WORLD TRADE  
ORGANIZATION  G/SCM/Q4/SLV/6 
9 October 2006 
 
 (06-4834) 
Committee on Subsidies and 
Countervailing Measures  
 
 
 
PROCEDURES FOR EXTENSIONS UNDER ARTICLE 27.4 OF 
THE AGREEMENT ON SUBSIDIES AND 
COUNTERVAILING MEASURES 
 
Replies to Questions Posed by CANADA1, COLOMBIA2, 
UNITED STATES,3 JAPAN4 and PERU5 
   The following communication, dated 5 October 2006, is being circulated at the request of the 
delegation of El Salvador. 
 
_______________ 
 
  Attached please find El Salvador's response to  the questions posed by the United States 
regarding an extension of the transition period  envisaged in Article 27.4 of the Agreement on 
Subsidies and Countervailing Measures.   Please also find El Salvador's responses to the questions posed by Canada, Colombia, the United States, Japan and Peru regarding extensio n of the aforementioned transition period, with 
reference to G/SCM/W/535. 
                                                     
 
1 G/SCM/Q4/SLV/2. 
2 G/SCM/Q4/SLV/1. 
3 G/SCM/Q4/SLV/3/Rev.1. 
4 G/SCM/Q4/SLV/4. 
5 G/SCM/Q4/SLV/5. G/SCM/Q4/SLV/6 
Page 2  
 
  CANADA
 
 
Question 1  
 
 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
 
  Taking account of the special situation of certain developing country Members, document 
G/CM/39 establishes a mechanism for extending th e transition period under Article 27.4 of the 
Agreement on Subsidies and Countervailing Measu res (the SCM Agreement) until 2007, for 
developing countries that meet certain criteria.   El Salvador has been analysing various a lternatives that would allow it to maintain 
programmes that are consistent with its commitment s, subject to its legitimate economic and social 
development needs at the present time. 
 
Question 2
 
 
 Could the proponents of both documents al so 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  
  If El Salvador obtains a further extension un til 2018 of the transition period envisaged under 
Article 27.4 of the SCM Agreement, it will continue  to its best to fulfil its commitments under the 
WTO Agreements, subject to the country's legitimat e economic and social development needs at the 
present time.  
Question 3
 
 
 Recalling that the previous extension of th e 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
 
 
 Taking account of the special situation of certain developing country Members, document 
G/CM/39 establishes a mechanism for extending th e transition period under Article 27.4 of the 
SCM Agreement until 2007, for developing co untries that meet certain criteria. 
 
 The extension period requested in document G/ SCM/W/535 should be viewed in the light of 
the discussions held prior to the adoption of document G/SCM/39.  At that time, the proponents of that document, including El Salvador, expressed and justified the need to phase out their programmes 
over a fairly long period of time, possibly as much as 20 years, depending on their legitimate 
economic and social development needs.  G/SCM/Q4/SLV/6 
 Page 3 
 
 
   
 The programme covered by the extension gr anted to El Salvador under the G/SCM/39 
procedures has proven very useful over the last few years, providing a very important source of 
employment that has helped raise the standard of living among the Salvadoran people.  The programme also helps to minimize levels of citizen  insecurity and to reduce migration to developed 
countries in search of job opportunities. 
  In particular, this programme has made a huge contribution in terms of opportunities for 
women, many of whom are heads of family and acc ount for the majority of persons employed in the 
sector covered by investments made under the programme. 
 
 The programme has also generated positive indirect effects such as technology and 
knowledge transfer.   Clearly, far from being driven by trade objectiv es, the role of this programme is to seek 
greater economic and social well-being for the Salva doran people, which is one of the highest, most 
legitimate and just of aspirations.   In view of this, and as the economic, social a nd financial needs that motivated the request for 
an extension of this scheme still persist, and in  some cases have worsened, continuation of the 
programme during the requested period could serve  to maximize and consolidate its benefits.  
Moreover, dismantling the programme now would damage the Salvadoran economy and undermine 
the social benefits generated by it.   Lastly, it is important to consider the certaint y and predictability that would be provided by an 
extension until 2018, enabling investors to take decisions on their future plans and allowing 
El Salvador to attract the foreign investment th at generates the socioeconomic benefits of this 
programme.  G/SCM/Q4/SLV/6 
Page 4  
 
  COLOMBIA
 
 
• Export Processing Zones and Marketing Act, as amended. 
 
Question 1  
 
 In the case of each of the programmes, pl ease provide the most up-to-date information 
available regarding the number of beneficiary en terprises classified according to industrial 
sector. 
 
