WORLD TRADE  
ORGANIZATION  G/SCM/N/211/SLV 
7 July 2010 
 (10-3726) 
Committee on Subsidies and 
Countervailing Measures Original:   Spanish 
 
 
 
SUBSIDIES 
 
Continuation of Extension under SCM Article 27.4 of the Transition Period for the  
Elimination of Export Subsidies Pursuant to the Procedures Contained in the  
General Council Decision in Document WT/L/691  
 
EL SALVADOR 
  
 The following communication, dated 30 June 2010,  is being circulated at the request of the 
delegation of El Salvador.  
_______________ 
 
 I. FREE ZONE AND INWARD-PROCESSING WAREHOUSE PROGRAMME 
 Pursuant to paragraph 10.6 of the Decision on Implementation-Related Issues and Concerns 
set forth in document WT/MIN(01)/17, the request fo r an extension of the transition period under the 
procedures laid down in document G/SCM/39 and the WTO General Council Decision in 
document WT/L/691, and the SCM Committee D ecisions contained in documents G/SCM/65, 
G/SCM/65/Add.1, G/SCM/65/Add.2, G/SCM/65/ Add.3, G/SCM/65/Add.4, G/SCM/65/Add.5, 
G/SCM/65/Add.6 and G/SCM/65/Add.7 concerning the Free Zone and Inward-Processing Warehouse 
Programme, El Salvador is pleased to submit th is notification relating to the programme, in 
accordance with paragraph 2(a) of document WT/L/691.
1 
  El Salvador hereby wishes to confir m that, pursuant to paragraph 3(a) of 
document WT/L/691, the Free Zone and Inward -Processing Warehouse Programme satisfies the 
standstill requirements established therein.  1. Title of the subsidy progra mme, if relevant, or brief descr iption or identification of the 
subsidy  
 
 Incentives for firms operating in free trad e zones or in inward-processing warehouses. 
 
                                                      
1 El Salvador's notifications pursuant to Article 27.4 of the Agreement on Subsidies and Countervailing 
Measures were circulated as documents G/SCM/N/38/SLV/Suppl.1, G/SCM/N/48/SLV/Suppl.1, 
G/SCM/N/60/SLV/Suppl.1 and G/SCM/N/71/SLV/Supp l.1;  G/SCM/N/95/SLV and G/SCM/N/99/SLV;  
G/SCM/N/114/SLV and G/SCM/N/11 4/SLV/Corr.1;  G/SCM/N/123/ SLV and G/SCM/N/128/SLV;  
G/SCM/N/146/SLV;  G/SCM/N/ 155/SLV and G/SCM/N/160/SLV;  G/SCM/N/177/SLV;  and 
G/SCM/N/186/SLV and G/SCM/N/192/SLV. G/SCM/N/211/SLV 
Page 2  
 
  2. Period covered by the notification
 
  2009.  3. Policy objective and/or purpose of the subsidy
 
 
 No changes have been made to the programme since the last updating notification.  4. Background and authority for the subsidy (inc luding identification of the legislation under 
 which it is granted ) 
 
A. BACKGROUND  
 For the reasons explained in previous notifica tions, El Salvador needs to improve the welfare 
of its people.  The benefits deriving from the pr ogramme, by creating opportunities to maintain and 
raise employment levels and, by extension, to improve the welfare of the Salvadoran people, are 
therefore essential for the country's economic and social development. 
  In this context, with a view to creating fa vourable conditions for su stained economic growth, 
El Salvador is developi ng and implementing mechanisms to st imulate aggregate demand, enhancing 
its exportable supply and creating a macroeconomi c environment conducive to the establishment of 
foreign direct investment in the country.  The programme of incentives to firms operating in free 
zones or inward-processing warehouses is part of a st rategy that seeks to create more and better jobs 
for Salvadorans, while reducing the country's reliance,  in terms of its balance of payments, on family 
remittances from the United States. 
 By the end of 2009, the programme in ques tion benefited 256 exporting companies, 59 per 
cent of which were foreign while the rest were dome stic.  The number of people directly employed by 
these companies rose to 65,000, which made it possibl e for the same number of households to enjoy a 
secure income, access to social security, education,  health and a pension plan, and other benefits.  
Another 130,000 jobs were created indirectly, thus making a total of  around 195,000 new jobs overall, 
equivalent to 8.4 per cent of the Salvadoran labour force.  It should be noted that around 80 per cent 
of the jobs created through this programme are held  by women, a large percentage of whom are heads 
of household and the main income providers in their respective families.  The programme thus 
ensures better living conditions for one of the mo st vulnerable sectors of Salvadoran society. 
 It should also be noted that 80 per cent of a ll companies operating in free zones form part of 
the in-bond assembly ( maquila ) industry, which has become the country's leading export sector, 
bringing in US$1,487 million in foreign currency in 2009, i.e. 39 per cent of the total value of El Salvador's exports to the world.  This sector also accounted for 2.5 per cent of El Salvador's 
2008 GDP, reflecting its importance in terms of the country's trade balance performance and 
economic activity. 
 Companies in the above-mentioned sector which operate under this programme have 
production chains that promote greater value a dded production, for instance through the "full 
package" concept.  It should be emphasized that this  industry is considered the most fully integrated 
in the Central American region.  Technological  progress has also been made in this sector. 
 Lastly, the programme is of particular inter est to El Salvador within the context of the 
international economic and financial crisis, wh ich has had a negative impact on the domestic 
economy.  Exports, together with remittances from Sa lvadorans living abroad, contracted by 19 per 
cent and 9 per cent respectively on an annualized b asis.  Similarly, credit for private investment 
diminished considerably, which worsened the d ecline in strategic sectors such as construction,  G/SCM/N/211/SLV 
 Page 3 
 
