experience of newly industrialized countries and emer ging economies.  In fact, the constant changes 
in world conditions have forced the small, vulnerable economies to face up to the reality of imperfect competition in an imperfect world.   Thus, Guatemala is convinced that trade is a means of achieving sustainable development and 
that poverty reduction is a natural outcome of job crea tion.  In the case of Guatemala, one of the best 
real opportunities for creating the number of jobs n eeded to lift the population out of poverty is to 
attract foreign investment and to encourage dom estic investment with a view to expanding the 
industrial export base.  It is necessary to gr ow and move away from poorly performing basic 
agricultural goods with little value added in or der to produce more profitable industrial goods. 
 
 Guatemala's current three pr ogrammes have proved to be effective means of achieving its 
objectives.  Admittedly, they are not the only measures that are needed but they have been invaluable 
and have served their purpose in recent years.   As already explained, the extension proposal calls for a longer transition period, on the same 
conditions as were negotiated under the Uruguay Round Agreements and, subsequently, at the Doha 
Ministerial Conference.  One of the main reasons is the poverty that still affects 56 per cent of the 
population (6.4 million Guatemalans), of whom 15.7 per cent are living on less than one US dollar a day
16, which means that these human beings have not even enough to afford two meals a day. 
 
 At the same time, not only are the programmes notified contributing to the implementation of 
trade policy objectives such as industrialization, diversification and employment, they are also encouraging imports (at zero or reduced tariff rates)  of raw materials from developed and developing 
countries, thereby making a positive contribution to the multilateral trading system.   On the other hand, the elimination of Guat emala's programmes in 2009 would only place at 
risk the economic and social contributions they ha ve generated.  Thus, Members should bear in mind 
that the extension requested in the above-mentioned documents is  based on the ec onomic, financial 
and social needs of the proponents.  Indeed, if Members compare the present data with those 
contained in the documents submitted at the time as ju stification for the current extension, they will 
find that these needs are practically iden tical to those that existed in 2001. 
 
 Moreover, the proposed date of  2018 is consistent with the discussions that took place prior to 
the adoption of document G/SCM/39.  At that ti me, the proponents of the document gave a reasoned 
explanation of the need to phase out the subsidies over a period of at least 20 years.  By definition, a development strategy cannot produce the expected resu lts from one day to the next.  In fact, it is not 
possible to go through the process of attracting and encouraging domestic and foreign investment, 
installing industries, and beginning to penetrate other markets and straightaway arrive at the level of 
competitiveness necessary for proper integration in th e multilateral context.  Furthermore, it should be 
taken into account that many of the factors involve d in attracting and promoting investment do not 
depend solely and exclusively on these programmes.  These many other factors depend on issues relating to education, health and welfare, which, in their turn, are directly related to economic and 
financial well-being.  Without wishing to appear repetitious, this economic a nd financial well-being 
can be achieved, among other things, through measur es such as those whose extension Guatemala is 
requesting.  
                                                     
 
16 National Statistics Institute of Guatemala, data for 2004.  G/SCM/Q4/GTM/5 
 Page 11 
 
 
 Consequently, to ensure that Guatemala has the capacity to integrate fully and derive real 
benefits from the multilateral trading system, its development strategies must be designed for the 
medium and long term.   In addition, as a proponent, Guatemala is convi nced that its special needs would justify a 
request based on annual consultations, in accordan ce with Article 27.4.  However, in terms of 
attracting foreign investment, that would not conve y a positive message of certainty and, on top of 
that, consideration should be given to the limite d institutional capacity of the Government of 
Guatemala to respond quickly and effectively to Memb ers' questions.  This is a condition that would 
place an excessive burden on the civil service while diverting the limited institutional resources also 
needed in other areas of implementation of Guat emala's obligations under the multilateral trading 
system.   Guatemala is grateful for the interest in this  proposal and looks forward to working closely 
together with interested Members, with a view to providing any additional information they may 
require concerning the country's particular economic , financial and development needs.  Moreover, 
Guatemala would like to thank Members in advance for the solidarity and support they may provide 
in bringing to a favourable conclusion the process initiated by the proposal in question. 
 