Reply  
 
 As stated in the notification made by El Salvador on 30 June 2006, and included in document 
G/SCM/N/146/SLV of 4 July 2006, there were 304 be neficiary enterprises registered for 2005, most 
of which are in the maquila garment sector.  For further information, please consult document 
G/SCM/N/146/SLV. 
 
Question 2  
 
 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
 
  Taking account of the special situation of certain developing country Members, document 
G/CM/39 establishes a mechanism for extending th e transition period under Article 27.4 of the 
SCM Agreement until 2007, for developing co untries that meet certain criteria. 
 
 El Salvador has been analysing various a lternatives that would allow it to maintain 
programmes that are consistent with its commitment s, subject to its legitimate economic and social 
development needs at the present time.   As the economic, social and financial needs that motivated the request for an extension of this 
scheme still persist, and in some cases have wo rsened, this programme is a key element in 
El Salvador's development strategies.  
Question 3
 
 
 The basis for requesting the extension is that El Salvador 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 its physical isol ation.  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 El Salvador's 
economy prevent the country from complying fully  and satisfactorily with WTO export subsidy 
disciplines. 
 
Reply
 
  Taking into account the special characteristic s of certain developing member countries, an 
extension was granted in accordance with  Article 27.4 of the SCM Agreement. 
  G/SCM/Q4/SLV/6 
 Page 5 
 
 
   If it obtains a further extension, El Salvador  will continue to do its best to fulfil its 
international commitments, subject to the count ry's legitimate economic and social development 
needs.   Given the lack of diversification of El Salvador 's exports and the fact that most of them are 
covered by the programme in question, a loss of e xport dynamism would have an adverse effect on 
domestic production, generating hi gh levels of unemployment, which would cause enormous 
socioeconomic problems in addition to those already being faced.  For that reason, the programme remains a key element in El Salvador's development strategy.  Question 4
 
 
 Please explain why the situation giving rise to the request for extension requires the 
granting of prohibited subsidies until the year 2018, rather than an earlier date. 
 Reply
 
  Taking account of the special situation of certain developing country Members, document 
G/CM/39 establishes a mechanism for extending th e transition period under Article 27.4 of the 
SCM Agreement until 2007, for developing co untries that meet certain criteria. 
 
 The period of extension requested in document G/SCM/W/535 should be viewed in the light 
of the discussions held prior to the adoption of doc ument G/SCM/39.  At that time, the proponents of 
that document, including El Salvador, expressed and justified the need to phase out their programmes 
over a fairly long period of time, possibly as much as 20 years, depending on their legitimate 
economic and social development needs. 
 
 The programme covered by the extension gr anted to El Salvador under the G/SCM/39 
procedures has proven very useful over the last few years, providing a very important source of 
employment that has helped raise the standard of living among the Salvadoran people.  The programme also helps to minimize levels of citizen  insecurity and to reduce migration to developed 
countries in search of job opportunities. 
 
 In particular, this programme has made a huge contribution in terms of opportunities for 
women, many of whom are heads of family and acc ount for the majority of persons employed in the 
sector covered by investments made under the programme.  
 The programme has also generated positive indirect effects such as technology and 
knowledge transfer.   Clearly, far from being driven by trade objectiv es, the role of this programme is to seek 
greater economic and social well-being for the Salva doran people, which is one of the highest, most 
legitimate and just aspirations. 
 
 In view of this, and as the economic, social a nd financial needs that motivated the request for 
an extension of this scheme still persist, and in  some cases have worsened, continuation of the 
programme during the requested period could serve  to maximize and consolidate its benefits.  
Moreover, dismantling the programme now would damage the Salvadoran economy and undermine 
the social benefits generated by it. 
 G/SCM/Q4/SLV/6 
Page 6  
 
  Question 5
 
 
 The free zone, inward processing warehouse and export reactivation programmes do 
not specify time-limits for the granting of benefits. What would be the duration of any such benefits? 
 
Reply
 
  Under the terms, and on the basis of the request formulated in document G/SCM/W/535, 
El Salvador will adjust to international commitments. 
 
Question 6
 
 
 If the extension for the programmes is refused, what type of measures would be taken in 
order to phase them out? 
 
Reply  
  El Salvador has been analysing various a lternatives that would allow it to maintain 
programmes that are consistent with its commitment s, subject to its legitimate economic and social 
development needs at the present time. 
 
Question 7
 
 
 The export reactivation programme provides for a 6 per cent refund of the f.o.b. value 
of exports.  In order for the refund to be payab le, must the exported product originate entirely 
in El Salvador or is provision made for the possibility of a percentage of the product originating 
in another country?  What are the requirements fo r obtaining the qualification of origin?  Must 
the amount refunded to the exporters or traders be destined for a particular purpose, for 
example, payment of future taxes that might arise? 
 
