RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/RL/M/26 
11 May 2005 
 (05-1927) 
Negotiating Group on Rules  
 
SUMMARY REPORT OF THE MEETING 
HELD ON 11, 13  & 15 APRIL 2005 
 
Note by the Secretariat  
 
 1. The Negotiating Group on Rules ("the Group") held a formal meeting on 11, 13 and 
15 April 2005. 
A. 
ADOPTION OF THE AGENDA  
2. The Group adopted the following agenda: 
A. ADOPTION OF THE AGENDA .........................................................................................................1  
B. ANTI -DUMPING ("AD")................................................................................................................1  
C. SUBSIDIES AND COUNTERVAILING MEASURES ("SCM"),  INCLUDING FISHERIES 
SUBSIDIES ............................................................................................................................... .....2 
D. OTHER BUSINESS ..........................................................................................................................5  
-  Date of the Group's next meeting 
B. ANTI -DUMPING ("AD")   
3. The Group first discussed a paper entitled "Proposal on Material Retardation"  
(TN/RL/W/175). The sponsor explained that, as th e AD Agreement ("ADA") neither defined material 
retardation, nor gave any indica tion of how its existence should be established, it was necessary to 
clarify the concept, taking into account problems fa ced by investigating authorities, particularly in 
developing countries.  The proposal identified difficu lties encountered by the sponsor in determining 
injury in specific circumstances,  specifically those relating to a new company in a developing 
domestic market, to the upgrading of production faciliti es, and to privatization.  The sponsor proposed 
to clarify that the concept of material retarda tion included not only industries established from zero, 
but also domestic industries characterised by a limite d level of development a nd/or new organization, 
including embryonic, restructured and newly priva tised industries. The sponsor further proposed to 
specify criteria for determining when material retardation occurs.           
4. A number of Participants agreed that the pr ovisions regarding material retardation would 
benefit from clarification.  Concern was however expressed regarding a perceived desire to expand 
the concept beyond establishment of a new industry to  other situations.  This could deprive Members 
of market access rights and have a particularly severe impact on developing countries.  Regarding the concept of an "embryonic industry", one Participan t asked whether the sponsor was suggesting that 
AD measures be used as industrial policy to promote infant industries.  Regarding new companies, 
one Participant queried why an existing company would not seek relief if there were injurious 
dumping.  Regarding privatization, it was queried wh en a newly privatized firm could be considered 
materially retarded and how causation should be established in such cases.  The sponsor was asked 
whether its proposal was for special and differentia l treatment (S&D) that would be applied only to 
developing and least-developed countries.   TN/RL/M/26 
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 5. The sponsor stated that the main theme of its  proposal was to try to find a proper definition 
for the concept of material retardation. Particip ants should not focus on th e examples as these were 
simply illustrations from the sponsor's own expe rience which could provide a basis to discuss a 
definition of this concept and the factors needed for its assessment.  The proposal did not address 
S&D.  
6. The Group then turned to the paper entitled "Public Interest"  (TN/RL/W/174) and 
sponsored by 10 Participants. The paper proposed th at an importing Member be required to analyse 
the effects of an AD measure on the various sector s of its economy before imposing an AD measure, 
and not to impose the measure if it was not in its  overall economic interest.  The proponents believed 
that such a provision would enable an importing Memb er to better assess the potential effects of an 
AD measure and to ensure that imposition was consis tent with its overall econom ic interest, which in 
turn would have a positive effect on global trade and the multilateral trading system. The proposal 
encompassed four main elements that could provide the public interest framework.  
7. Some Participants welcomed the paper and viewed  a public interest test to be in the self-
interest of every Member. These Participants em phasised the importance of a mechanism allowing 
users, competition authorities and consumer asso ciations to present their views regarding the 
imposition of an AD measure.  Other Participants however expressed concerns.  Some Participants 
considered that public interest was hard to define and subjective, and that criteria should be left to 
individual Members.  One Participant noted that the proposal allowed Members to take non-economic 
considerations into account, and asked how this  would relate to Members' non-discrimination 
obligations.  Some Participants expressed concern that application of the test could prove time-
consuming, costly and burdensome for interested parties and investigating authorities.  Questions 
were posed about the relationship between the prop osed test and the lesser duty rule, and about a 
possible overlap with the work of competition author ities.  It was also inquired whether the proposal 
envisioned a mandatory test as opposed to guideli nes, and whether the dispute settlement system 
would be authorized to determine whether Memb ers had appropriately judged their own public 
interest.  It was inquired how injurious dumping coul d be in a Member's overall economic interest.  
8. The sponsors indicated that the test proposed was primarily economic. The application of 
such a test was in the overall economic interest  of Members who therefore should not have any 
difficulties applying it on mandatory basis.  With  respect to dispute settlement, this primarily 
economic assessment did not differ much from what  was already contained in the ADA or put 
forward in the AD negotiations.  The issue of public interest was distinct from the lesser duty rule, as 
the latter adjusted a duty to a level adequate to re move the injury to the domestic industry, while the 
former assessed the effect of a duty on other sectors of the economy.  