JAPAN
 
 
1. 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. 
 
Response  
 
 First of all, the choice of 2018 in the proposal needs to be viewed in the light of the 
discussions held prior to the adoption of document G/ SCM/39.  At that time, the proponents of this 
document explained their concerns and the reasons  for phasing out their programmes over a fairly 
long period of time, possibly as much as 20 years.17  In view of these discussions and of Guatemala's 
legitimate economic, financial and development needs,  it is appropriate for the country to seek an 
extension up to 2018. 
 
 Secondly, each of Guatemala's programmes under scrutiny generally has the same objectives, 
structure and/or design as the programmes of the ot her proponents of the extension.  As a matter of 
fact, all the proponents face the same structural  difficulties which justify the request.  Recent 
developments in international trade might, moreover,  jeopardize the full integration of Guatemala – as 
well as that of the other proponents – in the global economy. 
  The uncertainty surrounding the future of the Doha Round negotiations and the significant 
changes in the global trade scenario  pose new challenges that will require major efforts on the part of 
domestic producers in small, vulnerable economies a nd will definitely place greater pressure on these 
countries in terms of trade and economic development. 
 
 Guatemala has implemented and notified only three export subsidy programmes.  These have 
been the cornerstone of the country's export de velopment strategy, and although they are not 
delivering the desired benefits under current global conditions, they certainly contribute to improving 
and diversifying Guatemala's miniscule export base and have proved effective in lifting people out of 
poverty.  Hence, it is vital to secure an extension "uniformly for all the export subsidy programmes".  
The economic, financial and development needs for th is request are explained below in the response 
to question 2.  
                                                     
 
17 See document G/SCM/38. G/SCM/Q4/GTM/5 
Page 12  
 
2. Please explain, one by one for each of th e 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 Member, why a furt her extension beyond 2007 is necessary for its 
economic and financial needs, and why the extens ion period has to be through to the end of 
2018. 
 
Response
 
  Article 27.4 of the SCM Agreement provides that  "[i]f a developing country Member deems it 
necessary to apply such subsidies beyond the 8-year pe riod, it shall not later than one year before the 
expiry of this period enter into consultation w ith the Committee, which will determine whether an 
extension of this period is justified, after ex amining all the relevant  economic, financial and 
development needs of the developing country Member in question".   Members that deemed it necessary to apply export subsidies beyond the above-mentioned 
eight-year period on account of their particular ch aracteristics and needs re quested extensions under 
this provision and in accordance with document G/SC M/39, the latter, which resulted from the Doha 
negotiations, having established e xpedited procedures for facilitating the extension approval process. 
  Thus, Members interested in obtaining these concessions had to meet certain requirements and criteria that justified the approval of their expo rt subsidies and accordingl y, in conformity with 
the above-mentioned legal provisions, the Committe e authorized a group of Members to maintain 
their export subsidies for a specified period of time,  subject to the usual conditions of transparency 
and standstill.   As stated in document G/SCM/39, the authorit y granted to beneficiary Members will continue 
in force up to the end of 2007.  Thereafter, th ese Members may request the continuation of the 
extension in accordance with Article 27.4 of the SC M Agreement or make use of the final two years 
provided for in that provision for phasing out the subsidies.   In view of the above, Guatemala, together w ith the other beneficiaries of the extensions, 
considers it necessary to request a further extension based on its ec onomic, financial and development 
needs.  In fact, all the beneficiar y countries can show that  the conditions that existed and justified the 
extension in 2001 continue to exist, despite the fact  that the export subsidies have had quite a positive 
effect in terms of attracting foreign investme nt, diversifying the export base and generating 
employment.  
 Thus, the choice of 2018 in the proposal should be considered in the light of the discussions 
that took place prior to the adoption of document G/SCM/39.  At that time, the proponents of the 
document gave a reasoned explanation of the need  to phase out their export subsidy programmes over 
a fairly long period of time, possibly as much as 20 years.
18 
  Guatemala is convinced that the extension re quested would continue to stimulate the export 
sector and would help lift thousands of Guatemalan s out of poverty.  The three programmes that 
Guatemala has notified have had quite a favourable im pact in a country that is not only small but has 
only a very limited industrial export base and a mi nimal share of world trade.  These programmes 
have been instrumental in promoting and divers ifying the export sector with a view to producing 
manufactured goods and thereby reducing Guatem ala's dependence on basic agricultural products, 
which are constantly exposed to the adverse effect s of sharp falls in international prices, not to 
mention the direct effects on job creation, the transfer of technology and know-how and poverty 
reduction, which in all these respects have been remarkable.  
                                                     