Reply  
 
 In accordance with the terms of proposal G/ SCM/W/535 and Annex A thereto, the extension 
request refers to the Export Processing Zones and Marketing Act, as amended. 
  G/SCM/Q4/SLV/6 
 Page 7 
 
 
  JAPAN  
 
Question 1  
 
 Please show the reasons why the lengthy extens ion of 11 years is indispensable uniformly 
for all the export subsidy programmes referred to in the above documents. 
 
Reply  
  Taking account of the special situation of certain developing country Members, document 
G/CM/39 establishes a mechanism for extending th e transition period under Article 27.4 of the 
SCM Agreement until 2007, for developing co untries that meet certain criteria. 
  The period of extension requested in document G/SCM/W/535 should be viewed in the light of the discussions held prior to the adoption of doc ument G/SCM/39.  At that time, the proponents of 
that document, including El Salvador, expressed and justified the need to phase out their programmes 
over a fairly long period of time, possibly as much as 20 years, depending on their legitimate 
economic and social development needs.   The programme covered by the extension gr anted to El Salvador under the G/SCM/39 
procedures has proven very useful over the last few years, providing a very important source of 
employment that has helped raise the standard of living among the Salvadoran people.  The 
programme also helps to minimize levels of citizen  insecurity and to reduce migration to developed 
countries in search of job opportunities.   In particular, this programme has made a huge contribution in terms of opportunities for 
women, many of whom are heads of family and acc ount for the majority of persons employed in the 
sector covered by investments made under the programme.   The programme has also generated positive indirect effects such as technology and 
knowledge transfer.  
 Clearly, far from being driven by trade objectiv es, the role of this programme is to seek 
greater economic and social well-being for the Salva doran people, which is one of the highest, most 
legitimate and just of aspirations.   In view of this, and as the economic, social a nd financial needs that motivated the request for 
an extension of this scheme still persist, and in  some cases have worsened, continuation of the 
programme during the requested period could serve  to maximize and consolidate its benefits.  
Moreover, dismantling the programme now would damage the Salvadoran economy and undermine 
the social benefits generated by it.  
Question 2
 
 
 Please explain, one by one for each of the export subsidy programmes referred to in the 
above documents, how each of those export  subsidy programmes are integrated in the 
development strategies of the relevant Member, why a further extension beyond 2007 is necessary for its economic and fina ncial needs, and why the extension period has to be through 
to the end of 2018.  
 G/SCM/Q4/SLV/6 
Page 8  
 
  Reply
 
  The programme contained in the Export Pro cessing Zones and Marketing Act, as amended, 
includes investment incentives for enterprises producing for the export market.  For further 
information, please consult document G/SCM/N/146/SLV. 
 
 Taking account of the special situation of certain developing country Members, document 
G/CM/39 establishes a mechanism for extending th e transition period under Article 27.4 of the 
SCM Agreement until 2007, for developing co untries that meet certain criteria. 
 
 The period of extension requested in document G/SCM/W/535 should be viewed in the light 
of the discussions held prior to the adoption of doc ument G/SCM/39.  At that time, the proponents of 
that document, including El Salvador, expressed and justified the need to phase out their programmes 
over a fairly long period of time, possibly as much as 20 years, depending on their legitimate 
economic and social development needs. 
 
 The programme covered by the extension gr anted to El Salvador under the G/SCM/39 
procedures has proven very useful over the last few years, providing a very important source of 
employment that has helped raise the standard of living among the Salvadoran people.  The programme also helps to minimize levels of citizen  insecurity and to reduce migration to developed 
countries in search of job opportunities. 
 
 In particular, this programme has made a huge contribution in terms of opportunities for 
women, many of whom are heads of family and acc ount for the majority of persons employed in the 
sector covered by investments made under the programme.  
 The programme has also generated positive indirect effects such as technology and 
knowledge transfer.   Clearly, far from being driven by trade objectiv es, the role of this programme is to seek 
greater economic and social well-being for the Salva doran people, which is one of the highest, most 
legitimate and just of aspirations. 
 
