RESTRICTED  WORLD TRADE  
ORGANIZATION  G/SCM/M/52 
25 February 2005 
 
 (05-0794) 
Committee on Subsidies 
and Countervailing Measures  
 
 
 
MINUTES OF THE REGULAR MEETING 
HELD ON 4-5 NOVEMBER 2004 
 
Chairman:  Mr. Naoshi Hirose (Japan) 
 
 1. The Committee on Subsidies and Countervailing Measures (the "Committee") held a regular 
meeting on 4 November 2004. 
2. The proposed agenda for this meeting was circulated in document WTO/AIR/2422.  The 
Committee adopted
 the following agenda: 
A. ELECTION  OF OFFICERS........................................................................................................2  
B. ARGENTINA  – REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  
(G/ADP/N/1/ARG/1/S UPPL .7-G/SCM/N/1/ARG/1/S UPPL .7) ....................................................2  
C. CANADA  - REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  
(G/ADP/N/1/CAN/4-G/SCM/N/1/CAN/4).................................................................................3  
D. EUROPEAN  COMMUNITIES  - REVIEW  OF NEW  LEGISLATIVE  
NOTIFICATION  (G/ADP/N/1/EEC/2/S UPPL .5-G/SCM/N/1/EEC/2/S UPPL .5).........................3  
E. JAPAN  – REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  
(G/ADP/N/1/JPN/2/S UPPL .4-G/SCM/N/1/JPN/S UPPL .4 & CORR.1)..........................................3  
F. JORDAN  – REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  
(G/ADP/N/1/JOR/2/C ORR.1-G/SCM/N/1/JOR/2/C ORR.1) ........................................................3  
G. SEMI-ANNUAL  REPORTS  OF COUNTERVAILING  ACTIONS  (ARTICLE 25.11)............4  
H. PRELIMINARY  AND  FINAL  COUNTERVAILING  ACTIONS:   NOTIFICATIONS  
(G/SCM/N/111-112,  115-116  + CORR.1, 117-  118)....................................................................5  
I. SUBSIDY  NOTIFICATIONS ....................................................................................................5  
1. Review of 2003 New and Full and Updating Notifications received too late to be 
reviewed under previously  agreed procedures.......................................................................5  
2. Review of 2001 and previous updating notifications .............................................................5  
3. Request from the United States to China pursuant to Article 25.8 of the 
SCM Agreement  (G/SCM/Q2/CHN/9) .....................................................................................6  
J. TRANSITION  REVIEW  UNDER  PARAGRAPH  18 OF THE  PROTOCOL  OF 
ACCESSION  OF THE  PEOPLE'S  REPUBLIC  OF CHINA  TO THE  WORLD  
TRADE  ORGANIZATION........................................................................................................7  
K. ARTICLE  27.4  PROCESS........................................................................................................18  G/SCM/M/52 
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 1.
 Committee's review of transparency and sta ndstill obligations in the decisions in 
G/SCM/50-102 and G/SCM/50/Add.1 - /94/Add.1 relating to the Article 27.4 Process........................................................................................................................ ..............18
 
2. Committee decisions in respect of the co ntinuation of extensions for certain 
developing country members for 2005..................................................................................22  
3. Procedure for 2005 Committee review of tr ansparency and standstill obligations 
relating to Article 27.4 process ..............................................................................................2 8 
L. OTHER  BUSINESS .................................................................................................................28  
M. DATE  OF NEXT  REGULAR  MEETING ................................................................................28  
N. ANNUAL  REPORT  TO THE  COUNCIL  FOR  TRADE  IN GOODS  (ARTICLE 32.7)..........28  
 
A. ELECTION  OF OFFICERS 
3. The Chairman  recalled that at the Spring 2004 regular meeting, the Committee suspended the 
election of a Vice-Chairman, as permitted under the rul es of procedure, until this regular meeting.  
After undertaking informal consultations, the Chairm an proposed the election of Mr. Mehmet Tan of 
Turkey to serve as Vice-Chairma n of the Committee.  The Chairman asked the Committee whether it 
would be able to agree to elect Mr. Tan as Vice-Chairman. 
4. The Committee agreed  to elect Mr. Tan as Vice-Chairman by acclamation. 
B. ARGENTINA  – REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  
(G/ADP/N/1/ARG/1/S UPPL .7-G/SCM/N/1/ARG/1/S UPPL .7) 
5. The Chairman  recalled that items B through F dealt with  the review of new notifications of 
countervailing duty legislation and/or  regulations, in accordance with  the procedures adopted by the 
Committee at its special meeting in April 1996 (document G/SCM/W/293).  He recalled that questions concerning new notifications of legisla tion were to have been submitted to the Member 
concerned and the Secretariat no later than three week s before this meeting, that is, no later than 
7 October 2004.  As provided for in the agreed pr ocedures, Members receiving written questions were 
to respond orally to timely-submitted questions during the meeting.  They were also to subsequently 
submit written version of their answers to all wr itten questions received.  Members were reminded 
that follow-up questions could be asked in this meeting.  If a Member posed a follow-up question and 
wished to receive a written answer, the follow-up ques tion had to be submitted in writing no later than 
18 November 2004.  Written answers to all written qu estions were to be s ubmitted to the relevant 
Member and the Secretariat no later than 13 January 2005.  The Chairman noted that certain 
legislative notifications referred to on the agenda, and questions posed with respect to their review, 
had also been on the agenda of meeting of the Committee on Anti-Dumping Practices which had 
taken place the previous week, and that some aspects  of those notifications had been considered at 
that meeting. 
6. The Chairman turned to the notification of Argentina
, contained in document 
G/ADP/N/1/ARG/1/Suppl.7-G/SCM/N/1/ARG/1/Suppl.7 , which had also been reviewed in the 
Committee on Anti-Dumping Practices.1  There were no further questions or comments with regard to 
this notification. 
                                                      
1 See questions from the United States in document G/ADP/Q1/ARG/15–G/SCM/Q1/ARG/15 and 
responses thereto in G/ADP/Q1/ARG/16–G/SCM/Q1/ARG/16.  G/SCM/M/52 
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 C. CANADA  - REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  (G/ADP/N/1/CAN/4-
G/SCM/N/1/CAN/4) 
7. The next notification on the Committe e's agenda was that of Canada , contained in document 
G/ADP/N/1/CAN/4-G/SCM/N/1/CAN/4, which had also been reviewed in the Committee on  
Anti-Dumping Practices.2  There were no further questions or comments with regard to this 
notification. 
D. EUROPEAN  COMMUNITIES  - REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  
(G/ADP/N/1/EEC/2/S UPPL .5-G/SCM/N/1/EEC/2/S UPPL .5) 
8. The Committee then turned to the notif ication of the European Communities , contained in 
document G/ADP/N/1/EEC/2/Suppl.5-G/SCM/N/1/EEC/2 /Suppl.5, which had also been reviewed in 
the Committee on Anti-Dumping Practices.3  There were no further questions or comments with 
regard to this notification. 
E. JAPAN  – REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  (G/ADP/N/1/JPN/2/S UPPL .4-
G/SCM/N/1/JPN/S UPPL .4 & CORR.1) 
9. The following notification on the Co mmittee's agenda was that of Japan , contained in 
document G/ADP/N/1/JPN/2/Suppl.4-G/SCM/N/1/JPN/2/Suppl.4 and /Suppl.4/Corr.1.  The 
Chairman  noted that the Subsidies and Countervaili ng Measures section of the Japanese legislation 
had not been reviewed during th e meeting of the Committee on Anti-Dumping Practices and that it 
was the intention of the Delegation of Japan to reply to the relevant questions today. 
10. The delegate of Japan  thanked the Delegations of the European Communities and the 
United States for their questions contained in  documents G/ADP/Q1/JPN/11-G/SCM/Q1/JPN/11 and 
G/ADP/Q1/JPN/12-G/SCM/Q1/JPN/12 respectively.  He  then proceeded to respond to questions 14 to 
18 from the United States which related to the CVD pa rt of Japan's notification.  These replies have 
subsequently been circulated in docu ment G/ADP/Q1/JPN/13-G/SCM/Q1/JPN/13. 
11. The delegate of the United States  thanked Japan for the replies and thought that the origins of 
some of the questions were in the language used a nd translation issues involved.  He recognized that 
there were some very complex issues to be a ddressed when confronting certain methodologies and 
methodological questions.   
F. JORDAN  – REVIEW  OF NEW  LEGISLATIVE  NOTIFICATION  
(G/ADP/N/1/JOR/2/C ORR.1-G/SCM/N/1/JOR/2/C ORR.1) 
12. The next notification to be reviewed was that of Jordan  contained in document 
G/ADP/N/1/JOR/2/Corr.1-G/SCM/N/1/JOR/2/Corr.1,  which had also been reviewed in the 
Committee on Anti-Dumping Practices.4  There were no further questions or comments with regard to 
this notification. 
13. The Chairman , while commending those Members who had fulfilled their transparency 
obligations, expressed his continuing concern over  the failure of some Members to submit any 
                                                      
