WORLD TRADE  
ORGANIZATION  G/SCM/Q4/MUS/6 
17 October 2006 
 (06-5018) 
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 16 October 2006, is being circulated at the request of the Delegation of Mauritius. 
 
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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
 
  Mauritius is of the view that document G/SC M/39 contains only a fast track procedure to 
approve extensions under Article 27.4 of the AS CM.  Document G/SCM/39 neither reduces nor does 
it increase the rights and obligations under the AS CM.  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 of the ASCM mentions in its first sentence a "progressive" elimination 
in relation to the phase out of the export subsid ies within the eight-year period mentioned in 
Article 27.2(b) as a condition that is completely di fferent to those regarding subsidies programme at 
issue.  Additionally, it is clear from the language in  Article 27.4 that such "progressive elimination" is 
not mandatory.   Mauritius considers that its export subsidy pr ogrammes are fully in compliance with its WTO 
obligation.  The current extensions have been gr anted in accordance with Article 27.4 and under the 
procedures and conditions provided for in document G/SCM/39. 
                                                     
 
1 G/SCM/Q4/MUS/2 
2 G/SCM/Q4/MUS/1 
3 G/SCM/Q4/MUS/4 
4 G/SCM/Q4/MUS/5 
5 G/SCM/Q3/MUS/13 and G/SCM/Q4/MUS/3/Rev.1 G/SCM/Q4/MUS/6 
Page 2  
 
   
 Nevertheless as stated on various occasions, the Government of Mauritius has been 
undertaking efforts to phase out its export subsidies programmes.  In this context, the wide ranging 
reform programme, including fiscal and incentive reform measures, recently announced in the 
2006/2007 reflects the real efforts being undertak en by Mauritius.  These measures have been 
translated into legislation through the Finance Act 2006 which provides, inter alia , for a gradual 
phasing out of these subsidy programmes in the light of economic needs.  The request for an extension should be read under this light.  It should be noted in this regard that, as indicated in previous notifications, the scope, cove rage and intensity of benefits of the subsidies originally notified 
have been reduce with the time. 
 
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 
document G/SCM/39.  The view of the proponent is to continue benefiting from the extension through 
to 2018, based on their special economic, financial a nd development needs.  Therefore, the rights and 
obligations contained in document G/SCM/39 and Article 27.4 of the ASM would remain unchanged. 
  Therefore, Mauritius would take a pertinen t decision, based on its specific financial, 
economic and development needs and in accordan ce with the procedures and timelines in the 
provisions mentioned above.  The development stra tegies of Mauritius have been aimed to address 
these needs.  In this respect a nd as stated above in the reply to Question 1, the Government of 
Mauritius has already embarked on a major re form economic programme as announced in the 
2006/2007 budget, which also include fiscal and in centive reform measures which have now been 
incorporated in the Finance Act 2006.  However, the responsibility of promo ting adequate conditions 
to allow full integration of SVEs into the mu ltilateral trading system belongs to the whole WTO 
membership. 
 
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
 
  The request for an extension up to 2018 should be read in light of the discussion that  had 
taken place prior to the adoption of G/SCM/39.  At that time, the proponents of the request had expressed their concerns and the reasons justifying th e elimination of the export subsidies over a long 
enough time frame, possibly extending over a period of 20 years.  In light of those discussions and 
taking into account the relevant and legitimate financial, economic and development needs of 
Mauritius, the extension proposed by SVEs  should be viewed as a credible one. 
  Moreover, the changes occurring internationally and developments in trade at the multilateral 
level create uncertainties and could pose serious  difficulties for SVEs, including Mauritius to 
successfully integrate the global economy.  The un certainty of the Doha Round negotiations and the 
significant transformation in the global trade scenar io can, indeed, trigger new challenges that will 
require great efforts from domestic economic operato rs and will, undoubtedly, put additional pressure 
on Mauritius in terms of trade and overall economic prospects. 
  G/SCM/Q4/MUS/6 
 Page 3 
 
 
   Mauritius has applied and notified only four programmes.  These programmes have been an 
integral part of the national exports developmen t strategy and although they do not perform as it 
would be desirable, under the current global conditi ons and as stated above, they contribute to 
enhance and diversify our extremely small export base.  For these reas ons, it is indispensable to have 
a long enough extension for the four export subsidy programmes.  This notwithstanding, the Finance 
Act 2006, as stated above, provides for a gr adual phase out of these programmes. G/SCM/Q4/MUS/6 
Page 4  
 
  COLOMBIA
 
 
Q1. 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.  
 
