. /.   WORLD TRADE  
ORGANIZATION  G/SCM/W/550 
15 October 2009 
 (09-5035) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
TRANSITIONAL REVIEW MECHANISM PURSUANT TO 
SECTION 18 OF THE PROTOCOL ON THE ACCESSION 
OF THE PEOPLE'S REPUBLIC OF CHINA 
 
Questions from the EUROPEAN COMMUNITIES to CHINA  
 
 
 The following communication, dated 13 October 2009, is being circulated at the request of 
the Delegation of the European Communities.   
 
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Notification requirements 
 
 Article 25 of the Agreement on Subsidies and Countervailing Measures ("SCM-Agreement") 
sets out the requirements for subsidy notifications ac cording to which Members agreed that subsidies 
shall be notified not later than 30 June of ev ery second year.  This area of requirement was 
specifically addressed in the Protocol of Accession of the People's Republic of China under paragraph 
"10 subsidies" in which China committed to notif y the WTO of any subsidy within the meaning of 
Article 1 of the SCM-Agreement and to eliminate all subsidy programmes falling within the scope of 
Article 3 of the SCM Agreement upon Accession.     However, it was only in April 2006 that Ch ina submitted its first new and full subsidy 
notification for the period 2001 to 2004 since its  accession to the WTO in 2001.  While China's 
submission of the notification was generally welcom ed, it did call into question the usefulness of a 
notification covering subsidy programs dating back to  the period of 2001-2004.  It would appear that 
China now attempts to follow the same approach by not having submitted a subsidy notification for 
the period of 2005-2006 and for the period of  2007-2008, due by end of June 2007 and 2009 
respectively.    
 a) Could China please indicate what progress it has made so far on the subsidy 
notification it is currently working on and which should cover the period of 2005-2008 
according to the statement made by the de legate of China in the last TRM?   
  b) In light of the statement made by the dele gate of China in the last TRM that he had no 
answer whether sub-federal governmental subsid ies would be covered by the next subsidy 
notification, could China confirm that these sub-federal programs will be covered?   
  c) When does China expect to submit its next subsidy notification?    G/SCM/W/550 
Page 2  
 
  Subsidies 
 
 Irrespective of China's continued failure to s ubmit a complete and timely subsidy notification 
the EC Trade defence services continue to uncover, in particular in the context of the MET (Market 
Economy Treatment) analysis for Chinese exporters, significant subsidies/distortions in the form of 
tax rebates, tax exemptions, the pr ovision of land and la nd rights, subsidized prices of raw materials 
and industrial inputs and subsidized loans.  Ma ny of these subsidies and subsidy programmes are 
provided to specific industries and sectors, which ma kes them susceptible to anti-subsidy actions.   
  The existence of these subsidies has been c onfirmed by a number of independent studies and 
by trade defence investigations carried out by sev eral WTO Members.  It is undeniable that the 
distortive effect of these subsidies has contributed to  China's rapid export growth in recent years.  For 
example, China has transformed itself from a net im porting country to the – by far – largest steel
 
exporter in the world.  In 2007, China already commanded a share of 20.7 per cent of global steel 
exports.  Chinese steel exports to Europe have incre ased at an even greater speed than China's total 
steel exports.  This expansion of Chinese expor t activities is not primarily based on a genuine 
competitive advantage of China in steel making bu t rather on the variety of subsidy programmes 
addressed to the steel making industr y on a highly selective basis.   
  In spite of China's professed efforts to subm it a subsidy notification in due course, it has so 
far not managed to submit a subsidy notification for the above mentioned period.  We therefore 
request China to provide Members in this committee with the inform ation on its subsidy programs it 
provides to the steel sector in the appropriate format as set out in Article 25.3 ASCM.    
Other distortions 
  China restricts the export of certain raw materials, a practice which may depress the price of 
these raw materials when used in the domestic downs tream manufacturing industry.  This practice, 
could effectively amount to a policy of subsidizati on of input for certain downstream products.  This 
has often been coupled with various incentives fo r exports of the downstr eam product which have 
benefited from the cheaper input raw material.    
 Could China comment on this practice?   
   
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