2 See questions from the European Communities in document G/ADP/Q1/CAN/12–
G/SCM/Q1/CAN/12 and responses thereto in G/ADP/Q1/CAN/13–G/SCM/Q1/CAN/13. 
3 See questions from the United States in document G/ADP/Q1/EEC/23–G/SCM/Q1/EEC/23 and 
responses thereto in G/ADP/Q1/EEC/24–G/SCM/Q1/EEC/24. 
4 See questions from the United States in document G/ADP/Q1/JOR/1-G/SCM/Q1/JOR/1 and from the 
European Communities in document G/ADP/Q1/JOR /2-G/SCM/Q1/JOR/2, and responses thereto in 
G/ADP/Q1/JOR/3-G/SCM/Q1/JOR/3. G/SCM/M/52 
Page 4  
 
 notification at all concerning legislation or regulatio ns relevant to countervailing measures.  In the 
interest of transparency and better understanding he  encouraged all Members who had not yet done so 
to submit their notification of legislation as soon as possible.  For those Members where no such 
legislation or regulations were currently in effect, all that was required was a simple nil notification. 
14. The Committee took note
 of the statements made. 
G. SEMI-ANNUAL  REPORTS  OF COUNTERVAILING  ACTIONS  (ARTICLE 25.11) 
15. The Chairman  recalled that a request for semi-annual reports for the period 1 January to 
30 June 2004, to be submitted not  later than 31 August 2004, had been circulated to Members in 
document G/SCM/N/113, dated 30 June 2004.  As w as unfortunately almost always the case, a 
number of the semi-annual reports had been receive d late.  He reminded Members that semi-annual 
reports were always due at the end of August for th e period January through June of the current year, 
and at the end of February for the period July thro ugh December of the previous year.  He once again 
urged Members to take the necessary steps to subm it these notifications on time.  He noted that 
particularly for those Members who had taken no actions, all that was re quired was a one-sentence 
letter stating that no actions had been taken. 
16. Members who had submitted semi-annual reports of  countervailing actions were identified in 
paragraph 1 of document G/SCM/N/113/Add.1, da ted 25 October 2004.  These Members comprised:  
Argentina;  Australia;  Canada;  Costa Rica;  Eu ropean Communities;  Mexico;  United States;  and 
Venezuela.  To the extent possibl e, the semi-annual reports had been translated and circulated to the 
Committee and were included in the documents made available for the meeting.  In addition to the 
Members who had submitted semi-annual reports of  countervailing actions, 46 Members, listed in 
paragraph 2 of document G/SCM/N/113/Add.1, had notified the Committee that they had not taken 
any countervailing actions.  This figure took into account the notification of the European Communities concerning the 10 newly acceded  EEC Member States.  Since the circulation 
of the document, Croatia had also notified the Co mmittee that it had not taken any countervailing 
actions during the relevant period.  While Member s who took actions appeared generally to have 
complied with the requirement, there remained a significant number of Members who had not 
responded to the request for semi-annual reports, a nd had therefore failed to comply with this 
important requirement set forth in Article 25.11 of the SCM Agreement .  These Members were 
identified in document G/SCM/N/113/Add.1, paragraph 3. 
17. There were no comments or questions regard ing the semi-annual reports of Argentina
, 
Australia , Canada,  and Costa Rica . 
18. The delegate of the European Communities  observed that the annex that they had provided 
relating to their new Member States was not included in the document package. 
19. The Chairman  explained that this was because the agenda item referred to the semi-annual 
reports of Members who had taken actions for the period in question.  The newly acceded countries 
were not listed as they had not taken any actions.  He  went on to say that there was no problem if the 
European Communities also wanted to include th e notifications of the newly acceded countries under 
this agenda item. 
20. There were no comments or questions with re gard to the semi-annual reports of Mexico , 
United States , and Venezuela . 
21. The Committee took note  of the statements made.  G/SCM/M/52 
 Page 5 
 
 
 H. PRELIMINARY  AND  FINAL  COUNTERVAILING  ACTIONS:   NOTIFICATIONS  
(G/SCM/N/111-112,  115-116  + CORR.1, 117-  118) 
22. The Chairman  stated that the lists of the notificati ons of preliminary and final countervailing 
duty actions received had been circulated to th e Committee in documents G/SCM/N/111, /112, /115, 
/116 & Corr.1, /117, /118, and /119.  Since the last regular meeting of the Committee, preliminary and 
final countervailing actions had been notified by Argentina , Australia , Canada , 
the European Communities , Japan , Mexico , the United States,  and Venezuela .  There were no 
comments or questions with respect to any of these notifications. 
I. SUBSIDY  NOTIFICATIONS 
1. Review of 2003 New and Full and Updating Notifications received too late to be 
reviewed under previously agreed procedures 
− Armenia (G/SCM/N/95/ARM/Suppl.1) 
 
− Mongolia (G/SCM/N/95/MNG-G/SCM/N/71/MNG- G/SCM/N/60/MNG) 
 
− Singapore (G/SCM/N/95/SGP/Suppl.1 
 23. The Chairman
 recalled that, in accordance with the agr eed procedures for review of 2003 new 
and full subsidy notifications (document series G/SC M/N/95...), the third and final special session to 
review 2003 new and full subsidy notifications ha d been held immediately prior to the regular 
meeting of the Committee.  As indicated in the dr aft annotated agenda for the meeting, three "nil" 
subsidy notifications had been r eceived too late to be reviewed at the special session under the 
procedures previously adopted by the Committ ee.  These notifications concerned Armenia 
(G/SCM/N/95/ARM/Suppl.1); Mongolia (G/SCM/N/60/MNG-SCM/N/71/MNG-
G/SCM/N/95/MNG);  and Singapore (G/SCM/N/95/SGP/Suppl.1). 
24. There were no further questions or comm ents on the notifications of Armenia , Mongolia , and 
Singapore  and the Committee took note  of the statements made. 
2. Review of 2001 and previous updating notifications 
− Hungary (G/SCM/N/71/HUN/Suppl.1) 
 
− Mongolia (G/SCM/N/95/MNG-G/SCM/N/71/MNG-G/SCM/N/60/MNG) 
 25. In addition, the Chairman reported that the fo llowing subsidy notifications relating to a prior 
period had been received and translated since the last meeting of the Committee:  Hungary 
(G/SCM/N/71/HUN/Suppl.1) and Mongolia (multi-symbolled document G/SCM/N/60/MNG-G/SCM/N/71/MNG-G/SCM/N/95/MNG).  Both of the notifications had been translated into all 
three WTO working languages prior to the circulatio n of the draft annotated agenda.  The Chairman 
had proposed in the annotated agenda that the Co mmittee review these notifications at this regular 
meeting, with any written questions submitted to the notifying Member and to the Secretariat by 
1 October 2004, and written answer s submitted by 20 October 2004. 
26. No written questions had been received on th e above-mentioned notifications of Hungary
 and 
Mongolia , and no questions or comments were made at the meeting. G/SCM/M/52 
Page 6  
 