 
  tourism and manufacturing, plunging the country fu rther into economic recession and contributing to 
a 3.5 per cent drop in real GDP by the end of 2009.  Gi ven that the current crisis is set to continue into 
the near future - it will take the Salvadoran economy almost a year to respond to US market stimuli, 
thus delaying recovery - and in the light of our  firm commitment to comply with the Millennium 
Development Goals, we believe that the programme in question remains a key factor for our country's 
sustained development in the face of its current economic and social challenges. 
B. LEGISLATION  
 No changes have been made to the programme since the last updating notification. 
 5. Form of the subsidy (i.e., grant, loan, tax concession, etc.
) 
 
 No changes have been made to the programme since the last updating notification.  6. To whom and how the subsidy is provided (whe ther to producers, to exporters, or others;  
through what mechanism;  whether a fixed or fluctuating amount per unit;  if the latter, how 
determined ) 
  No changes have been made to the programme since the last updating notification.  7. Subsidy per unit, or in cases where this is not possible, the total amount or the annual amount 
budgeted for that subsidy (indicating, if possible,  the average subsidy per unit in the previous 
year).  Where provision of per-unit subsid y information (for the year covered by the 
notification, for the previous year, or both) is not possible, a full explanation  
  Given the nature and scope of the programme , no statistical data reflecting the amount of 
incentives per unit are available. 
 
8. Duration of the subsidy and/or any other tim e-limits attached to it, including date of 
inception/commencement  
  This will be in line with the international oblig ations undertaken by El Salvador, in particular 
under the SCM Agreement. 
 
9. Statistical data permitting an assessment of th e trade effects of the subsidy.  The specific 
nature and scope of such statistics is left to the judgement of the notifying Member.  To the 
extent possible, relevant and/or determinable, however, it is desirable that such information 
include statistics on the production, consumpti on, imports and exports of the subsidized 
product(s) or sector(s ) 
  (See Annex 1) 
 10. Information concerning the steps taken pursuant to paragraphs 1(e) and 1(f) of the Procedures 
for Continuation of Extensions Pursuant to  Article 27.4 of the SCM Agreement of the 
Transition Period under Article 27.2(b) of the SCM Agreement for Certain Developing 
Country Members contained in the General Council Decision in document WT/L/691 
(the " Procedures ") 
  (See section 3 of Annex 2) 
 G/SCM/N/211/SLV 
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  11. Action plan provided for in paragraph 1(f) of the Procedures. 
  (See Annex 2)     
   G/SCM/N/211/SLV
 Page 5Annex 1 
COMPARATIVE TABLE 
(in US$ million) 
 
 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
(a) World exports  7,782,600.0 7,510,600.0 7,837,800.0 8,937,700.0 11,196,100.0 12 ,640,600.0 14,716,900.0 17,019,4 65.0 19,693,890.0 20,854,876.0 
(b) Salvadoran exports  2,950.5 2,864.0 2,995.0 3,128.0 3,305.0 3,418.0 3,707.0 3,979.9 4,549.2 3,797.3 
(c) (b)/(a)  0.0379% 0.0381% 0.0382% 0.0350% 0.0295% 0.0270% 0.0251% 0.0234% 0.0231% 0.0182% 
(d) Salvadoran net maquila  
exports  456 489 474 494 465 616 620 564 647 648 
(e) (d)/(a)  0.0059% 0.0065% 0.0060% 0.0055% 0.0042% 0.0049% 0.0042% 0.0033% 0.0033% 0.0031% 
Source :  International Monetary Fund, Central Reserve Bank, Ministry of the Economy. 
 
