WORLD TRADE  
ORGANIZATION  TN/RL/GEN/115/Rev.1 
24 January 2007 
 (07-0334) 
Negotiating Group on Rules Original:   English 
  
 
 
WITHDRAWAL OF A SUBSIDY 
 
Communication from Australia
 
 
Revision  
   The following communication, dated 22 January 2 007, is being circulated at the request of the 
Delegation of Australia. 
 
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  In response to the Chair’s invitation to put new proposals on subsidies before the Negotiating 
Group on Rules, Australia submits the following revi sed textual proposal and explanatory outline on 
"withdrawal of a subsidy".
1 
 
1. Explanatory Outline 
 Australia is essentially looking to address th e remedy of "withdrawal" of one-off, allocated 
subsidies (and not those subsidies which are r ecurring or expensed).  The proposed textual 
amendment intends to convey that depending on the facts and circumstances, the remedy of 
"withdrawal" may need to address the ongoing benefit of a subsidy.  
  The following scenarios are not
 intended to provide a formulaic approach to defining the 
standard for "withdrawal" of the subsidy but are merely to illustrate  the difficulties surrounding the 
granting of a subsidy and the range of possible approaches for withdrawing the subsidy given 
particular sets of facts and circumstances. 
 Scenario 1:  One-off
 
  An example under Scenario 1 would be a one-off grant of $15 million for plant and 
equipment, paid in June 2005 and where the useful life of assets is 15 years. 
 
                                                     
 
1 Previous submissions by Australia on this issue are contained in documents TN/RL/W/139, dated 
18 July 2003, TN/RL/GEN/35 (JOB (05)/41), dated 23 March 2005, TN/RL/GEN/97 (JOB (06)/9), dated 
20 January 2006 and TN/RL/GEN/115 (JOB (06/96), dated 21 April 2006. TN/RL/GEN/115/Rev.1 
Page 2  
 
   
 
 Withdrawal in this scenario would mean repayment
 (extinguishment) of the ongoing benefit 
(that is, equivalent to the subsidy benefit conf erred over the period June 2006 – the date of the 
adoption of the panel findings – to June 2020).  This would contain a punitive  element, given the 
provision of a one-off grant which has been found by a panel to be prohibited.  This punitive element 
should also provide a deterrent  effect on the provision of one-off prohibited subsidies.  Without a 
deterrent effect, "withdrawal" would not be an e ffective remedy as governments could design one-off 
grants which are contingent on export perform ance or the use of domestic over imported goods 
without fear of any remedy.  Equally, an affected  WTO Member would have an ineffective remedy to 
a subsidy which is prohibited and deemed to cause serious trade effects.  Scenario 2:  Grants paid in instalments
 
 
 In Scenario 2, an example would be a grant of $15 million for plant and equipment, paid in 
three instalments.  
 
 
 In this scenario, the subsidizing Member woul d be required not to pa y future non-disbursed 
payments (from the date of the adoption of the pa nel findings).  In other words, there would be non-
payment of future instalments ($10 million).    
 
  June 2005 December 
2005 June 2006WTO Challenge Panel Finding
June 2020 
Scenario 2  $5 million $5 million $5 million 
← 15 years → June 2005 December 2005 June 2006WTO Challenge  Panel Finding
←15 years→ 
June 2020 
Scenario 1  $15million   TN/RL/GEN/115/Rev.1 
 Page 3 
 
 
  Scenario 3:  Expensed  
  In Scenario 3, a tax incentive is paid on an a nnual basis and therefore expensed in the year of 
receipt.  In this scenario, withdrawal of the subsidy found to be  prohibited could be: 
 
o Termination of the program, 
o Amendment of the program to remove the prohi bited element from the design of the subsidy 
program.  That is, replacement of a prohib ited subsidy with an actionable subsidy. 
 
2. Proposed Textual Amendments 
 In light of consultations and discussions w ith other WTO Members and the range of views 
expressed to date, Australia has further simplified a nd refined its proposal to clarify Article 4.7 by 
inserting a footnote to indicate that there must be some consideration of what "withdrawal of the 
subsidy" constitutes.  
 
4.7 If the measure in question is found to be a prohibited subsidy, the panel shall  
recommend that the subsidizing Member withdraw the subsidy [footnote *]  without 
delay.  In this regard, the panel shall specify in its recommendation the time period 
within which the measure must be withdrawn. 
Footnote */4.7 bis   What constitutes withdrawal of the subsidy necessarily 
depends upon the facts and circumstances surrounding the granting of the 
subsidy, including, but not limited to, whether the benefits of the subsidy are 
allocated to future production.   
7.8 Where a panel report or an Appellate Body report is adopted in which it is 
determined that any subsidy has resulted in adverse effects to the interests of another 
Member within the meaning of Article 5, the Member granting or maintaining such 
subsidy shall take appropriate steps to rem ove the adverse effects or shall withdraw 
the subsidy [footnote ** ]. 
Footnote **   As set forth in Article 4.7 of this Agreement.  
 
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