Reply  
  There are some 477 companies in the EPZ sector , 265 under the Pioneer Status Enterprise and 
350 in the Freeport sector. 
 
Q2. Please explain why, under the above programmes, which have been in place for over ten 
years, it is still not possible to dismantle the prohibited subsidies.  
 
Reply
 
 
 Mauritius is of the view that Article 27.4 being a provision that enshrines the special and 
differential treatment principle in the ASCM, the subsidies programme currently being implemented 
by Mauritius are fully compatible with the relevant WTO principles.   The subsidy programmes contribute to economi c diversification and export promotion of 
Mauritius.  However, while the need for these programmes will continue for some years, the 
Government of Mauritius has come forward with a bold and credible reform programme, including 
fiscal and incentive reform measures, under the Finance Act 2006, which provides for their gradual 
phase-out.  However, it is difficult at this stage to exactly assess the implic ation and the transition 
period.  Government may be required to review the situation based on the impacts and make 
appropriate adjustments. 
 
Q3. The justification for the extension request  is that Mauritius is a small, vulnerable 
economy, which suffers from the combined effect  of diseconomies of scale caused by the small 
size of its economy and administration and by it s 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 
Mauritius' economy prevent the country from complying fully and satisfactorily with WTO 
export subsidy disciplines.  
 
Reply
 
 
 As a small economy, Mauritius is con fronted to inherent problems including iner alia . 
geographic distance, small market, and diseconomies of  scale.  This clearly limits our ability to tap 
benefits emerging on the international markets.  For instance, Mauritius e xperienced a decline in 
growth rate from 4.7 per cent in  2005 to 2.5 per cent in 2004.  The balance of trade deteriorated by 
52 per cent from 2000 to 2004.  Employment also plummeted drastically.  The EPZ sector alone 
registered a 17 per cent decline in employment and 11 factories closed down from 1995 to 2005.  
Consequently to adjust to new challenges, an exte nsion of the subsidies schemes could be considered 
in case of a further deterioration of macro economic figures.   Assuming that Colombia is referring to 'disto rtion factors' as those related to 'relevant 
economic, financial and social needs', then the ability  to bring under control those distorting factors 
would eventually depend on how the multilateral ru le-based system would address such distortions.  
Therefore, Mauritius would be in a position to take  a decision in this regard on the basis of the 
procedures and time lines established in the provision for granting an extension.   G/SCM/Q4/MUS/6 
 Page 5 
 
 
   As stated in the reply to Question No. 2, Mauritius holds that by virtue of Article 27.4 of the 
ASCM being a Special and differential treatment re lated provision, the subsidies programme currently 
being implemented by Mauritius are fully comp atible with the relevant WTO principles. 
  It is reiterated that the above-mentioned Fi nance Act 2006, provides for gradual phase-out of 
the subsidies programme. 
 
Q4. 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.  
 Reply
 
  The request for an extension up to 2018 should be read in light of the discussion that had taken place prior to the adoption of G/SCM/39.  At that time, the proponents of the request had expressed their concerns and the reasons justifying th e elimination of the export subsidies over a long 
enough time frame, possibly extending over a period of 20 years.  In light of those discussions and 
taking into account the relevant and legitimate financial, economic and development needs of 
Mauritius, the extension proposed by SVEs  should be viewed as a credible one. 
  Moreover, the changes occurring internationally and developments in trade at the multilateral 
level create uncertainties and could pose serious  difficulties for SVEs, including Mauritius, to 
successfully integrate the global economy.  The un certainty of the Doha Round negotiations and the 
significant transformation in the global trade scenar io can, indeed, trigger new challenges that will 
require great efforts from domestic economic operato rs and will, undoubtedly, put additional pressure 
on Mauritius in terms of trade and overall economic prospects. 
 
 Mauritius has applied and notified only four programmes.  These programmes have been an 
integral part of the national exports developmen t strategy and although they do not perform, as it 
would be desirable, under the current global conditi ons and as stated above, they contribute to 
enhance and diversify our extremely small export base.  For these reas ons, it is indispensable to have 
a long enough extension for the four export subsidy programmes.  This notwithstanding, the Finance 
Act 2006, as stated above, provides for a gr adual phase out of these programmes. 
 
Q5. According to document G/SCM/N/115/MUS,  the schemes (Export Enterprises, Pioneer 
Status Enterprise, Export Promotion, Freeport) for which the extension is being requested are 
not limited in time.  Why has no time-frame been  set for the phasing out of the measures?  In 
the event that the extension under Articl e 27.4 of the Agreement on Subsidies and 
Countervailing Measures should not be grante d, what would be the date envisaged for 
eliminating the above schemes?  
 