 G/SCM/N/211/SLV 
Page 6  
 
  Annex 2 
 
ACTION PLAN PURSUANT TO 
GENERAL COUNCIL DECISION WT/L/691 
  
1. P
ROPOSAL FROM EL SALVADOR PURSUANT TO THE "PROCEDURES FOR THE 
CONTINUATION OF EXTENSIONS PURSUANT TO ARTICLE 27.4  OF THE SCM  AGREEMENT 
OF THE TRANSITION PERIOD UNDER ARTICLE 27.2( B) OF THE SCM  AGREEMENT FOR 
CERTAIN DEVELOPING COUNTRY MEMBERS " CONTAINED IN THE GENERAL COUNCIL 
DECISION IN DOCUMENT WT/L/691  (THE "PROCEDURES ") 
 
 The Government of El Salvador, through the competent authorities responsible for trade policy design and the promotion of trade policy implementation, has been making efforts to ensure that it meets its obligations under the " Procedures " by no later than 31 December 2015. 
 
 In this respect, it has now been decided that  technical efforts are to focus on making the 
necessary recommendations, on the basis of the following actions aimed at ensuring compliance with the " Procedures ": 
 
(a) In the Inter-Institutional Committee for the Analysis of the Incentives Regime in Free 
Zones and Inward-Processing Warehouses
1:  continuity and follow-up in respect of 
the task of identifying the actions n eeded to ensure compliance with the 
"Procedures ";  consideration of the legislative measures needed, comparative analysis 
of regimes, and establishment of a timeta ble for the implementation of the activities 
identified during this process. 
 
(b) Review of the Export Processing Zones a nd Marketing Act (LZFC)  and definition of 
the legislative measures needed:  activity  conducted under the responsibility of the 
above-mentioned Inter-Institutional Committee,  on the basis of studies carried out 
during the first few years of implementation of the " Procedures " and subsequent 
studies.  The experience gained individuall y, from practical implementation of the 
Act in question, by the representatives of entities participating in the Committee, has 
been brought to bear on the development of conclusions germane to the recommendations that are to be made to ensure compliance with the " Procedures ".  
These studies have focused on full enforcemen t of the rights and obligations deriving 
from El Salvador's current legal framework. 
 
 The above technical activities are expected to be  completed shortly.  The necessary steps will 
then be taken to begin drafting recommendations fo r the proposed legislative measures needed to 
ensure compliance with the " Procedures ". 
  By way of general strategy, the authorities r esponsible for El Salvador's trade policy have 
drafted the following guidelines for the technical wo rk described above.  These are centred on a series 
of key processes which, in an integral and comp lementary manner, facilitate the implementation of 
the legislative measures that are needed to ensure the fulfilment of El Salvador's international 
commitments by the end of 2015, in accordance with the " Procedures ": 
 (a) Enhance general government investment  in production.  While it is true that 
production sectors play the leading role in in ternational trade, the State must develop 
a matrix of international trade-related processes, tools and policies designed to 
                                                     
 
1 Further information on this Committee can be found in section 3 of the present Annex.  G/SCM/N/211/SLV 
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  facilitate the expansion of trade and rai se it to a higher level of development and 
competitiveness.  In this context, general government investment will be enhanced so 
as to give the competent institutions the tec hnical and financial capacity they need to 
ensure standardized and specialized production methods. 
 (b) Incorporate innovation and the transfer of technology into Salvadoran trade.  Being a 
small, open country exposed to ever increasi ng external competition, our challenge is 
to generate new innovative production processes.   Our plan is to see this process 
accompanied by a national system for improving the quality and competitiveness of products.  Consequently, the second line of  action involves developing a solid and 
consistent national programme  for quality, productivity and innovation, and building 
human resources from and for the production sectors, where the transfer of 
technology plays a vital role. 
 (c) Develop a strategy for marketing, prod uction and attracting investment which helps 
create better jobs.  The measures taken to support the production sector should be 
geared towards creating a solid basis for marketing and measurable and real increases 
in value added in national production, taking into account  regional challenges and the 
potential of the various sectors in the production structure.  The third line of action involves developing a strategy that generat es good jobs and is fully integrated with a 
socio-economic development programme th at lowers the levels of poverty and 
inequality in the country. 
 (d) Reinforce the integration of production.  It is important to start from the production 
base itself in order to reinforce the inte rnationalization of enterprises, especially 
micro, small and medium-sized enterprises.  The fourth line of action involves developing a strategy that fosters the integration of production sectors and boosts 
production chains, business alliances, associati ons and, in short, gives a dynamic 
impetus to intra and inter-sectoral relations. 
 (e) Making the most of trade liberalization.   Given the international trade scenario in 
which our country will find itself in years to come, the strategy should focus on deriving maximum benefit from trade opportun ities for Salvadoran products and on 
attracting and retaining investment.  The fifth line of action involves laying the groundwork for implementing a systemic approach to the promotion and internationalization of strategic sectors in  the country and/or niche markets where 
there are obvious comparative advantages. 
 The processes and lines of action described above form part of, but also guide, the strategy 
that has been devised by the authorities responsible  for Salvadoran trade policy to ensure compliance 
with the " Procedures ". 
2. I
NFORMATION AS TO LEGISLATIVE CHANGES , ADMINISTRATIVE AMENDMENTS AND /OR 
OTHER PROCEDURES AS MAY BE NECESSARY  
 Under El Salvador's current legal framework, legal measures, according to their status, may 
only be adopted by the body legally empowered to do so.   In this particular case, pursuant to domestic legi slation, the status of the LZFC is that of Law 
of the Republic.  Therefore, the determination that another draft Law may, by virtue of its form and 
content, invalidate and/or amend the status of the LZFC depends on approval by the Salvadoran 
legislature, in accordance, naturally, with the legal procedures relevant to the case. 
 G/SCM/N/211/SLV 
Page 8  
 