 In view of this, and as the economic, social a nd financial needs that motivated the request for 
an extension of this scheme still persist, and in  some cases have worsened, continuation of the 
programme during the requested period could serve  to maximize and consolidate its benefits.  
Moreover, dismantling the programme now would damage the Salvadoran economy and undermine 
the social benefits generated by it. 
  G/SCM/Q4/SLV/6 
 Page 9 
 
 
  PERU  
 
 Peru hereby submits to the Committee on Subsidies and Countervailing Measures, as 
requested, the following questions to Members seeking extensions to their programmes under 
Article 27.4 of the SCM Agreement 
 
Question 1  
 
 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  
 
 In accordance with the terms of proposal G/ SCM/W/535 and Annex A thereto, the extension 
request refers to Export Processing Zo nes and Marketing Act, as amended. 
 
Question 2  
 
 Under what laws and enabling regulations are the programmes listed in Annex A of the 
proposal implemented? 
 
Reply  
 
 The Export Processing Zones and Marketing Act, as amended. 
 
Question 3  
 
 Which sectors and products be nefit from the programmes? 
 Reply
 
  Pursuant to the notification made by El Salva dor on 30 June 2006, and contained in document 
G/SCM/N/146/SLV of 4 July 2006, there are 304 bene ficiary enterprises registered for 2005, most of 
which are in the maquila garment sector.  For further information, please consult document 
G/SCM/N/146/SLV. 
 
Question 4
 
 
 What amount is disbursed by the Stat e to the programmes listed in Annex A? 
 Reply
 
  Given the characteristics of the programme in  question, which is based on forgoing tax 
revenue in exchange for improvement in resp ect of El Salvador's economic, financial and 
development needs, and because of the programme's coverage, it is impossibl e to provide statistics 
quantifying the incentives provided. 
 G/SCM/Q4/SLV/6 
Page 10  
 
  Question 5
 
 
 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, adapted to the programmes for which extensions 
are requested, will apply. 
 
Reply  
  Not applicable.   G/SCM/Q4/SLV/6 
 Page 11 
 
 
  UNITED STATES  
 
Free Zone and Inward-Pro cessing Warehouse Programme  
 
 El Salvador has requested an extension for the above programme through calendar year 2018, 
pursuant to the 2001 Doha Ministerial Decision on th e Procedures for Extension under Article 27.4 of 
the ASCM.6 
 
Question 1  
 
 Please describe what efforts El Salvador has made to phase out the programme within 
the extension period that has already been granted, as provided under the "Procedures for 
Extension Under Article 27.4 for Certain Developing Country Members."7  Please further 
describe how El Salvador will continue to ensure  that the programme will be phased out, if an 
additional extension were granted. 
 
Reply  
  Taking account of the special situation of certain developing country Members, document 
G/CM/39 establishes a mechanism for extending th e transition period under Article 27.4 of the 
SCM Agreement until 2007, for developing co untries that meet certain criteria. 
 
 El Salvador is studying various alternatives that would allow it to ma intain programmes that 
are consistent with its commitments in the WTO.  
  If it obtains a further extension until 2018 under the terms of the G/SCM/W/535 proposal, 
El Salvador will continue to do its best to fulfil its  international commitments, subject to the country's 
legitimate economic and social development needs.  
Question 2
 
 
 Please describe changes to the programme since 2001.  Also, please provide any updated 
or revised implementing legislation, and an y relevant amendments, unde r this programme and 
any accompanying regulations and decrees. 
 
Reply  
 
 No amendments have been approved to the programme under the Export Processing Zones 
and Marketing Act, as amended, to increase the scope, coverage and inte nsity of the benefits 
(favourability).  
Question 3
 
 
 How many beneficiaries of this progr amme were there in 2001?  How many 
beneficiaries are there currently under the prog ramme?  What types of industries currently 
benefit under the programme? 
 
                                                      
6 G/SCM/W/535. 
7 G/SCM/39. 
 G/SCM/Q4/SLV/6 
Page 12  
 
  Reply
 
  In 2001, there were 246 beneficiaries, and for 2005 there are 304 registered beneficiary enterprises, most of which are in the maquila garmen t sector.  In addition, 80 out of the total number 
of enterprises registered in 2005 are of United Stat es origin.  For further information, please consult 
documents G/SCM/N/71/SLV/Suppl.1 and G/SCM/N/146/SLV. 
 
Question 4
 
 
 Did El Salvador 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  
 
 El Salvador will continue to do its best to  fulfil its commitments under the WTO Agreements. 
 
Question 5  
 
 If available, please provide the amount of  the subsidy provided under the programme 
for each year from 2001 through 2005. 
 
Reply  
  Given the characteristics of the programme in  question, which is based on forgoing tax 
revenue in exchange for improvement in resp ect of El Salvador's economic, financial and 
development needs, and because of the programme's coverage, it is impossibl e to provide statistics 
quantifying the incentives provided.  
__________