Reply
 
  As stated in our response to Question 2, it would be extremely diffi cult for Mauritius to assess 
the implications.  Government may be required to review the situation and make appropriate 
amendments based on the impacts thereon.  
Q6. With regard to the income tax credit pr ovided for under the Export Promotion Scheme, 
document G/SCM/N/114/MUS states that the scheme has become virtually inoperative and its 
trade effects are insignificant.  Please provide further information on the grounds for requesting 
the extension of this programme in particular.  
 G/SCM/Q4/MUS/6 
Page 6  
 
  Reply
 
  In future we may be confronted with a situati on where this particular instrument will have to 
be used to promote investment and exports partic ularly in the Small and Medium Enterprise sector 
which is already experiencing problems to export. 
  G/SCM/Q4/MUS/6 
 Page 7 
 
 
  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 request for an extension up to 2018 should be read in light of the discussion that had taken place prior to the adoption of G/SCM/39.  At that time, the proponents of the request had expressed their concerns and the reasons justifying th e elimination of the export subsidies over a long 
enough time frame, possibly extending over a period of 20 years.  In light of those discussions and 
taking into account the relevant and legitimate financial, economic and development needs of 
Mauritius, the extension proposed by SVEs  should be viewed as a credible one. 
  Moreover, the changes occurring internationally and developments in trade at the multilateral 
level create uncertainties and could pose serious  difficulties for SVEs, including Mauritius, to 
successfully integrate the global economy.  The un certainty of the Doha Round negotiations and the 
significant transformation in the global trade scenar io can, indeed, trigger new challenges that will 
require great efforts from domestic economic operato rs and will, undoubtedly, put additional pressure 
on Mauritius in terms of trade and overall economic prospects. 
 
 Mauritius has applied and notified only four programmes.  These programmes have been an 
integral part of the national exports developmen t strategy and although they do not perform, as it 
would be desirable, under the current global conditi ons and as stated above, they contribute to 
enhance and diversify our extremely small export base.  For these reas ons, it is indispensable to have 
a long enough extension for the four export subsidy programmes.  This notwithstanding, the Finance 
Act 2006, as stated above, provides for a gr adual phase out of these programmes. 
 
Q2. 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 Me mber, why a further 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.  
Reply
 
  The information regarding each of the progr ammes notified by Mauritius, including how 
these programmes are integrated into the development strategies of the country is available in the 
documents submitted in 2001 to obtain the current ex tension.  Furthermore,  this information is 
available in each of the annual notifications that Mauritius has submitted to the Committee on 
Subsidies and Countervailing Measures in compliance with the transparency and standstill obligations.  As regard the reas ons for seeking an additional ex tension beyond 2007, Japan may refer 
to the response provided to question 1 above.  If the information contained in these official documents 
is not sufficient for Japan, Mauritius would be ple ased to respond to any further questions in the 
course of the discussions before the Committee.  
 G/SCM/Q4/MUS/6 
Page 8  
 
  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 refers only to the amendment of paragraph 1(e) of 
GF/SCM/39.  Therefore, the intention of the s ponsors of G/SCM/W/535 is to continue benefiting 
from the extension until the end of 2018 and the conditions specified in G/SCM/39 would remain 
unchanged.  This clearly excludes the possi bility to include any further programmes. 
 Q2. Under what laws and enabling regulations are the programmes listed in Annex A of the proposal implemented? 
 
Reply
 
  With respect to Mauritius, the relevant legislations are as follows: 
 
 - Export Enterprise Scheme and Pioneer En terprise Scheme:  These two schemes were 
initially implemented under the Industrial Ac t 1993, which has now been repealed by 
way of the Finance Act 2006; 
 
 - Export Promotion Scheme:  This scheme was initially governed by the Income Tax 
Act, which has now been superseded by the Finance Act 2006; 
  - Freeport Scheme providing the corporate tax exemption under the Freeport Scheme 
Provision has been made for the repeal of the exemption by way of the Finance Act 2006. 
 
Q3. Which sectors and products benefit from the programmes? 
 