 3. Request from the United States to China pursuant to Article 25.8 of the SCM Agreement  
(G/SCM/Q2/CHN/9) 
27. The Chairman
 reported that the United States had requested the circulation of a request to 
China pursuant to Article 25.8 of the SCM Agreement , contained in document G/SCM/Q2/CHN/9. 
28. The delegate of the United States  stated that as China had not yet provided a subsidies 
notification to the Committee, despite the fact that it was obligated to do so pursuant to Article 25 of 
the SCM Agreement.   In light of China's failure to provide a subsidies notification, the United States 
had felt obligated to file a request pursuant to Article 25.8.  Document G/SCM/Q2/CHN/9 constituted 
a written request for information on the nature and extent of certain subsidy programmes believed to 
exist in China, some of which could be prohibi ted export or import substitution subsidies.  The 
delegate of the United States requested that Ch ina provide a comprehensive response as soon as 
possible. 
29. The delegate of China  thanked the US for its questionnaire on China's subsidy programmes 
pursuant to Article 25.8 of the SCM Agreement  and wished to clarify certain issues.  Firstly, in 
accordance with the Protocol of Accession of the Pe ople's Republic of China to the WTO, China was 
committed to eliminating all e xport subsidy and import substituti on programmes falling within the 
scope of Article 3 of the SCM Agreement .  China intended to fully honour this commitment following 
its accession to the WTO.  Secondly, China had no tified the WTO of 24 types of subsidy programmes 
in the WTO format contained in Annex V of the Prot ocol.  That information was made on the basis of 
a summary of the domestic situation and reflected th e current overall situation of domestic subsidies. 
The notification, including the implementation peri od for these subsidies, was still valid.  Thirdly, 
China was in the process of assimilating informa tion on subsidies and good progress had been made, 
given the heavy workload and the number of government  agencies involved.  China's efforts had been 
recognized by WTO Members in paragraph 173 of  the Working Party Report on China's Accession, 
and the delegate assured the Committee that ever y effort was being made to fulfil this work. 
30. The delegate of the United States  noted that their questions rela ted in particular to prohibited 
subsidies, based on publicly availa ble information and, although some  of the programmes might have 
been terminated, any documentation or indica tion of when and how these programmes were 
terminated would be greatly appreciated. 
31. The delegate of China  said that as far as he knew the specific programme discussed during the 
accession negotiations concerned the au to industry policy and that this subsidy had been eliminated.  
He stated that the new automobile industry po licy, promulgated by his government, had replaced the 
previous programme and that there were no provi sions through which certain prohibited subsidies 
could be granted. 
32. The delegate of the European Communities  wished to register their interest in receiving 
replies to the questions that had been posed by  the United States.  He noted that for general 
transparency purposes requests under Article 25.8 of the SCM Agreement  should follow certain 
procedures involving written questions and answer s which would be applicable to all Members. 
33. The delegate of Japan  emphasized the importance of improving transparency and methods of 
improving information-sharing con cerning subsidies in all WTO Member countries, including China. 
34. The delegate of the United States  wanted to second the statements by the 
European Communities and Japan and once again emphasized the importance of transparency, 
especially in light of China's increasing role in world trade and their on-going transition to a more 
market-based economy.  He was particularly inte rested to know when the elimination of China's  G/SCM/M/52 
 Page 7 
 
 
 prohibited subsidies took effect and whether China could confirm that all prohibited subsidies were 
eliminated upon accession. 
35. The delegate of Canada  also expressed his interest in receiving information with regard to the 
Chinese subsidy programmes currently in effect.  He also wanted to register Canada's systemic concern with respect to transparency in this matter. 
36. The delegate of China
 thanked the delegations who had made comments on this particular 
issue.  He assured Members that China had be en making every effort to prepare and collect 
information with regard to their subsidy programmes.   He confirmed that in response to the question 
from the US, as far as he was aware, the programme  relating to the auto industry policy had been 
terminated and he reiterated that China currently ha d no WTO-inconsistent subsides in this regard.   
37. The delegate of the United States  referred to at least two programmes which he considered to 
be WTO-inconsistent, namely a programme described  in Article 75.7 of the Detailed Implementation 
Rules of the Income Tax Law of the People's Repub lic of China on Foreign Investment Enterprises.  
He also referred to a programme that had r ecently been reported in the news concerning  
semi-conductors and VAT. 
38. The delegate of China  reiterated that they were curre ntly undertaking a comprehensive 
examination of their domestic policies and he had noted the comments of the United States and these 
would be reflected in the preparation of any future notification. 
39. The Committee took note  of the statements made. 
J. TRANSITION  REVIEW  UNDER  PARAGRAPH  18 OF THE  PROTOCOL  OF ACCESSION  
OF THE  PEOPLE'S  REPUBLIC  OF CHINA  TO THE  WORLD  TRADE  ORGANIZATION 
40. The Chairman  recalled that paragraph 18 of the Protocol of Accession of the People's Republic 
of China to the World Trade Organization provided that all subsidiary bodies, including this Committee, "which have a mandate covering Ch ina's commitments under the WTO Agreement or 
[the] Protocol shall, within one year after accessi on review, as appropriate to their mandate, the 
implementation by China of the WTO Agreement and of the related provisions of [the] Protocol."  
China was to provide relevant information in adva nce of the review, including information specified 
in Annex 1A to the Protocol.  China could also  raise issues relating to any reservations under 
Section 17 or to any other specific commitments made by other Members in the Protocol, in subsidiary bodies which had a releva nt mandate.  The Chairman said that this Committee had to report 
the results of the review promptly to the Council fo r Trade in Goods.  Review was to take place after 
accession in each year for eight years, with a final review in year 10 or at an earlier date decided by 
the General Council.  
41. The Chairman said that there were no procedures set out for the conduct of the transition 
review in the Protocol, except that China was to provide relevant informa tion in advance of the 
review.  In this regard, the Chairman noted that Annex 1A specifies China is requested to provide 
information on the following to this Committee in  accordance with Article 18.1 of its Accession 
Protocol:  "Pricing Policies":  (a) "application of ex isting or any other price controls and the reason for 
their use";  and (b) "pricing mechanisms of Chin a's state trading enterprises for exported products".  
He said that China had submitted a notification in  this respect on 1 Novemb er 2004, which had been 
circulated as document G/SCM/N/120. 
42. The Chairman noted that questions and comments submitted by the Delegations of the 
European Communities, the United States, Japan, and Chinese Taipei in the context of the transition 
review, had been circulated in documents G/SCM/Q2/CHN/7-8 and /10 (double-symbolled as a G/SCM/M/52 
Page 8  
 
