. /.   WORLD TRADE  
ORGANIZATION  TN/RL/GEN/101/Rev.1 
6 June 2006 
 (06-2671) 
Negotiating Group on Rules Original:   English 
  
 
BENCHMARK ESTIMATION 
 
Paper from Brazil
 
 
Revision  
 
 The following communication, dated 1 June 2006, is being circulated at the request of the 
Delegation of Brazil.  
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I. INTRODUCTION 
 
1. In document TN/RL/GEN/101, Brazil raised so me concerns regarding the existence of a 
benefit for the purpose of parts II and III of the SC M Agreement and the calculation of a benefit under 
Part V of the SCM Agreement.  In this propo sal, Brazil wishes to review and complement the 
previous submission and to clarify what guidelin es authorities shall use when estimating market 
benchmarks.  2.  In Brazil - Export Financing Programme for Aircraft, the Panel expressed the view that 
"although the concept of benefit is not defined in  the SCM Agreement, its application in various 
circumstances suggests that one should examine objective benchmarks
".  For instance, this could 
involve "a comparison of the terms of the financia l contribution to a market benchmark reflecting the 
terms under which the beneficiary of the financial contribution would be operating in the absence of 
the government financial contribution" (W T/DS46/R, para. 7.24, emphasis added).  
 
3.  A problem arises when there are no objective be nchmarks to be examined.  That is to say, 
there is no marketplace to assess the benefit conferre d by financial contribut ions by governments. 
 
II. PROPOSED TEXTUAL AMENDMENTS 
 4. Brazil proposes to replace the drafting sugg estion contained in document TN/RL/GEN/101, 
regarding the amendment to Article 1.1, w ith the following proposed textual amendment: 
 
Article 1 
Definition of a subsidy 
 
1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if: 
 (b) a benefit is thereby conferred. 
x 
 -----------------------------------  TN/RL/GEN/101/Rev.1 
Page 2  
 
  Amended new footnote x
: 
  x.  For the purpose of Parts II and III of the Agreement, Article 14 is relevant context for determining the existence of a benefit.  
5. Under the same approach, Brazil also s uggests the following revised amendments to 
Article 14: 
 
Article 14 
Calculation of the Amount of a Subsidy in Terms of the Benefit to the Recipient 
  For the purpose of Part V, any method used by the investigating authority to calculate the 
benefit to the recipient conferred pursuant to para graph 1 of Article 1 shall be provided for in the 
national legislation or implementing regulations of the Member concerned and its application to each 
particular case shall be transparent and adequately explained The calculation of the "benefit" shall be 
determined on the basis of a comparison be tween a financial contribution as provided under 
Article 1.1(a)(1) of the Agreement, and a comp arable commercial benchmark, under the prevailing 
market conditions.  If a comparable commercial benchmark is not available under the prevailing 
market conditions, a reasonable and unbiased  estimat e of a comparable commercial benchmark shall 
be made on the basis of positive evidence . y  Furthermore, any such method shall be consistent with 
the following guidelines: 
 
 b. a loan by a government shall not be c onsidered as conferring a benefit, unless there is 
a difference between the amount that the firm receiving the loan pays on the government loan and the amount the firm  would pay on a comparable commercial 
loan which the firm could actually obtain on the market.  In this case the benefit shall 
be the difference between these two amounts 
z; 
   --------------------------------------  Amended new footnote y
: 
 
 y.  The absence of medium or long-term private capital markets in developing country 
Members shall not, for this reason alone, characterize the existence of a 'benef it' within the meaning 
of Article 1.1(b).  The applicable benchmark to determine the existence of the 'benefit' in this case 
shall be a comparable commercial financial transact ion taking place in the international markets. 
 
Amended new footnote z : 
  z.  In the case there is available public info rmation on commercial loans which the firm could 
actually obtain in the domestic market, a fair co mparison between a "loan by a government" and "the 
comparable commercial loan which the firm could actually obtain on the market" shall ensue if both 
loans:  1) are denominated in the same currency;  2) have similar terms and struct ure;  3) have implicit 
or explicit guarantees of a similar nature and covera ge, and 4) are granted within the territory of the 
same Member.  If one or more of the previous  conditions are not met, a reasonable and unbiased 
estimate of a comparable commercial loan to the fi rm concerned shall be calculated on the basis of 
positive evidence.   
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