WORLD TRADE  
ORGANIZATION  G/SCM/Q4/JOR/5 
17 October 2006 
 
 (06-5020) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
PROCEDURES FOR EXTENSIONS UNDER  
ARTICLE 27.4 OF THE AGREEMENT ON SUBSIDIES  
AND COUNTERVAILING MEASURES 
 
Replies to Questions Posed by CANADA1;  COLOMBIA2; 
JAPAN3;  and PERU4 
 
 
 The following communication, dated 12 October 2006, is being circulated at the request of the Delegation of Jordan. 
 
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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 
 
 Jordan is of the view that document G/SCM/39 contains only fast track procedure to approve 
extensions under Article 27.4 of the ASCM. This  document neither reduces nor does it increase the 
rights and obligations under the ASCM therefore ne ither document G/SCM/39 nor Article 27.4 of the 
ASCM provide for a progressive elimin ation of export subsidy programme. 
 
 Moreover, Article 27.4 mentions a "progressive" elimination is the first sentence which refers 
to the phase out of the export subsidies within the eight-year period mentioned in article 27.2 (b), a 
condition that is completely different to tho se regarding the subsidies programmes at issue. 
Additionally, it is clear from the language in Article  27.4 that such "progressive elimination", is not 
mandatory.  In consequences Jordan doesn't see any obligation to take any effort for gradually phasing 
out this export subsidy programme.  
                                                     
 
1 G/SCM/Q4/JOR/2 
2 G/SCM/Q4/JOR/1/Rev.1 
3 G/SCM/Q4/JOR/3 
4 G/SCM/Q4/JOR/4 G/SCM/Q4/JOR/5 
Page 2  
 
   In addition, Jordan considers that its export s ubsidy programme is fully in compliance with its 
WTO obligations. As a matter of fact, the current extensions have been granted to Jordan in 
accordance to article 27.4 and under the procedures and conditions set forth in document G/SCM/39. 
  Nevertheless, Jordan has been undertaking e fforts to phase out its export subsidy programme. 
This information is available in the answers provi ded to questions made by certain WTO Members in 
previous years under signature G/SCM/Q3. Additionally , Jordan would be pleased to answer further 
questions that Canada may have in the co urse of the discussions before the committee. 
 
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   The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1 (c) of 
G/SCM/39. The view of the proponents is to conti nue benefiting from the extension throughout 2018, 
based on their special economic, financial and de velopment needs. Therefore, the rights and 
obligations contained in document G/SCM/39 an d Article 27.4 of the ASCM would remain 
unchanged.   Consequently, Jordan would take pertinent d ecision, based on its specific financial, economic 
and development needs and in accordance with th e procedures and timelines established in the 
provisions mentioned above. As a WTO Member, Jo rdan has designed its development strategies to 
address these needs with a view to utilize trade promotion as a t ool for poverty reduction and to 
achieve a fruitful integration into the world ec onomy. However; these goals  may be achieved only 
with the full support and solidarity of the whole WTO Membership.   The main challenges currently  facing Jordan is to reinforce the capabilities of domestic 
industries to adjust to the economic developments  in Jordan and the region, as well as to create 
investment incentives and open more markets and pr omote job creation. This  programme has several 
positive effects on the Jordanian SMEs, who are pe rsistently inquiring about the possibility of 
extending it as long as possible in order to enhan ce its capabilities in light of the mentioned 
circumstances. 
 
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   A period of 11 years will induce investment pr ospects and endorse the local industries that 
were shadowed by the continuous aggression in th e Middle East region and the resultant tremendous 
recession. Additionally, 11 years will be a sufficien t period of time for the SMEs to cope with the 
progressive trade liberalization achieved due to Jo rdan accession to the WTO thus ensuring a stable 
performance for the industrial sector in light of Jordan's economic and development needs. 
  G/SCM/Q4/JOR/5 
 Page 3 
 