C. 
SUBSIDIES AND COUNTERVAILING MEASURES ("SCM"), INCLUDING FISHERIES SUBSIDIES  
9. The first paper discussed was entitled "Contribution to the Discussion on the Framework 
for Disciplines on Fisheries Subsidies"  (TN/Rl/W/176). The sponsor stated that the aim of its 
proposal was to address S&D, but in order to do so  it had first to address the general rules.  The 
proposed disciplines involved two basic categories of subsidies, a green box and a red box. The proposal identified four categories of programmes th at could be deemed non- actionable.  Subsidies 
not falling within the green box would be prohibited.  The sponsor explained that the S&D it proposed 
aimed at defining a very specific limited set of conditions under which developing countries would 
need flexibility to address their sp ecial situations and concerns. Tho se situations would be captured in 
an amber box, providing developing countries with th e possibility to grant actionable subsidies. The 
proposal envisaged also a dark amber box within  which the burden of proof regarding serious 
prejudice would be shifted in case the granting deve loping countries surpass a certain threshold. The 
proposal also dealt with the concerns of least-developed countries.   TN/RL/M/26 
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 10. Several Participants emphasized the need for S&D for developing and least-developed 
countries.  One Participant stated that such S& D should supplement that already existing under 
Article 27 of the ASCM.  Another Participant e xplained that many developing countries had not yet 
developed their fisheries industries and should be  allowed to take advantage of underexploited 
fisheries.  Other Participants considered that th e S&D proposed was too extensive.  It was observed 
that developed countries represented only three of th e ten most important fishing countries, and that 
the level of S&D proposed by the sponsor would render any new disciplines ineffective.  Several 
Participants indicated that linking S&D to such c oncepts as "patently at risk" fisheries was complex 
and queried who could make such judgements.  While one Participant questioned whether all 
developing countries should be treated similarly, an other indicated that S&D should be available to all 
developing countries regardless of the scale of their fisheries. 
11. Regarding the general framework for disciplines, certain Participants considered the proposal 
to adopt a top-down approach, which they considered  to be inconsistent with the current ASCM and 
contrary to the Doha mandate, while others welc omed the positive-list approach.  One Participant 
agreed with the sponsor that fisheries management  and general infrastructure should be excluded from 
the definition of fisheries subsidies.   Several Participants asked for further explanations regarding the 
exclusion of inland fisheries and aquaculture from the proposed disciplines, while others asked for 
clarifications regarding the issue of specificity.   
12. Regarding the issue of top-down versus bottom- up approaches, the sponsor explained that its 
intention was to have a detailed discussion rega rding programmes that it considered should be 
actionable for developing countries and programmes that  should be green.  Regarding the depletion of 
fisheries resources, the proposal did not aim to defi ne what is a sustainable level as WTO negotiators 
had neither the competence nor the mandate to do so.  On the exclusion of inland fisheries, the 
proposal was meant to tackle the issue of open a nd high seas fisheries, not inland fisheries.  With 
respect to specificity, this term was used to cap ture the nature of the discussions which focus 
specifically on fisheries subsidies, not on subsidi es in general. Regarding fisheries management, the 
sponsor confirmed that these services are on the bor der between being green subsidies or not being 
subsidies at all.   
13. The second paper discussed was entitled "Fisheries Subsidies"  (TN/RL/W/178).  The 
sponsor explained that its paper focused on tran sparency and enforcement through the adoption by 
Members of one of two alternative approaches, a WTO control system and a domestic-based system. The WTO control system would not only require prio r notification, but would consider any subsidies 
programmes not notified in sufficient time for Memb ers to examine them to be prohibited. With 
respect to the domestic control approach, it woul d require the introduction of a provision in the 
domestic law of the Member concerned making full transparency a mandatory legal requirement. 
These legal provisions would be notified to the WTO and be subject to scrutiny and if the system 
proved to be inadequate or subject to abuse, such su bsidies could also be deemed to be prohibited. It 
was thus essentially an ex-post  surveillance mechanism ensuring tr ansparency. On S&D, the paper 
acknowledged the need for a certain phase-in pe riod for developing countries during which they 
should be given special help via an intensive progr amme on how to set up a comprehensive system for 
transparency and enforcement.  
14. Some Participants considered that an effectiv e enforcement system should form an integral 
part of any new disciplines on fisheries subsidies, and welcomed the two-track approach to 
transparency and enforcement suggested in the pape r.  Other Participants however queried whether 
the two alternatives would be equally effective.  One Participant considered the proposed pre-
notification and pre-authorization obligations to be  an intrusion into the domestic affairs of WTO 
Members which would not be acceptable to lawmaker s. Such obligations would depart from the basic 
structure of the ASCM and be at odds with para graph 28 of the Doha Declaration, while a presumed 
prohibition as the consequence of non-performance of  a pre-notification obligation would reverse the TN/RL/M/26 
Page 4  
 
 burden of proof, thus violating a fundamental prin ciple of the dispute settlement system. On S&D, 
some Participants viewed it necessary to allow de veloping countries certain exceptions from the pre-
notification system in the case of subsidies for emergency relief and unforeseeable national disasters where immediate help from the gove rnment is needed urgently.  