 G/SCM/W document) and Corrs. 1, and /11.  Be fore proceeding to these questions, the Chairman 
opened the floor for any general comments from Members. 
43. The delegate of the United States
 stated that the purpose of this transitional review 
mechanism was to review China’s progress in  implementing its obligations under the 
WTO Agreement and its Protocol of Accession on an annual basis.  He noted that now, as the 
US delegation examined China’s third year as a Memb er of the WTO, the US continued to have many 
of the same questions and concerns, in the area of subsidies and countervailing measures, that it raised 
at this time last year and the year before.  The US  noted that China had yet to provide any notification 
of its subsidies as required by Article 25 of th e Agreement on Subsidies and Countervailing Measures 
(SCM Agreement ), and the US delegation continued to see  evidence of government support that China 
had committed to eliminate.  In addition, due to Ch ina’s failure to notify certain legislation, the US 
did not have a clear picture of China’s regime  for handling countervailing duty investigations. 
44. The delegate of the US observed that Chin a’s failure to submit the annual subsidies 
notification required of every Member of the Committee under Article 25.1 of the SCM Agreement  is 
a key concern of the US because of the central a nd material role that notifications plays in 
transparency and accountability in internationa l trade.  Although China cited administrative 
difficulties with the start-up of its notification pro cess, the representative of the US commented that 
this explanation is less compelling three years into  China’s WTO Membership.  While the US (and no 
doubt other WTO Members) appreciated the challe nges of assembling a comprehensive subsidies 
notification, the delegate of the US noted that the SCM Agreement  does not provide for exceptions to 
the notification requirement.  The US noted that  in the years since entry into force of the 
SCM Agreement , many WTO Members, including a number of developing countries, had made 
notable progress in improving their compliance wi th this obligation, notwithstanding the obvious 
difficulties.  The US urged China to comply with its  own obligations on an expedited basis, providing 
full notification of its subsidy programmes. 
45. The delegate of the US stated that China’s s ubsidies to state-owned enterprises running at a 
loss are illustrative of his delegation's concerns with China’s inadequate  disclosure before the 
Committee.  These subsidies were to end in 2000 a ccording to China’s Protocol of Accession.  In 
2002, the representative of China told the Committee that these subsidies had been eliminated in 
2001.  Then, according to the US, during last year’s transitional review, China failed to respond to the 
questions of the US delegation regarding Chinese press reports in 2003 that the government was still 
working to eliminate these subsidies and that it hoped to  do so by 2005.  The delegate of the US asked 
China to provide the Committee with  information on these subsidies. 
46. The delegate of the US further noted that during China’s accession process, Members had 
raised concerns about the financial contributions  provided by China’s state-owned banks, including 
forgiven and non-performing loans.  In response to these concerns, China agreed that its state-owned 
banks should be run on a commercial basis and be re sponsible for their own profits and losses.  Since 
last year’s transitional review before this Co mmittee, however, certain de velopments had raised 
serious concerns.  The US observed that in  December 2003, China undertook two massive bank 
bailouts, injecting US$45 billion into the Bank of Ch ina and the China Construction Bank.  In China’s 
Northeast region, in Heilongjiang Province, US$ 4.4 billion of non-performing loans unpaid by state-owned enterprises had been written-off.  The US de legation noted that, while the US did not take 
issue with China’s development objectives, it had gr ave concerns with the significant subsidization 
that pursuit of those objectives has entailed, and with the potential adverse trade effects resulting 
directly or indirectly from this subsidization.  The US commented that the huge, unserviceable debts 
and non-performing loans represented in these trans actions signal severe economic viability issues;  
yet, the Government of China continued with its policy of subsidizing these enterprises.  Continued 
intervention by the Chinese government in this manne r, according to the US, thwarts the development 
of institutionalized market  mechanisms in China.  G/SCM/M/52 
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 47. The delegate of the US stated that despite its  commitments under its Protocol of Accession to 
eliminate all subsidies prohibited within the meaning of Article 3 of the SCM Agreement , it appeared 
that China continued to provide subsidies con tingent upon export performan ce and/or on the use of 
domestic over imported goods.  In the questions posed by the US delegation to China under 
Article 25.8 of the SCM Agreement , the US identified several subs idy programmes in China that 
appeared to fall under the prohibited category as well  as subsidy programmes providing other types of 
assistance to a wide range of industries, including  forest products, textiles, semiconductors, and 
agriculture.  The US noted that the volume of pr ogrammes it had identified highlighted the need for 
China to comply with its commitments on prohibite d subsidies as well as its notification obligations. 
48. The US noted that China issued a revised Fo reign Trade Law and Anti-Subsidy Regulations 
this past year.  During the May 2004 meeting of the Committee, China indicated that certain 
implementing rules had been annulled.  The US stat ed that it did not know whether other rules had 
taken their place.  As a result, significant uncerta inty surrounded China’s countervailing duty regime.  
The US delegate expressed hope that China would soon notify all outstanding measures and help to 
clarify this situation through its responses to its questions. 
49. The US stated that its submission for this transitional review also outlined a series of 
questions concerning price control mechanisms in China.  The number of questions asked and the 
additional information sought highlighted US concer ns with China’s apparent difficulty in meeting 
fundamental transparency obligations.  The US expressed hope that China would provide 
comprehensive and forthcoming respon ses to its price control questions.  
50. Finally, the US expressed appreciation for the difficulty and sensitivity of many of the steps 
that China must take to honour its obligations  under both the Protocol of Accession and the 
SCM Agreement .  However, after three years as a Member of the WTO, the US was of the opinion 
that the Committee should be reviewing China’s progress towards  meeting those obligations, not its 
rationales for non-compliance.  The US looked forw ard to China’s full and forthcoming responses to 
its transitional review questions before the Co mmittee, as well as to its recent request under 
Article 25.8 of the Agreement. 
51. The Chairman  thanked the United States for its statem ent and invited other delegations to 
make comments. 
52. The delegate of the European Communities  stated that in preparing for this agenda item, he 
had reviewed the minutes of last year's Committee m eeting, and in particular, the opening statements 
made by his delegation regarding the very same agenda item.  The delegate of the 
European Communities noted that it was striking that his delegation could have used the statement of 
last year for this year.  The delegate of the Eu ropean Communities commented that this was striking 
but also disappointing.  In his opinion, this m eant that no progress had been made on compliance by 
China with transparency obligations  since last year.  The delegate of the European Communities noted 
that the consequences of China's lack of progress were non-compliance by China of WTO rules in a 
critical area, and an imbalance of information av ailable on subsidies for economic operators.  The 
delegate of the European Communities stated that  these were serious consequences and that they 
continued to be of serious concern to the EC. 
53. The delegate of the European Communities men tioned that his delegation took very good note 
of the point made by the US on the recent worry ing developments in Ch ina's financial sector 
involving significant bail-outs of state-owned banks .  The delegate of the European Communities 
stated that his delegation would listen to China's replies on these issues with great interest since 
subsidies to the financial sector may have dir ect knock-on effects on other sectors of China's 
economy. G/SCM/M/52 
Page 10  
 
 54. Finally, the delegate of the European Comm unities commented that his delegation submitted 
a set of questions on apparent subsidies schemes, noting that for many of these, information found on the internet indicated that many appeared to be prohibited subsidies.  The delegate of the 
European Communities stated that his delegation ha d also reiterated questions  on subsidies to copper 
scrap imports, which was a matter of particular concern to the EC and an issue that had already been 
raised by the Japanese delegation, in the cont ext of discussion on a preceding agenda item. 
55. The delegate of the European Communities lo oked forward to China's replies to these 
questions.  He stated that he wanted to make one po int very clear:  it should not be the EC's task to 
search for Chinese subsidies on its own.  Instead of surfing the web to search for subsidies, the EC's 
task should be to pose questions on China's WTO subsidy notification, like for any other 
WTO Member.  The delegate of the European Comm unities stated that his delegation believed that 
this would be in the interest of everybody in th e Committee including China.  He urged China to bring 
the Committee to a position of doing so sooner rather than later.  
56. The Chairman
 thanked the European Communities for its statement and invited other 
delegations to make comments.  Th e delegate of China was invited to take the floor to respond to the 
questions and comments that it had received. 
57. The delegate of China  thanked the Chairman for givi ng her the floor to address the 
Committee on the implementation of China’s commitmen ts and to respond to the questions raised by 
Members.  
58. Before turning to the specific qu estions asked by the Members, the delegate of China stated 
that she wanted to first provide an overview of th e action China had undertaken in the lead-up to this 
review.  Pursuant to Article 32.6 of the SCM Agreement , the Chinese government notified to the 
Committee the newly promulgated regulations of the People's Republic of China on countervailing 
measures in G/SCM/1/CHN/1/Suppl.3 and submitted in formation on price control and export pricing 
policies in the light of the requirements listed in A nnex 1A to the Protocol of Accession of China.  
The delegate of China stated that she hoped this  information would present Members with a clear 
picture of China's countervailing legisla tion and relevant pricing mechanisms. 
59. The delegate of China noted that her delegation had, prior to this review, received a number 
of questions and comments from Members with explic it concerns about China's implementation of its 
obligations regarding subsidy notifications.  The delegate of China thanked the Members for their 
questions and stated that it was her delegation's belief that these questions and comments would help 
it collect information on domestic subsidies so as to further improve the implementation of the 
transparency obligations.  
60. As regards the notification of subsidies, the dele gate of China stated that she wanted to draw 
the Committee's attention to the following:  first, paragraph 10.3 of the Protocol of Accession stipulates that China shall eliminate all subsidy pr ogrammes falling within the scope of Article 3 of 
the SCM Agreement  upon accession.  Since China's accession, China had implemented this 
commitment seriously and completely, and it had e liminated all export subsidies and subsidies for 
import substitution.  China had provided numerous clear explanations of this position in written 
format in two prior transitional reviews conducted by this Committee.  At present, China did not 
maintain export subsidies or import substitution subs idies of any form.  China therefore could not 
undertake any obligation of further notification in these two areas.  
61. Secondly, pursuant to Article 25 of the SCM Agreement , China had made all notifications on 
subsidy measures maintained and subsidies to be  phased out.  These notifications were made in 
Annexes 5A and 5B to the Protoc ol of Accession of China.  The two notifications reflected the 
situation with respect to Chinese subsidy measures a ccurately and completely.  The delegate of China  G/SCM/M/52 
 Page 11 
 
