WORLD TRADE  
ORGANIZATION  TN/RL/W/251 
29 March 2011 
 (11-1539) 
Negotiating Group on Rules Original:   English 
  
 
COMMENTS REGARDING THE FUEL SUBSIDY IN  
THE FISHERIES SUBSIDIES ANNEX 
 
Communication from the Republic of Korea
 
 
 
The following communication, dated 25 March 2011, is being circulated at the request of the 
delegation of the Republic of Korea. 
 
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The Need to Address Low Price Fuel 
 
Sunken Billions  emphasizes the importance of reducing fishing efforts and capacity to address 
the problem of depletion of fish stocks.  To this end, one of the policy options suggested by the report 
is the elimination of pernicious subsidies that ha ve direct impact on fishing efforts and capacity.  
Among these subsidies, the fuel subsidy takes up the bu lk of the portion with US$6.4 billion globally.   
 
 Perhaps, no Member could deny that the fuel subsidy is a problem and requires immediate 
regulation to the extent it increases fishing efforts and capacity.  If the conclusion of the Sunken 
Billions  holds true, however, the low price fuel itself should cause as much, if not more, harm to fish 
stocks as the fuel subsidy.   
 An argument can be made that the low price fu el has facilitated and will continue to facilitate 
the fishing activities globally.  Provision of subsidies should be merely one of the reasons for a low price fuel in the fisheries sector.  If the Fisheri es Annex does not address this low price fuel issue 
directly, complete prohibition of the fuel subsidy wo uld do little in protecting the fish stocks, because 
certain Members will continue to facilitate overfishi ng with the low price fuel.  As much as the fuel 
subsidy is addressed by the new Annex, the low pric e fuel itself should be equally or appropriately 
addressed by the Annex.  The regulation of the fu el subsidy simply addresses only one aspect of the 
real problem. 
 The problem of the low price fuel is also high lighted by the well-known practice of the distant 
water industrial fishing fleets of Members with a high fuel price.  Not surprisingly, the fleets from 
these Members with a high oil price refrain from purc hasing the oil from their flag states.  Instead, 
most of the time they purchase fuel oil from their flag  states only for the short trip to the nearest port 
of a Member with a low fuel price.  They then pur chase the low price oil from the Member as much as 
they need followed by regular refuelling and con tinue their fishing activities in high seas.  This 
business practice indicates that the bulk of the fuel oil for these fleets is actually provided by the 
Member with a low fuel price.  This example show s the inherent limitation of restricting the current 
discussion to the fuel subsidy of the flag state only, instead of facing the reality of the low price fuel 
in the global fisheries sector.  This reality also  shows that the Annex s hould consider a creative 
approach in dealing with the fuel problem in the fisheries sector. TN/RL/W/251 
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  The Need to Ensure Fairness 
 In Korea's view, new norms to be introduced in  the Annex regarding the fuel in the fisheries 
sector should be devised to ensure fairness among Me mbers.  Blind prohibition of the fuel subsidy 
only fails to achieve this goal.  The concept of "a  level playing field" is as equally important in 
discussing the fuel subsidy issue as it is in othe r WTO Agreements.  To the extent this concept 
represents fairness among Members and fairness amo ng individuals and corporations from different 
Members in terms of the legal norms, it should be equally relevant in this  negotiation.  This is 
particularly important where, as here, a new rule is to be adopted for the first time. 
 The Fisheries Annex is to achieve a specific common objective of protecting global fish 
stocks.  In this common undertaking, all Members should share equitable burden and face equitable 
consequence.  Otherwise, the integrity of the Fish eries Annex itself may be questioned repeatedly in 
the long run.   
 Unfortunately, the blanket fuel subsidy prohib ition in the Chair's Text seems to contain a 
significant weakness in terms of ensuring fair ness among Members.  As evidenced through the 
discussions so far among Members, the prices of fuel  oil vary among Members and this difference is 
mainly the reflection of the different tax policies of respective Members.
1  So, a subsidy, a subsidy in 
the form of tax exemption or tax reduction in partic ular, should be regarded as simply the outcome of 
the operation of different tax policies.   
 Obviously, we are not in a position to say whose tax system is better or more appropriate.  A 
tax system of a Member is based on the general national economic policy as adopted by the Member.  
And yet, under the approach of the Chair's Text, some Members who have maintained a low (or no) 
tax system do not have to face a new burden as a re sult of the adoption of the Annex despite the low 
price fuel that apparently facilitates the global overfi shing: in the post-Annex era they can continue to 
provide low price fuel and are allowed to continue to  contribute to the global overfishing.  Perhaps, 
these Members can register commercial gains in th e fisheries sector, although unintended, under the 
current regime of the Chair's Text.   
 On the contrary, there are some Members who have maintained a high tax system 
traditionally, as a result of a general economic polic y, and who will now have to go through a major 
overhaul of the tax system, despite domestic oppositi on, to raise the price of the fuel oil for the 
fisheries sector, even if their fuel oil price with a s ubsidy, e.g. tax exemption is still higher than the oil 
price of certain Members that provide low price fuel .  The consequence is that one group of Members 
are allowed to maintain the low price fuel while othe rs are not.  If the low price fuel is the problem, 
the solution should include the regulation of the low price fuel.   
 If, in the new Annex, some Members enjoy benefits while other Members face unprecedented 
burden simply because of the economic system includi ng the tax policy that they maintain at the time 
of the Fisheries Annex is adopted, it is feared that this will undermine the principle of fairness and good faith implementation of the Annex in the long run.  
Limitation of the Specificity Test in Add ressing Political Sensitivity of Fuel Subsidy 
Also, it appears that there are some Members who tend to believe that their fuel subsidy 
programs are safe from future challenges because of the specificity defence.  Probably, this initial 
assessment seems to be mainly based on a de jure  specificity analysis and does not take into account 
                                                     