 
18 See document G/SCM/38.  G/SCM/Q4/GTM/5 
 Page 13 
 
 
 However, these favourable eff ects have still not been enough.  Members must bear in mind 
that Guatemala still has a small and vulnerable econom y.  To mention just a few of the facts that 
could be cited in support of th is observation, Members will find that not a single Guatemalan 
manufactured product is yet competitive at internati onal level.  Indeed, Guatemala's share of total 
exports of manufactured products is only 0.012 per cent.19  Moreover, despite the fact that the 
industrial sector accounts for almost 40 per cent of domestic production, Guatemala still depends to a 
large extent on the agricultural sector whose products have little valued added and are at the mercy of 
unstable international prices.  For the information of Members, of the 10 main export products only 3 
are industrial manufactures: 2 of these are articles of apparel and clothing accessories for men and 
women, and the other is technically specified rubbe r.  In 2005, in value terms, these three products 
were worth 147 million dollars.20  Hence, it is obvious that Guatem ala's programmes are not distorting 
trade, but, on the contrary, as will be appreciat ed from what follows, are having a positive and 
important impact on the Guatemalan population.   Guatemala's economically active population numbers about 5 million
21, of whom, in 2004, 
only 199,701 were employed in the industrial sector (about 4 per cent of the total).22  Of these jobs in 
the industrial sector, 73.5 per cent were in textiles and clothing.  Taking into account the fact that the textiles and clothing sector is one of the sectors to benefit most from the programmes in question 
(approximately 46 per cent of the beneficiaries are in this sector), and the fact that 70 per cent of the textiles and clothing companies are of foreign origin, Guatemala has no doubt that its programmes have contributed to the development of its indust rial sector and to the well-being of thousands of 
Guatemalan families by providing them with decent j obs.  It should also be borne in mind that these 
figures relate only to the jobs directly generated a nd not to jobs that depend indirectly on the sector, 
such as printing services, transport, packi ng, laundries, office equipment, etc. 
  In short, these programmes are contributing to the development of Guatemalan industry 
while, at the same time, not having any prejudicial  effects either on the importing countries or on 
competitor countries, given the minimal market share of Guatemalan exports and the lack of diversification of the export base.   Moreover, it should be remembered that globali zation can also entail the less than optimal 
integration of small, vulnerable economies into th e international markets because of their size and 
endemic liabilities.  Therefore, appropriate measures  should be incorporated in the multilateral trading 
regime so that countries such as Gu atemala can be helped to derive tangible benefits from trade.  The 
promises of trade liberalization and development s hould be a common objective of the membership of 
the WTO as a whole.  
 On the other hand, the laissez-faire  model would appear to be incompatible with the 
experience of newly industrialized countries and emer ging economies. In fact, the constant changes in 
world conditions have forced the small, vulnerabl e economies to face up to the reality of imperfect 
competition in an imperfect world.   Thus, Guatemala is convinced that trade is a means of achieving sustainable development and 
that poverty reduction is a natural outcome of job crea tion.  In the case of Guatemala, one of the best 
real opportunities for creating the number of jobs n eeded to lift the population out of poverty is to 
attract foreign investment and to encourage dom estic investment with a view to expanding the 
industrial export base.  It is necessary to gr ow and move away from poorly performing basic 
agricultural goods with little value added in or der to produce more profitable industrial goods. 
 