 
 noted that these two notifications are still current a nd effective, and that they fulfil the notification 
requirements under the SCM Agreement . 
62. Thirdly, China emphasized that, as was the ca se in all other WTO Committees, it placed great 
importance and undertook much effort in implem enting its transparency obligations.  Since its 
accession to the WTO, China had been actively coll ecting subsidy information.  China had invited 
WTO experts on subsidies to various  exchange and consultation activities conducted by the competent 
Chinese authorities, with the most recent session being held last August.  However, the delegate of 
China noted that there was more than one authority responsible for the administration of subsidies in 
China, and that information collecting and sorting is a complex and time-consuming exercise.  The delegate of China stated that many Members face th e same problems, even some developed Members.  
Questions with respect to the VAT rebate gr anted for imports of copper raw materials 
63. The representative of China stated that this po licy was based on a joint notice of the Ministry 
of Finance and the State Taxation Administration.   It applied only to copper raw materials, 
specifically copper waste and scrap, copper ore c oncentrates and raw copper imported by copper 
producing enterprises with a production capacity of mo re than 30,000 tonnes per year.  The delegate 
of China explained that the detailed procedure for obtaining the refund is as follows:  when eligible 
enterprises import copper waste and scrap copper ore concentrates and raw copper, import duties 
including tariff and import VAT are levied by customs.  After clearance of all import customs procedures, the enterprises filled in an applica tion form for refund of import duties, which after 
verification by local customs authorities, are submitted to the Ministry of Finance and copied to the General Customs Administration.  The Ministry of Finance together with other relevant authorities 
then undertook a verification process.  It would th en respond, by formal correspondence, to the local 
customs office with a copy of the correspondence being sent to the local customs administration and 
other relevant authorities.  The local customs office would then refund 30 per cent of the collected import VAT making specific reference to the formal  correspondence from the Ministry of Finance.  
The delegate of China commented that, as he had explained, all of the procedures implementing the 
VAT refund policy are therefore clear and transparent.  
64. The delegate of China noted that based on information he had recei ved from the relevant 
authority, 40 enterprises benefited from this policy in  2003.  At this stage, the total value refunded 
was still unclear because some of the enterprises in question had not yet been refunded.  As to the 
impact of this policy on international trade, the de legate of China stated th at China did not accept that 
this policy deteriorated the international trade envi ronment for copper raw materials.  The delegate of 
China explained that 2.67 million tonnes of copper or e concentrates were imported in 2003;  and that 
of this amount, only 360,000 tonnes (or 13.5 per cent of imports) benefited from the VAT refund 
scheme.  Furthermore, of the 3.16 million tonnes of  copper waste and scrap imported into China last 
year, only 39,000 tonnes (or 1.2 per cent of imports) benefited from the VAT refund scheme.  The delegate of China wondered how su ch small amounts could adversely a ffect the international trading 
environment for copper, and stated that the world was undergoing a shortage of copper raw materials, 
not because of China's VAT refund scheme, but  because many mines reduced and/or closed 
production in response to a fall in prices in the late 1990s and also because of the later recession in the 
world economy.  The delegate of China stated that  there was no ground to allege that China's policy 
led to the shortage of copper supply in the world market. 
65. As regards the consistency of this policy with WTO rules, the delegate of China stated that, 
after detailed study, China believed it did not violat e WTO rules.  The delegate of China noted that 
the Chinese authorities had started a review of the pol icy and that, up to now, no definite conclusions 
have been reached.  G/SCM/M/52 
Page 12  
 
 Questions with respect to the semiconductor industry 
66. The delegate of China confirmed that a Na tional Development and Reform Commission 
official made an announcement some time ago re garding the semiconductor industry.  However, the 
delegate of China pointed out that this announcem ent only concerned considerations related to the 
changes to be made to the previous policy whic h was terminated.  The aspects of the policy being 
considered included providing full VAT refund for export of semiconductor a nd integrated circuit 
products and also other support meas ures regarding research and development and training, etc.  The 
delegate of China stressed that these features of th e policy were only under consideration.  They had 
still to be translated into government decrees and notices, before they could be published and 
implemented.  The delegate of China stated th at when published and implemented, these policies 
would be WTO-consistent. 
Questions with respect to special economic zones 
67. The delegate of China stated that China did maintain some preferential tax programmes for 
foreign investors in the special economic zones, and economic and technological development areas.  
These policies were included in Annex 5 of Ch ina's Accession Protocol.  These were being 
implemented and some may have undergone some adjustment sinc e China's accession to the WTO.  
68. As regards the questions from Members citing information collected from media reports, the 
Chinese delegate mentioned that the WTO is an organization where Members discuss government policies and measures.  He stated that the Chinese government undertook no obligation to verify information published on non-official websites, and it did not accept that such information could be a 
basis for making accusations against China's policies.  The delegate of China noted that given the size 
of China, it was virtually impossible to verify all of the information in the media.  Furthermore, the 
delegate of China noted that a lot of the inform ation coming from these sources was either inaccurate 
or outdated.  For example, in the semiconductor case, the information that was published reflected only intentions or considerations but not actual implemented policy.  In the Heilongjiang Province 
matter, an extremely important fact was neglected.  For non-performing loans, the 
Chinese government had followed the practice that the creditor banks and debtor enterprises should 
come to a resolution through negotiations and consul tations between themselves.  When restructuring 
non-performing loans, the creditor banks in China now followed commercial principles, taking into 
consideration the repaying ability , asset quality of the debtor, and their own ability to absorb the 
losses.  The delegate of China stated that in th e restructuring process, the government would neither 
assume the losses nor provide subsidies to th e creditor banks.  With respect to the 
Heilongjiang Province matter, the debt of the state ow ned enterprises was dealt with in the exact same 
fashion, i.e. on a commercial basis.  According to Chin a, the statement that Heilongjiang Province 
agreed to write-off RMB 36 billion worth of non-pe rforming loans unpaid by state-owned enterprises 
was not true.  Non-performing loans involved in that  case were only RMB 18 billion.  At present, only 
the Industrial and Commercial Bank of China had begun negotiations with the SOEs in 
Heilongjiang Province.  No scheme has been implemented. 
Questions with respect to reform of the financial sector  
69. The delegate of China stated that the Chinese delegation did not think the details of this 
reform were related in any way to  the mandate of the Committee.  However, to facilitate Members' 
understanding of the efforts and resolve of his governme nt, the delegate of China stated that he would 
provide the following information:  reform of Chin a's banking system had been considered for some 
time, and it was recognised that it could not be completed overnight.  The delegate of China 
commented that relevant experience would need to be accumulated, step by step.  The delegate of 
China stated that the Chinese government had previ ously adopted a number of reforms toward state-
owned banks, and with these efforts, commercial banks  in China, whether state-owned or not, were  G/SCM/M/52 
 Page 13 
 
