. /.  WORLD TRADE  
ORGANIZATION  TN/RL/GEN/80 
16 November 2005 
 (05-5385) 
Negotiating Group on Rules Original:   English 
  
 
 
PROHIBITED EXPORT SUBSIDIES 
 
Paper from Australia
 
 
 
 The following communication, dated 15 November 2005, is being circulated at the request of the Delegation of Australia.  
 The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(05)/ 283), also be circulated as a formal document. 
 
_______________ 
 
  Australia recalls the discussion at the Negotiating Group on Rules meeting in April 2005 on the Australian proposal 
1 to clarify the standard of ‘in fact’ export contingency, as contained in 
Article 3.1(a) of the WTO Agreement on Subsid ies and Countervailing Measures (SCM).  This 
discussion was on the basis of an elaborated and amended proposal which took into account earlier 
and preliminary discussions within the Negotiating Group.  2   
  In bringing this issue to Members’ attention,  Australia recalls the issues that the proposal 
seeks to address, namely:  
• what facts or factors must be considered in determining “in fact” export contingency;  
• the fact of export propensity should not be ta ken in isolation and this fact should not 
necessarily have greater weight in any case-specific examination; and  
• the need for parallel consideration in the appli cation of the subsidy analysis in countervailing 
duty investigations.   
  Australia notes the constructive comments made  and the textual suggestions to improve and 
clarify the intent of this proposal.  At the same time, discussion was somewhat divided on the 
direction the textual guidance should take.   
  Australia notes in particular that some concerns  were raised over an illustrative list of factors 
that should be examined in determining ‘in fact’ e xport contingency.  Some suggested that this would 
defeat the very nature of an in fact analysis.  Equally, the introduction of  language such as “export 
orientation” itself begged clarification, definiti on and possible measurement.  It may also undermine 
the presumption of serious trade effects caused by prohi bited subsidies.  Australia is concerned that 
any proposed wording not require further definition or reduce the clarity of the text.    
                                                     
 
1 TN/RL/GEN/34 (JOB(05)/40) dated 23 March 2005 
2 See Documents TN/RL/GEN/22 (JOB(04)/151) dated October 2004;. TN/RL/GEN/80 
Page 2  
 
 Some Members commented at the April session that export propensity, that is, where a 
Member exports much of its goods, due to the small size of the domestic market, itself is sufficient to meet the export contingency standard.  This conf irms or underlines our concern about the way panels 
appear to have given greater weight  to this fact, and that one fact alone is given undue weight.  Nor do 
we believe that this is consistent  with existing footnote 4 to Article  3.1(a).  The Appellate Body in 
Canada Aircraft  
3noted that the high export orientation of a subsidized industry alone was insufficient 
evidence upon which to find that a subsidy was ‘in fact’ export contingent.  
PROPOSED TEXTUAL AMENDMENTS 
  To take into account the two aspects that we are seeking to clarify, that is, the type of facts 
and the weighting of facts, and reflecting on text ual suggestions of other WTO Members, Australia 
proposes in ‘in fact’ export contingency cases that fo otnote 4 to SCM Article 3.1(a) be amended to 
read as follows (new text bolded and underscored):  
 
 3.1  Except as provided in the Agreemen t on Agriculture, the following subsidies, 
within the meaning of Article 1, shall be prohibited: 
 
  (a) subsidies contingent, in law or in fact
4, whether solely or as one of 
several other conditions, upon expo rt performance, including those 
illustrated in Annex I … 
 _____________________________________________________________________ 
 4  This standard is met when the facts demonstrate that the granting of a subsidy, 
without having been made legally contingent  upon export performance, is in fact tied 
to actual or anticipated exportation or export earnings. The mere fact that a subsidy is 
granted to enterprises which export , regardless of the level of export,  shall not for 
that reason alone be considered to be an export subsidy within the meaning of this 
provision.  Nor shall any fact be taken in isolation or have greater weight when 
considering whether this standard is met.  
 
  Australia reserves the right to submit further proposals on this issue. 
 
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3 Canada – Measures Affecting the Export of Civilian Aircraft , (hereafter Canada – Aircraft ), 
Appellate Body Report, WT/DS70/AB/R, Adopted 8 August 1999.