 
   At the same time, the Jordanian economy is still suffering from the implications of the 2nd 
Gulf War, which imposed heavy pressure on infr astructure, public services, and housing, thus 
destabilizing the system of resource and capital redistribution and hastened the demise of the 
economic system upon which a welfare state had been established. In light of the prevailing political 
situation in the Middle East, and its significant effects on economic conditions of the region, the 
subject subsidy programme is necessary to extend  to ensure sustainability of domestic industry's 
performance.   Ninety eight per cent of the Jordanian exporting industrial companies that are mostly of small and medium size suffer from the lack of market access  caused by their small size and limited capacity, 
that obstruct them from reaching economies of scale, leaving their costs higher, and depriving them 
from having opportunities to compete in world markets.  Also, oil prices rocketed up in the last two 
years, changing by such prices of energy resour ces and consequently cost of outputs got more 
expensive which is being reflected in a slower activ ity of the small and medium enterprises that are 
already facing mounting competitive pressures as a result of trade liberalization. 
 
 The main challenges currently  facing Jordan is to reinforce the capabilities of domestic 
industries to adjust to the economic developments  in Jordan and the region, as well as to create 
investment incentives and open more markets and pr omote job creation. This  programme has several 
positive effects on the Jordanian SMEs, who are pe rsistently inquiring about the possibility of 
extending it as long as possible in order to enhan ce its capabilities in light of the mentioned 
circumstances. 
  Finally, in light of the prevailing political situation in the Middle East, and its significant effects on the economic conditions of the region, exp ectations of decreased trade deficit in the coming 
years will be disappointing, and in order to enha nce the positive effects of this programme, the 
continuation of the subject subsidy programme to the year 2018 is necessary to ensure the 
sustainability of the domestic industry's performance  and to improve its export potential and further 
develop exporting capabilities.   
COLOMBIA
 
 
Question 1 
 
 In document G/SCM/W/S37/Add.2, Jordan co-sponsors the proposal by Panama 
contained in document G/SCM/W/537. The la tter document states that "[t]he extension 
procedures under Article 27.4 would hence be applicable to all members and existing 
programmes in line with paragraph 2 of G/SCM/ 39". One of the conditions in paragraph 2 is 
that those Members "whose share of world mercha ndise export trade was not greater than 0.10 
per cent" shall benefit from such an extension.  Do Jordan's exports currently account for less 
than 0.10 per cent of world merchandise export trade? 
 Reply 
  As a matter of fact Jordan is still a developing country with a share not greater than 0.10 per 
cent of world's export trade, and this fact implies th at the income tax relief still has a slight effect on 
Jordan's International Trade due to its meagre value. 
 
Question 2 
 
 Jordan provides no justification in docume nt G/SCM/W/537/Add.2 for being granted an 
extension of the phase-out period for export s ubsidies. Does Jordan share the justification put G/SCM/Q4/JOR/5 
Page 4  
 
  forward by the group of small, vulnerable econo mies, on the grounds that Jordan suffers from 
the combined effect of diseconomies of scale caused by the small size of its economy and 
administration and by its physical isolation? 
 
Reply 
 
 The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1(e) of 
G/SCM/39. View of the proponents is to continue  benefiting from the extension throughout 2018. 
Therefore, the rights and obligations contained in the document G/SCM/39 and Article 27.4 of the 
ASCM would remain unchanged. Ninety-eight per cent of the Jordanian exporting industrial 
companies that are mostly of small and medium si ze suffer from the lack of market access caused by 
their small size and limited capacity, that obstruct them from reaching economies of scale, leaving their costs higher, and depriving them from having opportunities to compete in world markets. Also, oil prices rocketed up in the last two years, changing by such prices of energy resources and 
consequently cost of outputs got more expensive whic h is being reflected in a slower activity of the 
small and medium enterprises that are already f acing mounting competitive pressures as a result of 
trade liberalization.  
Question 3 
 
 Given that Jordan did not provide any economic justification for the extension of the 
phase-out period for export subsidies, please expl ain why it requires an extension up to the year 
2018 to comply with the obligation to eliminate the above subsidies and why it cannot comply with this obligation within the period of extension already granted. 
 
Reply 
 
 Jordan requires an extension up to the year 2018, as one of its strategies is to support the 
SMEs (92% of Jordan industry sector), and this progr amme is a part of its strategy, a further extension 
up to the year 2018 will enhance the positive eff ects of the subject subsidy programme and will 
reinforce the capabilities of the domestic industries to adjust to the general ec onomic situation and to 
cope with the progressive trade liberalization achieved due to Jordan accession to the WTO. 
 