 
 already operating under commercial conditions.  Government intervention has been reduced to a 
minimum level. 
70. The latest reorganisation and injection of cap ital into the Bank of China and the China 
Construction Bank were considered to  be one of the steps needed in the overall reform of the banking 
sector in China.  The delegate of China noted th at compared with previous reform measures, the 
capital injection measures of December 2003 were  designed and implemented with commercial 
considerations in mind.  The State, through the Central Weijing Corporation, injected US$ 45 billion 
into the two banks to increase their capital funds, with  future dividends expected as a return on this 
investment.  The delegate of China explained that th e action taken was, in nature, an investment, not a 
subsidy.  With this capital injection, the Bank of China and the Construction Bank of China were 
reorganised into shareholding companies.  Corpor ate management mechanisms had been introduced, 
the banks' operations and assets had been restruct ured, quality of assets improved, and the capital 
sufficiency rate increased.  The delegate of Chin a commented that these initiatives were aimed at fully 
commercialising the operations of the two banks and would enable China to accumulate further 
experience for additional reform of the Chinese banking system.  
71. The delegate of China noted that there was no major difference between this reform carried 
out by China and reforms carried out by other WTO Members.  Any such reform involved a write-off 
of non-performing loans.  If these types of reforms were labelled subsidies, then this issue was 
definitely not unique to China. 
Questions with respect to pricing administration 
72. The delegate of China stated that no new law, regulations or other meas ures had been taken to 
change the listing in Annex 4 to the Protocol of  Accession, apart from what was explained in last 
year's review – i.e., that vegetable oil was no longer subject to pricing controls.  The delegate of China 
also stated that China had not implemented any new pricing controls. 
Questions with respect to steel and steel scrap pricing 
73. The delegate of China stated that prices for steel  and steel scrap were fully liberalised in 1999, 
and that copper and copper scrap pr icing had also been liberalised.  
Questions with respect to the pricing mechanism for water 
74. The delegate of China stated that although wate r was still subject to state pricing, the pricing 
mechanism had been reformed to re flect market forces and the availability of resources.  The delegate 
of China provided the following details with resp ect to China's pricing mechanism reform:  it was 
aimed at establishing water pricing mechanisms that fully reflect water scarcity  in China, focusing on 
water saving, reasonable allocation of water resources, higher effici ency of water utilisation, and 
facilitation of the sustainable utilisation of water resources. 
75. The delegate of China noted that the prin ciples underlying a reasonable water pricing 
mechanism included:  first, combining water price adjustment with water price structure 
improvement, establishing a multi-level pricing system according to the capabilities of different users.  
Secondly, water pricing should take into consideration the adjustment of water pricing facilities so as 
to realise a reasonable allocation of water resource s.  Thirdly, reflecting reasonable utilisation of 
water resources with water pollutio n prevention to encourage recycling of waste water.  Fourthly, 
realising sustainable development of water s uppliers through the construction of water saving 
facilities and providing reasonable compensation for th eir cost, facilitating the construction of water 
savings projects and promoting water savings tec hnologies.  Fifthly, combining the water pricing 
mechanism with the operational mechanism of wate r suppliers, pushing forward the operation on a G/SCM/M/52 
Page 14  
 
 commercial basis as enterprises and industry strengt hen cost control through the pricing mechanism 
and bring into play market mechanisms.  
Questions with respect to protective pricing 
76. The delegate of China stated that the basic prin ciples of protective prices were set out in:  The 
Law of the People's Republic of China on Pricing.  The purchase prices of grains were in general 
subject to supply conditions of the markets.  It  was only when there was a major change in the 
demand/supply situation, in such a way that it was deemed necessary to guarantee market supply and 
to protect the interests of the peasants, that protective prices would be applied. 
Questions with respect to the price of coal and oil 
77. The delegate of China stated that the price of coal was completely subject to market 
mechanisms.  As regards the prices of land oil, stat e pricing had been eliminated.  The price was now 
determined by enterprises according to commercial negotiations.  The price of offshore oil was 
determined by the market.  The current prici ng mechanism for crude oil applies regardless of 
geographical, industrial, or enterprise differences. 
78. In conclusion, the delegate of China stated that it was not hard to imagine the difficulties 
encountered by China as a new Member of the Or ganization to prepare a full and comprehensive 
subsidy notification.  China cited such difficu lties during its accession negotiations, and these were 
recognised in the Working Party Report.  Therefore, the delegate of China continued, it was important 
to realise that China was making all possible efforts.   The delegate of China stressed that China had 
never stated that it would not comply with its transparency obligations.  What China had said was that, as a new Member, it faced a lot of difficu lties, like other Members with better capabilities and 
more experience.  For instance, the US and the EC notifications of their domestic support for 2000 
and 2001 were only received in March 2004.  In China's view, this was also a three-year delay.  The 
delegate of China stated that he was highlighting this example not to excuse China's delay in making 
its notification, but so that Members knew that pressure on China on this point would not resolve the 
challenges it faced.  Some of these challenges included needing to educate all of the officials working 
on subsidies policies in China.  In August 2004, the Secretariat had held a detailed technical workshop 
with over 20 participants in China.  The delega te of China thanked the Secretariat for all the 
assistance provided.  Other difficulties included domestic negotiations.  
79. The delegate of China commented that every Member had its own problems, and he asked 
why was it so difficult for other members to reco gnise the challenges curre ntly faced by China, 
particularly as a new Member.  Finally, the dele gate of China stated that China was in a better 
position today than last year, noting that the spir it of cooperation from the relevant Ministries was 
increasing.  He hoped that the Members would be able to understand China's difficulties. 
80. The delegate of China said he was surprised to see that questions from the delegation of 
Chinese Taipei were listed in the agenda for the meeting.  The delegate of China noted that his 
delegation had not received any qu estions from Chinese Taipei.  The delegate of China said his 
delegation could not assume any oblig ation at this meeting to respond to questions which have never 
been delivered to the Chinese delegation. 
81. The Chairman
 thanked China for its responses and asked  if any other delegations wanted to 
take the floor. 
82. The delegate of Chinese Taipei  said he appreciated the detailed responses provided by the 
Chinese delegation.  He stated that the questions from Chinese Taipei were very clear,  as set out in  G/SCM/M/52 
 Page 15 
 