                                                     
 
19 Profile of Guatemala, World Trade Organization. 
20 Database of the Secretariat of Central American Economic Integration (SIECA). 
21 National Statistics Institute of Guatemala, data for 2004. 
22 Labour Statistics Directorate, Gu atemalan Ministry of Labour. G/SCM/Q4/GTM/5 
Page 14  
 
 Guatemala's current three pr ogrammes have proved to be effective means of achieving its 
objectives.  Admittedly, they are not the only measures that are needed but they have been invaluable 
and have served their purpose in recent years.   As already explained, the extension proposal calls for a longer transition period, on the same 
conditions as were negotiated under the Uruguay Round Agreements and, subsequently, at the Doha 
Ministerial Conference.  One of the main reasons is the poverty that still affects 56 per cent of the 
population (6.4 million Guatemalans), of whom 15.7 per cent are living on less than one US dollar a day
23, which means that these human beings have not even enough to afford two meals a day. 
 
 At the same time, not only are the programmes notified contributing to the implementation of 
trade policy objectives such as industrialization, diversification and employment, they are also encouraging imports (at zero or reduced tariff rates)  of raw materials from developed and developing 
countries, thereby making a positive contribution to the multilateral trading system.  
 On the other hand, the elimination of Guat emala's programmes in 2009 would only place at 
risk the economic and social contributions they ha ve generated.  Thus, Members should bear in mind 
that the extension requested in the above-mentioned documents is  based on the ec onomic, financial 
and social needs of the proponents.  Indeed, if Members compare the present data with those 
contained in the documents submitted at the time as ju stification for the current extension, they will 
find that these needs are practically iden tical to those that existed in 2001. 
 
 Moreover, the proposed date of  2018 is consistent with the discussions that took place prior to 
the adoption of document G/SCM/39.  At that ti me, the proponents of the document gave a reasoned 
explanation of the need to phase out the subsidies over a period of at least 20 years.  By definition, a development strategy cannot produce the expected resu lts from one day to the next.  In fact, it is not 
possible to go through the process of attracting and encouraging domestic and foreign investment, 
installing industries, and beginning to penetrate other markets and straightaway arrive at the level of 
competitiveness necessary for proper integration in th e multilateral context.  Furthermore, it should be 
taken into account that many of the factors involve d in attracting and promoting investment do not 
depend solely and exclusively on these programmes.  These many other factors depend on issues relating to education, health and welfare which, in  their turn, are directly related to economic and 
financial well-being.  Without wishing to appear repetitious, this economic a nd financial well-being 
can be achieved, among other things, through measur es such as those whose extension Guatemala is 
requesting.   Consequently, to ensure that Guatemala has the capacity to integrate fully and derive real 
benefits from the multilateral trading system, its development strategies must be designed for the 
medium and long term.   In addition, as a proponent, Guatemala is convi nced that its special needs would justify a 
request based on annual consultations, in accordan ce with Article 27.4.  However, in terms of 
attracting foreign investment, that would not conve y a positive message of certainty and, on top of 
that, consideration should be given to the limite d institutional capacity of the Government of 
Guatemala to respond quickly and effectively to Memb ers' questions.  This is a condition that would 
place an excessive burden on the civil service while diverting the limited institutional resources also 
needed in other areas of implementation of Guat emala's obligations under the multilateral trading 
system. 
 
 Guatemala is grateful for the interest in this  proposal and looks forward to working closely 
together with interested Members, with a view to providing any additional information they may 
require concerning the country's particular economic , financial and development needs.  Moreover, 
                                                     
 
23 National Statistics Institute of Guatemala, data for 2004.  G/SCM/Q4/GTM/5 
 Page 15 
 
 
Guatemala would like to thank Members in advance for the solidarity and support they may provide 
in bringing to a favourable conclusion the process initiated by the proposal in question. 
 