Reply
 
 
 Export Enterprise Scheme  
 
 Beneficiaries are holders of Export Enterpri se Certificate operating in the Export Processing 
Zone (EPZ).   Pioneer Enterprise Scheme
 
 
 Beneficiaries are holders of a Pioneer Status Enterprise Certificate gran ted to those investing 
in higher technology and sophisticated industries and services,   Export Promotion
 
  Beneficiaries are companies engaged in the export of goods and services, which are not tax 
incentive companies.  Such a schem e aims at encouraging enterprise traditionally geared towards the 
domestic market to diversify into the export market.  G/SCM/Q4/MUS/6 
 Page 9 
 
 
   
 Freeport Scheme  
  Beneficiaries are private Freeport developers , third party Freeport developers and Freeport 
operators.  This programme is aimed at promoti ng and encouraging Freeport trade including transit 
and entrepôt  trade and positioning Mauritius as a major regional distribution, transhipment and 
marketing centre.  
Q4. What amount is disbursed by the St ate to the programmes listed in Annex A? 
 Reply
 
  The programmes are not based on disbursements.   They rather constitute revenue foregone. 
  Q5. In the case of Members other than the co -sponsors of G/SCM/W/535 that are seeking 
extensions to their programmes, questions 1-4, adopted to the programmes for which extensions 
are requested, will apply.    
Reply
 
 
 Question is not applicable to Mauritius. 
  G/SCM/Q4/MUS/6 
Page 10  
 
  UNITES STATES
 
 
Q1. Please describe what efforts Mauritius ha s made, if any, to phase out the programme 
within the extension period that has already b een granted, as provided under the ‘Procedures 
for Extension Under Article 27.4 for Certain De veloping Country Members’.  Please further 
describe how Mauritius will continue to ensure that the programmes will be phased out if an 
additional extension were granted. 
 
Reply  
 
 The Government of Mauritius has stated on a number of occasions that it will pursue the 
review of the existing tax incentives schemes, including subsidy schemes.  This is  amply reflected in a 
the reform programme recently announced in the 2006/2007 Budget including fiscal and incentive 
reform.  The measures listed in this Budget, includi ng fiscal and incentive reforms, have already been 
translated into legislation through the Finance Act 2006.  The objective of the Government is to move 
to a low tax platform thus gradually eliminating the need for exemptions. 
  The time frame for the complete elimination of the subsidies schemes is yet to be fully 
determined, but it will be compatible with decisi ons taken at the WTO level and commitments taken 
by the Government of Mauritius.  It should also be  noted that, as indicated in previous notifications, 
the scope, coverage and intensity of  benefits of the subsidies origin ally notified have been reduced 
with time. 
  In the 2006 Finance Act, concrete measures we re taken to address the issue of subsidies.  
However, in the event of adverse economic cond itions which is already the case for Mauritius, it 
would be essential to explore the possibility of extending these schemes to create a conducive 
environment to promote FDI and trade. 
 
Q2. Please describe changes to the Progra mmes since 2001.  Also, please provide any 
updated or revised implementing legislation,  and any relevant amendments, under these 
programmes and any accompanying regulations and decrees. 
 Reply
 
  The four programmes have not been modified since 2001 until to date so as to make them more favourable in terms of scope, coverage and intensity than it was on 1 September 2001. 
 
 As regards the initial laws regulating the e xport subsidy programmes, namely the Industrial 
Expansion Act 1993, the Income Tax 1995 and the Freeport Act 2001, the Government of Mauritius 
wishes to inform that Industrial Expansion Act 1993 and the Income Tax Act 1995 have been 
repealed by way of the Finance Act 2006, while  the Freeport Act 2001 has been replaced by the 
Freeport Act 2004.  Q3. How many beneficiaries of these Programmes were there in 2001?  How many beneficiaries are there currently under each of these programmes?  What type of industries 
currently benefit under the programmes?  
Reply
 
 
 In the year 2001, there were 524 companies in  the EPZ sector, 233 under the Pioneer Status 
Enterprise and 31 in the Freeport sector.  Currently , there are some 477 companies in the EPZ sector, 
265 under the Pioneer Status Enterprise and 350 in the Freeport sector.   G/SCM/Q4/MUS/6 
 Page 11 
 
 
   Beneficiaries under these programmes, are companies operating in the EPZ and 
manufacturing sector.  Freeport sector as well as t hose companies investing in higher technology and 
sophisticated industries and services.  
Q4. Did Mauritius 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
 
 
 The legislation governing the investment schemes provides that any enterp rise falling within a 
particular scheme, whether foreign-owned, locally  owned or a joint venture is eligible to the 
incentives associated with the sc hemes until their complete phase-out.  Therefore, the number of 
beneficiaries cannot be known in advance.  Q5. If available, please provide the amount of the subsidy provided under these programmes 
for each year from 2001 through to 2005.  
Reply
 
  The programmes are not based on disbursements or  transfers, rather they constitute revenue 
forgone. 
 
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