 
 document G/SCM/Q2/CHN/11.  The delegate of Chinese Taipei stated that, if necessary, he could 
read through all of the questions in order to fac ilitate the Chinese delegates' provision of a response. 
83. The delegate of China requested that the ques tions of Chinese Taipei be delivered to his 
delegation. 
84. The Chairman  asked if there were any other delegati ons that had any questions or comments. 
85. The representative of Japan  mentioned that, despite the statement of the Chinese delegate that 
its copper ore VAT refund system was WTO-consis tent, the delegation of Ja pan was still concerned 
about the programme.   The delegate of Japan noted  that Japan's copper sme lting industry believed that 
this system increased the price of copper in the international ma rket, and accordingly, Japan's industry 
had been adversely affected.  The delegate of Japan recalled that at last year's Committee meeting in 
October, the delegation of China mentioned that it wa s ready to undertake a bilateral exchange of views 
on this subject.  In this regard, the delegate of Japan mentioned that a vice-minister level conference 
between the Ministry of Commerce of China and the Ministry of Economy, Trade and Industry of Japan was held in May this year, wh ere China stated that it was consid ering the future treatment of the 
VAT refund system for copper, including a partial el imination of the system and that it would be 
ready to provide relative information at a later stag e.  The delegate of Japan commented that China 
should provide it with all of the information releva nt to this issue, including information on the said 
elimination.  
86. The representative of the United States
 initially responded to four points made by China.  First, 
as regards the statement of the delegate of China that the notification provided in the Protocol of 
Accession reflects accurately and co mpletely the current situation and satisfies China's obligations under 
the SCM Agreement , the delegate of the US stated that his delegation could not accept that a notification 
that was supplied in the course of accession sati sfied an ongoing obligation of all WTO Members.  
Secondly, as regards China's commen ts relating to US reliance on me dia reports for information about 
China's subsidy policies, the delegate of the US stated  that the solution to this problem was for China to 
provide a notification.  China was the best sour ce of information with respect to its subsidies 
programmes.  The delegate of the US noted that th e WTO was three years into  China's membership and 
China had still not tabled its first subsidies notification.  Thirdly, according to the US delegate, China made the point that it was making a mu ch better effort now than in the past.  However, the delegate of 
the US stressed that despite these apparent efforts, there were no concrete resu lts.  He noted that last 
year the US delegation suggested that China submit a partial notification so that the Committee could 
satisfy itself that ther e was some movement towards Chin a meeting its obligation under the 
SCM Agreement .  Finally, the delegate of the US noted that China made the point that a US notification 
is three years behind.  The US delegate commented, a nd suggested that the Secretariat confirm, that the 
US was up to date with respect to its notifications, in the same way as the EC. 
87. As regards the specific comments made by the Chinese delegate with respect to Members' 
reliance on third-party sources of information, the representative of the US noted the existence of an 
OECD report entitled "China in the World Economy, th e Domestic Policy Challenges".  The delegate of 
the US noted that this report was based on informat ion that post-dates China' s accession to the WTO.  
The delegate read from Chapter 18, entitled "The cu rrent tax system and priorities for reform".  On 
page 625 of the report, the third paragraph read as follows: 
"The current tax system excessively relies on revenues from tax (VAT, business tax, 
consumption tax).  Revenue from income taxation has been seriously eroded by the 
generous tax incentives provided to forei gn and domestic enterprises and by the high 
threshold in personal income tax. ... some of the tax incentives are clearly violating 
WTO rules and need to be removed." G/SCM/M/52 
Page 16  
 
 88. The delegate of the US quoted further from page 633 as follows: 
"Foreign invested enterprises exporting 70% or more of their output in a given year 
are eligible for a 50% tax reduction in that year, even after the expiry of the normal tax holiday." 
89. The delegate of the US described what he beli eved was the overall tax incentive referred to in 
this report:  a foreign investment enterprise in Chin a was granted an exemption of all income taxes for 
two years beginning with the year it starts making a profit.  Three years after that, it was granted a 
50 per cent reduction in taxes.  These tax incentiv es were not contingent upon export performance.  The 
same company was entitled to a 50 pe r cent reduction of income taxes after this five-year period if it 
exports 70 per cent or more of its  output.  The delegate of the US not ed that these programmes provide a 
powerful incentive for firms to locate in and export from China.  The US delegate further commented 
that his delegation would argue that the latter set of  income tax reductions were inconsistent with the 
SCM Agreement . 
90. The delegate of the US then read a passage fr om page 634 of the report regarding a programme 
described in the report as a "t ax refund on reinvestment": 
"Foreign investors or foreign invested enterp rises that invest their share of profits in 
China for a period of no less than five years, may obtain a tax refund of 40% of the income tax paid on the amount of reinvestment.  If the reinvestment is made in establishing or expanding an export oriented  enterprise or a technologically advanced 
enterprise, the tax refund is 100%." 
91. The delegate of the US noted that the main poi nt he wanted to make was that there was no 
disagreement whether these programmes had existed in the past.  There was some doubt about whether 
they still existed.  The OECD report said that they existed today.  An Economist Intelligence Unit report, 
dated February 2004, descri bed the same programmes.  Thus, the delegate of the US commented that 
two separate independent organisations both stated that the subs idy programmes described continue to 
exist today.  He stated that all the US was asking China to do was to provide the Committee with 
information on the legislative measures China had undertaken to eliminate at least these two subsidies 
upon accession. 
92. On the issue of Heilongjiang Province and the northeast revitalisation programme, the 
representative of the US recalled that the Chinese delegate mentione d that the banks were working on a 
commercial basis and that any loan forgiveness that  had taken place had been decided by the banks and 
by the banks only.  The US delegate d commented that if indeed that was the case, it was puzzling to see 
some of the characteristics of the northeast re vitalisation programme.  For instance, the central 
government intended to spend US$ 12 billion this year on interest rate reducti ons to fund technological 
upgrades of 100 state-owned enterprises in the re gion.  The central government and the provincial 
governments had also decided to se t up a northeast revitalisation bank th at would finance low interest 
loans to state enterp rises.  The industries that  had been targeted in the northeast region were 
petrochemicals, machinery and equipment, and othe r industries that make-up the traditional core of 
these economies.  The US delegate asked the Chin ese delegation to explain the rationale of this 
revitalisation programme in light of the statement that the assistance coming from banks in that region 
was commercially based.   The US delegate stated that his delegation was unclear about the 
US$ 12 billion interest rate reductions granted to co mpanies in traditional sectors of the economy, given 
that China was trying to revitalise a programme along market economy lines, and trying to improve 
resource allocations.  The US delegate commented that one could think it would be understandable to 
establish a financing vehicle, if the financing was directed towards the promotion and development of 
small- and medium-sized enterpri ses.  One would also understand why the Chinese government would  G/SCM/M/52 
 Page 17 
 
 
 want to finance the social cost of a structural adjust ment.  But, the delegate of the US continued, it was 
unclear why the Chinese government would do what the government is doing now. 
93. The representative of the European Communities  stated he fully supported the position taken 
by the US with respect to the statement made by  China that the Annex to its Accession Protocol 
contains an adequate and complete notification.  Th e delegate of the EC respectfully disagreed with 
China on this point, in particular, because the Chinese delegates informed the Committee at the 
meeting that several of the programmes pertaining to special economic zones contained in the Annex 
have been modified.  The EC delegate stated th at, as he has mentioned in previous meetings, the 
Annex to the Accession Protocol could be a useful starting point for making a partial notification, if 
further elaborated and updated.  This would be a major improvement to the current situation where 
there was nothing to review. 
94. The delegate of the EC stated that he found Ch ina’s failure to respond to questions 3 to 7 of 
the EC’s questionnaire, on grounds that the Chin ese government was not in the business of verifying 
information found by other Members on websites, di sappointing.  The EC delegate recalled that he 
did not ask China to verify any websites.  What wa s asked was to respond to certain information that 
had come to the attention of the EC delegation.  Th e EC delegate asked China to provide a response to 
his questions, and in particular, whether or not su ch subsidy programmes existed, yes or no, and if 
they existed to describe them in more detail. 
95. With respect to the copper imports scheme, the EC  delegate said that he did not hear an exact 
reference in the Chinese delegate’s address to a te xt or a law which would describe the copper VAT 
reimbursement scheme.  The delegate of the EC al so commented that it would have been interesting 
to receive information on the value of refunds gran ted under the scheme for years prior to 2003, given 
that the Chinese delegate had stated that the sy stem was in place since 2000 and figures for 2003 were 
not available.  The delegate of the EC stressed that, firstly, the overall figures of raw material imports had to be looked at over a longer time period, wh ere a strong upwards trend of imports could be 
observed and, secondly, the figures cited by the Ch inese delegate appeared to comprise the overall 
tonnage of raw material and did not reflect the coppe r content.  The numbers held by the EC showed 
that 30 per cent of copper scrap imports and 50 per cent of the copper concentrate imports had 
benefited from the system.  The price reduction for Chinese smelters obtained through the VAT 
refund had also to be seen in terms of treatment a nd refining costs and the metal content.  Finally, the 
delegate of the EC stated that the trade distorti on in this measure resulted from higher buying prices 
for raw materials which were possible through the s ubsidy to the Chinese smelters and which were 
not reflected in equally higher prices for the finished  product.  The EC delegate concluded by stating 
that the EC considered that this trade distorti ng subsidy practice had caused it and other Members’ 
industries serious prejudice and should therefore be eliminated. 
96. The representative of Japan
 noted that the Japanese government was of the view that the VAT 
refund scheme could also have an adve rse impact on the Japanese industry.   He commented that his 
country was interested in acting jointly agains t this scheme with the EC, who shared a common 
concern about this scheme.  The delegate of Japan urged China to review the situation. 
97. The delegate of China  thanked the Members for the questions raised.  The delegate of China 
took note of the concerns and stated that these concerns would be transm itted to the relevant 
departments in Beijing.  Recognising the limited time allocated for transitional re views, China noted that 
it was willing to discuss SCM issues e ither before or after this review. 
98. The representative of Japan  thanked China for providing inform ation on its laws and regulations 
on CVD investigations.  However, he noted that Chin a should provide this information according to the 
procedures set by this Committe e.  Otherwise WTO Members coul d not share information on this 
important issue.  G/SCM/M/52 
Page 18  
 