 
1 Diesel fuel prices are different from country to country from the low end of less than US$2 dollars per 
gallon to the high end of more than US$6 dollars per gallon. The difference in prices is due to different tax 
policies from country to country (see Attachment).  TN/RL/W/251 
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  the highly unpredictable nature of the de facto  specificity test.  Because the final outcome of a 
de facto  specificity test basically hinges upon the diversity of economic situation of a Member 
concerned in the future when a specific dispute arises, probably no one could guarantee operational 
predictability of the de facto  specificity test at this point.  It may be the case that most Members, 
except those with sufficient budgets so as to distribute governmental funds broadly and meticulously 
enough, will become vulnerable to the de facto  specificity test.  So, in Korea's view, downplaying the 
political sensitivity of the fuel subsidy believing in the possibility of the specificity defence, when 
viewed from this perspective, seems to face an inhe rent limitation.  This is another reason that a 
systemic feature should be considered to address the political sensitivity of the fuel subsidy. 
 On the other hand, in our view, the deletion of the specificity test in the prohibited category 
also seems problematic and politically unfeasible, because it might lead to the exclusion of the 
fisheries sector from all governmental programs.  Al though more effective conservation of fish stocks 
may be achieved through this appr oach, it is highly unlikely that this kind of scheme will be feasible 
domestically.   
Suggestions for Future Course of Action 
In light of the above, Members might want to explore various alternatives to address the 
inherent problems contained in the Chair's Text co ncerning the fuel subsidy and to ensure the basic 
fairness among Members in the new regime.  For inst ance, Members might want to consider different 
approaches to different fuel subsidy programs.  A fu el subsidy which is mainly the reflection of the 
difference in fuel prices that arises from different tax policies may warrant a different treatment from 
the one accorded to the other types of fuel subsidy programs that purport to intervene in market to 
affirmatively adjust the price of the oil itself. 
 In this process, a benchmark for the fuel pr ice may be contemplated, and a fuel price below 
the benchmark could be regarded as a "low fuel price" for the purpose of the Fisheries Subsidies 
which can potentially facilitate overfishing.  Restrict ing a Member maintaining a low fuel price below 
the designated benchmark from initiating an action agai nst a Member with a fuel price that is higher 
than the benchmark, to the extent a fuel subs idy is concerned, would be another option.   
 If a fuel subsidy is politically sensitive and it is  difficult to introduce a mechanism to regulate 
this problem in a predictable manner, addressing this problem from a more systemic perspective should be contemplated as well.  One option is to put the fuel subsidy in the actionable subsidy category instead of the prohibited one, as proposed by Korea for its amber box concept, so as to 
examine the fuel subsidy in question in a more detailed manner within the specific context of the 
program.  Another option may be to introduce a more predictable de minimis  carve-out with stringent 
conditions attached in the context of general exceptions.   
  TN/RL/W/251 
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