   One way of activating the law-making process is by using the institutional powers of the 
President of the Republic in his capacity as head  of the Executive, who in  this case, through the 
authorities responsible for trade policy promotion, in particular the Ministry of the Economy of 
El Salvador in close coordination with other na tional authorities, including those responsible for 
public finance, is empowered to submit the necessary draft legislative measures to the Legislature for 
due consideration and approval. 
  In the light of the above, and taking into acc ount the priorities of the National Agenda for 
which the above-mentioned Salvador an government bodies are responsible, El Salvador is committed 
to promoting the actions and processes necess ary to ensure compliance with the " Procedures " by the 
end of 2015. 
 
3. A
CTIONS THAT HAVE BEEN OR ARE IN THE PROCESS OF BEING UNDERTAKEN  
 
 In addition to the measures described in pa ragraph 10 of the updating notification for 2008, 
circulated by the WTO as document G/SCM/N/186/SLV-G/SCM/N/192/SLV, El Salvador has 
consistently and systematically implemented ac tions and processes designed to ensure that the 
"Procedures " are complied with by 31 December 2015. 
  To this end, the Ministry of the Economy of  El Salvador mandated the establishment of the 
Inter-Institutional Committee for the Analysis of the Incentives Regime in Free Zones and 
Inward-Processing Warehouses. 
  This Committee, made up of public and privat e sector representatives, agreed to hold regular 
meetings with a view to conducting an in-depth an alysis of the economic, commercial, financial and 
development context surrounding the LZFC in El Salvador. 
 
 The Committee's general function is to provide a platform for dialogue and the formulation of 
recommendations which will enable El Salvador to comply with the " Procedures " within the 
time-frames stipulated by the Nati onal Agenda, i.e. before the end of 2015 (in accordance with the 
"Procedures ").  The specific tasks entrusted to the Comm ittee include those described in section 1 of 
the present Annex:  to consider practices that have proved successful in countries in similar situations;  
to analyse situations in accordance with the ru les governing multilateral trade;  to identify, 
recommend and implement the necessary actions;  to formulate the draft legislative measures required;  and to formulate and implement the timetable for the implementation of actions and 
processes approved by the authorities responsible for trade policy promotion in El Salvador. 
 
 As mentioned above, the Committee will also  conclude the final review of the LZFC. 
  The work carried out by th is Committee has progressed to th e stage where the beginning of 
the next phase is taking shape;  this involves dr afting recommendations for the proposed legislative 
measures needed to ensure compliance with the " Procedures ".  It is important to note that these 
recommended measures provide the Executive with the basis for beginning the process of formulating 
the draft Law that is to be submitted to El Salva dor's Legislative Assembly with a view to ensuring 
compliance with the commitments assumed under the " Procedures " by the end of 2015. 
 
4. H
OW THE INDIVIDUAL BENEFICIARIES HAVE BEEN NOTIFIED PURSUANT TO 
PARAGRAPH  1(E) OF DOCUMENT WT/L/691 
 
 In order to notify each beneficiary in accordan ce with paragraph 1(e), the Government of the 
Republic of El Salvador made the content of the " Procedures " publicly available from the moment of 
their adoption by the General Council in July 2007, in particular the terms and conditions thereof,  G/SCM/N/211/SLV 
 Page 9 
 
 
  which favour developing countries with programm es that are, according to footnote 1 of the 
"Procedures ", eligible for continuation of extensions. 
  The respective trade associations grouping togeth er LZFC beneficiaries have taken note of the 
above;  however, in order to e nhance the level of awareness, we are continuing to implement a 
permanent notification campaign so as to cover both individual LZFC beneficiaries and trade 
associations.  To this end, vari ous notification formats have been selected, such as communication to 
the public through the national media, direct notifi cation to each of the beneficiaries, notifications 
including a copy of the " Procedures ", and the organization of forums  and meetings that are devoted 
specifically to ensuring compliance with the " Procedures " in question by the end of 2015. 
 
__________