 In light of the prevailing political situation in  the Middle East, and its significant effects on 
the economic conditions of the region, expectations of decreased trade deficit in the coming years will 
be disappointing, and in order to enhance the positiv e effects of this programme , the continuation of 
the subject subsidy programme to the year 2018 is necessary to en sure the sustainability of the 
domestic industry performance and to improve it s export potential and further develop exporting 
capabilities.  
Question 4 
 
 What measures has Jordan adopted to fulfil  the obligation to phase out the export 
subsidy programmes, in line with the latest extension it was granted?  
Reply   Jordan is at all times committed that its programme must be compatible with the WTO 
obligations, exporters are informed that the extensi on decision is decided on a yearly basis, and that 
Jordan will phase out this programme at the end of  the extension period to be considered by the 
Committee.    G/SCM/Q4/JOR/5 
 Page 5 
 
 
  Question 5 
 
 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   The number of beneficiary enterprises based on Article 3(c) of the Income Tax Law No. 57 is all exports enterprises in Jordan except Potash exports, Phosphate exports, and Exports subject to 
Protocol Trade. 
 
Question 6 
 
 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   Currently, it is still not possible to disman tle the prohibited subsidies as the Jordanian 
economy is still suffering from the implications of the 2nd Gulf War, which imposed heavy pressure 
on infrastructure, public services, and housing, thus destabilizing the system of resource and capital 
redistribution and hastened the demise of the ec onomic system upon which a welfare state had been 
established. Ninety-eight per cent of the Jordanian exporting industrial companies that are mostly of small and medium size suffer from the lack of market access caused by their small size and limited 
capacity, that obstruct them from reaching economies of scale, leaving their costs higher, and 
depriving them from having opportun ities to compete in world markets.  Also, oil prices rocketed up in 
the last two years, changing by such prices of en ergy resources and consequent ly cost of outputs got 
more expensive which is being reflected in a slower activity of the small and medium enterprises that are already facing mounting competitive pressures as a result of trade liberalization.   Thus the continuation of the subject subsidy programme to the year 2018 is necessary to 
ensure the sustainability of the domestic industry' s performance and to improve its export potential 
and further develop exporting capabilities.   
JAPAN
 
 
Question 1 
 
 Please show the reasons why the lengthy exte nsion of 11 years is indispensable uniformly 
for all the export subsidy programmes referred to in the above documents. 
 Reply 
  First of all, the choice of the suggested date  of 2018 should be read in the light of the 
discussion that had taken place before the adoption of  G/SCM/39. At the time, the proponents of this 
document had already explained their concerns and the reasons to eliminate their programmes over a 
long enough timeframe, possibly extending over 20 years.  In the light of those discussions and taking 
into account the relevant and legitimate financial,  economic and development needs of JORDAN, the 
extension proposed in G/SCM/W535 should be  regarded as an appropriate extension. 
 G/SCM/Q4/JOR/5 
Page 6  
 
   Jordan Programme under scrutiny generally sh ares the same objectives, structure and/or 
design as the ones of other proponents of the extension. As a matter of fact, all proponents face the same structural shortcomings which justify the requi rement of the extension. Additionally, the recent 
developments in the trading environment could hind er the fruitful insertion of Jordan and the other 
proponents in the global economy. 
 
 The uncertainty regarding the future of the negotiations in the Doha  Round and the significant 
transformation in the global trading scenario tri gger new challenges that will require great efforts 
from domestic producers in SVEs and will definitivel y put additional pressure to these countries in 
terms of trade and overall economic prospects. 
 