15. A number of questions were posed regardi ng the proposal.  Was the WTO control system 
simply an analogue to the regular treatment of Me mbers' subsidy notifications that currently takes 
place in the SCM Committee?  What was envisaged by  the sponsor to be an appropriate de minimis 
level of any specific subsidy?  Should this leve l be the same for developed and developing countries 
including LDCs?  what should be done if the cumula tive effect of such programmes is substantial?  
Why shouldn’t Members be required to notify all typ es of subsidies whether prohibited or not?  If a 
Member was found to be in breach of its notificat ion obligation, would it have to terminate the 
subsidy immediately or just submit a notification? Would a developing country Member be subject to 
a transitional enforcement mechanism?  What type  of assistance programmes were envisaged in order 
to assist developing countries to set-up an enforcement system?     
16. The sponsor explained that it intended to s ubmit this paper for further discussion in the 
informal session of the Group.     
17. The third paper discussed was entitled "Treatment of Government Support for Export 
Credits and Guarantees under the Agreement  on Subsidies and Countervailing Measures"  
(TN/RL/W/177). The sponsor explained that the pa per sought to clarify items (j) and (k) of the 
Illustrative List of Export Subsidies relating to export credit guarantee and insurance programmes.  
The paper was motivated by the d esire to ensure a level playing field for all WTO Members in the 
field of export credits and the concern that WTO rights and obligations should be based on the 
decision of all WTO Members. The idea underlyi ng the latter point arose from the second paragraph 
of Item (k) which creates a safe harbour for export credit practices that are in conformity with the interest rates provisions of the OECD Arrangement on Export Credits. It would be in contradiction 
with basic principles of public international law to allow a small number of Members to decide on 
rules which automatically determine the ri ghts and obligations of all WTO Members. 
18. With respect to the second paragraph of item (k ), several Participants considered that the 
OECD Arrangement was a tested and workable set of rules which should be taken into account.  
These Participants considered that WTO Members as a whole benefit from rules that are kept current and reflective of evolving market  development and conditions, and th at it would not be prudent to 
freeze the relevant text of the OECD Arrangement referred to in that paragraph.  One Participant 
queried in this regard how the proposed amendmen t would impact recent amendments to the OECD 
Arrangement that provided greater transparency vis-à-vis  non-Participants. It was further observed 
that the safe harbour was available to OECD and non-OECD countries alike, so OECD countries 
could not vote themselves a better deal to the ex clusion of non-OECD WTO Members. Moreover, the 
Participants to the OECD Arrangement had invited non- Participants to participate in negotiations to 
revise the Arrangement where those non-Participants are net providers of export credits, and the WTO 
Secretariat had also been invited to comment.   
19. Several Participants queried whet her item (j) in fact creates any form of "safe harbour" and 
asked whether the sponsor was advocating an a contrario  reading of item (j).  In this vein, one  
Participant inquired about the relationship between 14(c) of the ASCM and item (j) as amended by the 
proposal, and why item (j) did not fully reflect Article 14(c).  It was also suggested that the sponsor's 
draft language regarding item (j) was unclear, in that it seemed to offer a Member providing export 
credit guarantees the choice between the two benchm arks identified in the proposal.  One Participant 
warned that the proposal would drive up premium rates for transactions involving exports to 
developing countries and reduce the flow of capital to such countries.     TN/RL/M/26 
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 20. With respect to the first paragraph of item (k),  several Participants noted that the difference 
between the current text and the proposal appear ed to be that the language "borrowed by 
governments" in the current text is replaced by "f unds available" in the proposed text and it was 
inquired to whom those funds would have to be made available.  
21. In response, the sponsor reiterated its concern that a small number of Members should not be 
allowed to decide on certain disciplines on behalf of the WTO Membership.  It emphasised that item 
(k) should reflect that the 1992 Arrangement, and no t any subsequent version, is the "international 
undertaking" used to determine whether export credits fall within the safe harbour, unless WTO 
Members, by consensus, agree otherwise.  Si nce 1992, the Arrangement had been significantly 
modified to the benefit of OECD Members by allo wing Participants to match offers which did not 
comply with the Arrangement.   This change underm ined the special and diffe rential treatment given 
to developing Members by Article 27 of the ASCM.  With respect to item (j), the sponsor clarified 
that it rejects the "a contrario" interpretation of  item (j), and its proposal seeks to reconcile the 
Illustrative List with the normal tests found in Articles 1 and 3 of the ASM.   
D. OTHER BUSINESS  
22. The next meeting of the Group will be held on  30 May–3 June 2005.  The deadline for any 
informal elaborated proposals for consideration in  informal mode at that meeting is Thursday, 
12 May 2005, close of business.   
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