PERU  
  Peru hereby submits to the Committee on Subsidies and Countervailing Measures, as 
requested, the following questions to Members seeking extensions to their programmes under 
Article 27.4 of the SCM Agreement.  
1. Do the co-sponsors of proposal G/SCM/W/535 intend to extend only the programmes 
which have been notified to date under Article 27.4 of the Agreement on Subsidies and 
Countervailing Measures and which are include d in Annex A of their proposal or do 
they intend to include any other export subsidy programme which fulfils the criteria set forth under 2 in document G/SCM/39? 
 Response
 
  Documents G/SCM/W/535 and G/SCM/W/535/Add.1 only propose the amendment of paragraph 1(e) of document G/SCM/39.  Therefore,  the rights and obligations contained in document 
G/SCM/39 and in Article 27.4 of the WTO Agreement on Subsidies and Countervailing 
(SCM Agreement) would be le ft unchanged.  This precludes any possibility of including new 
programmes. 
 
2. Under what laws and enabling regulations are the programmes listed in Annex A of the 
proposal implemented? 
 Response
 
  Information on the enabling legislation for th e programmes listed in Annex A is given in the 
respective annual notifications made by Guatemala.
24 
 
3. Which sectors and products benefit from the programmes? 
 
Response  
  Guatemala has no details concerning the specific products covered by the various 
programmes.  However, the sectors benefiting fro m the subsidies in question are listed below. 
 
Fishing n.e.s. 
Extraction of non-ferrous minerals 
Extraction of minerals n.e.s. 
Processed fish, crustaceans and other marine products 
Textile yarn, fabric and finished goods 
Non-clothing textile articles 
Knitted fabrics 
Manufacture of carpets and rugs 
Cordage, ropes 
Manufacture of textiles n.e.s. 
Manufacture of clothing, excluding footwear 
Tanneries and finishing shops 
Manufacture of leather products and leathe r substitutes, excluding clothing/footwear 
Manufacture of footwear, other than of rubber or plastics 
Sawmills, planing shops 
Manufacture of wood and cork products n.e.s. 
Manufacture of furniture and fixtures, other than of metal 
                                                      
24 For reference purposes, see document G/SCM/N/71/GTM. G/SCM/Q4/GTM/5 
Page 16  
 
Manufacture of wood pulp, paper and paperboard 
Manufacture of containers and boxes of paper and paperboard 
Manufacture of pulp, paper and paperboard articles n.e.s. 
Printing, publishing and related industries 
Manufacture of basic industrial ch emicals, other than fertilizer 
Manufacture of fertilizer and pesticides 
Manufacture of synthetic resins, plastics and fibres 
Manufacture of paints, varnishes and lacquers 
Manufacture of pharmaceutical products and medicines 
Manufacture of soaps and cleaning agents, perfumes, cosmetics, etc. 
Manufacture of chemical products n.e.s. 
Manufacture of rubber products n.e.s. 
Manufacture of plastic products n.e.s. 
Manufacture of pottery, earthenware and porcelain articles 
Manufacture of glass and glass products 
Manufacture of cement, lime and gypsum 
Manufacture of non-metallic mineral products n.e.s. 
Basic iron and steel industries 
Basic non-ferrous metal industries 
Manufacture of metal furniture and fixtures 
Manufacture of structural metal products 
Manufacture of metal products n.e.s., excluding machinery and equipment 
Manufacture of special industrial machinery and equipment  
Manufacture of machinery/equipment n.e. s., other than electrical machinery 
Manufacture of radio, TV and communications equipment 
Manufacture of electrical apparatus and supplies n.e.s. 
Manufacture of transport equipment n.e.s. 
Manufacture of clocks and watches 
Manufacture of jewellery  and related articles 
Manufacturing industries n.e.s. 
 
4. What amount is disbursed by the St ate to the programmes listed in Annex A? 
 Response
 
  All three subsidy programmes grant exemption from certain taxes but none of them involves 
"disbursement" as such.  Hence, there is no amount to report.  
__________