 Jordan has applied and notified only one progra mme which is "the Partial or Total Exemption 
From Income Tax For Profits On Certain Export". This programme has been the core of its export 
development strategy and, notwithstanding they do not perform as it would be desirable under the 
current global conditions, it contribute to enhance and diversify the minuscule export base of the 
country and have provide to be a tool to lift people out of poverty. 
  As a matter of fact, the Jordanian economy is still suffering from the implications of the 2
nd Gulf War, which imposed heavy pressure on infrastructure, public services, and housing, and 
destabilized the system of resource and capital redist ribution and hastened the demise of the economic 
system upon which a welfare state had been established, as a conse quence of the prevailing political 
& economic situation in the Middle East, the subject  subsidy programme is necessary to be extended 
to ensure sustainability of domes tic industry's performance. For th ese reasons, it is dispensable to 
have uniform extension for its export subsidy programme. 
 
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 subs idy programs are integrated in the development 
strategies of the relevant Me mber, why a further extension beyond 2007 is necessary for its 
economic and financial needs, and why the extens ion period has to be through to the end of 
2018. 
 
Reply   The information regarding the programme notif ied by Jordan, including how this programme 
is integrated into the development strategies of th e country is available in the documents submitted in 
2001 to obtain the current extension. Furthermore, th is information is available in each of the annual 
notifications that Jordan has submitted to the Committee on Subsidies and Countervailing Measures in 
compliance with the transparency and standstill obligations.   The main challenges currently  facing Jordan is to reinforce the capabilities of domestic 
industries to adjust to the economic developments  in Jordan and the region, as well as to create 
investment incentives and open more markets and pr omote job creation. This  programme has several 
positive effects on the Jordanian SMEs, who are pe rsistently inquiring about the possibility of 
extending it as long as possible in order to enhan ce its capabilities in light of the mentioned 
circumstances.  
 Thus, Jordan requires an extension up to the y ear 2018, as one of its strategies is to support 
the SMEs (92 per cent of Jordan industry sector), and this programme is a part of its strategy, a further 
extension up to the year 2018 will enhance the pos itive effects of the subject subsidy programme and 
will reinforce the capabilities of the domestic industr ies to adjust to the general economic situation 
and to cope with the progressive trade liberaliza tion achieved due to Jordan accession to the WTO.  G/SCM/Q4/JOR/5 
 Page 7 
 
 
  PERU 
 Question 1 
 
 Do the co-sponsors of proposal G/SCMI 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 
  The proposal contained in G/SCM/W/35 and G/SCM/535 Add.l refers only to the amendment of paragraph 1(e) of G/SCM/39. Therefore, the in tention of the sponsors of these documents is to 
continue benefiting from the extension until the end of 2018 and the conditions specified in 
G/SCM/39 would remain unchanged. Realizing that Jordan is a developing country with a trade 
deficit equal US$ 4.4b and with an export share not gr eater than 0.01 per cent of world's export trade, 
it is clear that no harmful effects have been intr oduced on the international trade as a result of the 
subsidy programme. This clearly excludes the po ssibility to include any further programmes. 
 
Question 2 
 
 Under what laws and enabling regulations are the programmes listed in Annex A of the 
proposal implemented? 
 
Reply 
 
 The implementing legislation is "Income Tax La w No. 25 for the year 2001 amending Income 
Tax Law No. 57 for the Year 1985".  
Question 3 
 
 Which sectors and products be nefit from the programmes? 
 
Reply   The programme is not specified to a particular  sector or product; however exports that are not 
entitled to the exemption are mentioned therein, 
 - Potash Exports,  - Phosphate exports and, 
 - Exports subject to Protocol Trade. (Trade  protocol is agreement between Jordan and 
other countries to exchange products) 
 Question 4 
 
 What amount is disbursed by the Stat e to the programmes listed in Annex A? 
 G/SCM/Q4/JOR/5 
Page 8  
 
  Reply 
  The normal Income Tax, which will be paid in the absence of the programme, is on average 
15 per cent or less on the profits generated from all th eir operations irrespective of the nature of their 
sales. As a matter of fact in 2005 that the total amount of exemption of US$ 1,061,299 constitutes 
only 0.02 per cent of Jordan's national exports. This implies that the income tax relief still has a slight 
effect on Jordan's International Trade due to its me agre value, and also disbursements for the year 
2004, 2003, 2002 were as follows:   For the year 2004: US$ 1,150,235 
 For the year 2003: US $ 8,285,555 
 For the year 2002: US $7,833,558.70  
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