 99. The representative of the United States
 stated that it was troublin g that China did not provide 
responses to the very substantive questions forwarded by the Member s.  The US delegate commented 
that his delegation found this development disturbing.  He noted that the US was willing to work with 
China over time, and also willing to work bilaterally, but China needed to  realise that the issues that had 
been raised were not going to go away.  
100. The representative of the European Communities  supported the statements made by Japan and 
the US.  The EC expressed disappointment that the re view process was cut short.  The delegate of the 
EC noted that the Committee was left hanging in th e air with respect to a large number of the 
questions asked, and Members did not really know when the answers would be provided.  Any reaction from the Chinese delegation about when they  intend to respond to those questions would be 
very much appreciated.  Finally, the EC delegate  indicated that his delegation was willing to work 
bilaterally with the Chinese side to a dd more value to the review process. 
101. The Committee took note
 of the statements made.  
102. Turning to the Committee's report on the transitional review, the Chairman  noted that there 
were no guidelines for the report contained in the Pr otocol.  Following the re view at last October's 
regular meeting, the Chairman, acti ng on her own responsibility, had pr epared a brief, factual report, 
with references to the documents concerned, and attaching the porti on of the minutes of the meeting 
which related to the transitional review.  The Chai rman asked Members whether this procedure should 
be followed again. 
103. The Committee so agreed . 
K. ARTICLE  27.4  PROCESS 
1. Committee's review of transparency and standstill obligations in the decisions in 
G/SCM/50-102 and G/SCM/50/Add.1 - /94/Add.1 relating to the Article 27.4 Process 
− Antigua and Barbuda (G/SCM/N/114/ATG) 
− Barbados (G/SCM/N/114/BRB) 
− Belize (G/SCM/N/114/BLZ) 
− Colombia (G/SCM/N/114/COL) 
− Costa Rica (G/SCM/N/114/CRI) 
− Dominica (G/SCM/N/114/DMA) 
− Dominican Republic (G/SCM/N/114/DOM) 
− El Salvador (G/SCM/N/114/SLV) 
− Fiji (G/SCM/N/114/FJI) 
− Grenada (G/SCM/N/114/GRD) 
− Guatemala (G/SCM/N/114/GTM) 
− Jamaica (G/SCM/N/114/JAM) 
− Jordan (G/SCM/N/114/JOR) 
− Mauritius (G/SCM/N/114/MUS & Corr.1) 
− Panama (G/SCM/N/114/PAN) 
− Papua New Guinea (G/SCM/N/114/PNG) 
− St. Kitts and Nevis (G/SCM/N/114/KNA) 
− St. Lucia (G/SCM/N/114/LCA/Rev.1) 
− St. Vincent & Grenadines (G/SCM/N/114/VCT) 
− Thailand (G/SCM/N/114/THA & Corr.1) 
− Uruguay (G/SCM/N/114/URY) 
  G/SCM/M/52 
 Page 19 
 
 
 104. The Chairman  referred to the Committee's review of tr ansparency and standstill obligations in 
the decisions contained in documents G/SCM/N/50-1 02 regarding the extension of the export subsidy 
transition period of certain Members' eligible pr ogrammes as provided for under Article 27.4 of the 
SCM Agreement .  Members were aware that the trans ition periods for certain export subsidy 
programmes of some developing country Members ha d been extended in 2002 in respect of calendar 
year 2003, and had been largely continued last year in respect of the calendar year 2004.  Under the 
provisions of Article 27.4, the Committee was only aut horized to grant such extensions one year at a 
time, on the basis of consultations undertaken with the Member concerned.  The Article 27.4 
decisions originally taken by the Committee in 2002,  and those that had been continued last year, 
could be broadly divided into two categories:  firs t, the so-called "fast track" decisions which were 
adopted pursuant to the procedures in document G/SCM/39 and, in respect of Colombia, 
paragraph 10.6 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns;  
and second, the decisions based on Article 27.4 alone.   All of the decisions contained standstill and 
transparency obligations which the Committee had to review this year.  Agenda item K.1 provided for 
the review of all the decisions taken (fast-track  and those based on Article 27.4 alone) and these 
notifications had been circulated in the G/SCM/N/ 114 document series.  In addition, agenda item K.2 
envisaged Committee decisions in respect of the con tinuation of extensions of eligible programmes of 
certain developing country Members for 2004.  Th is item was intended in particular to address the 
continuation of the fast-track extensions (relati ng to the decisions in G/SCM/50-92 & Adds.1) as 
foreseen in the procedures in document G/SCM/39.  As provided for in paragraph 1(e) of those 
procedures, through the end of 2007, and "subject to  annual review ... to verify that the transparency 
and standstill requirements ... are being fulfilled, Me mbers of the Committee shall agree to continue 
the extensions".  The Chairman proposed that the Co mmittee take decisions to continue the extensions 
for calendar year 2005 for those fast-track extens ions where the Committee's review in respect of 
standstill and transparency appeared to have been satisfactorily completed.  Those decisions would be 
on the same basis and subject to the same requirement s as the original ones.  He suggested that the 
Committee first review all the notifications concerni ng fast-track extensions based on the procedures 
in document G/SCM/39, and then consider the proposed  decisions to continue those extensions where 
it appeared that the Committee had completed its review of transparency and standstill to the 
satisfaction of Members. 
105. After the completion of the "fast-track" revi ew and decision-making process, the Chairman 
proposed that the Committee should address the stands till and transparency review of the remaining 
programmes, in respect of which no Committee decision was to be made this year.  This would 
include firstly the two programmes of Colombia wh ich had been subject to decisions based on the 
fast-track procedures and the language in paragr aph 10.6 of the Doha Implementation decision 
(documents G/SCM/93-94 & Adds.1 ), and secondly those programmes subject to decisions based on 
Article 27.4 alone (documents G/SCM/95-102). 
106. The delegate of the European Communities  stated that they had asked questions to a number 
of delegations concerning programm es which had benefited from extens ions under Article 27.4, both 
under the so-called fast-track procedure and also under the regular 27.4 process alone.  The purpose of 
those questions had not been in any way to cast doubt on the extensions of the programmes covered 
by the Agreement reached at Doha.  He did, however , wish to keep the issue of phase-out before the 
Committee, given the risk which appeared to a pply to certain programmes in particular where 
Members concerned could find themselves caught betw een a WTO obligation on the one hand and an 
understanding that they might have reached with ec onomic operators on the other.  This situation had 
already arisen in the past, and the issue could al so apply to other Members than those to whom 
questions had been addresse d.  He went on to thank the Members concerned for all their replies which 
had been given in the same spirit of transparency  and openness as the questions that had been asked 
and he was mindful of the burden which the exercise  placed on smaller and in particular non-resident 
Members of the Organization. G/SCM/M/52 
Page 20  
 
 107. The Chairman
 turned first to the transparency a nd standstill review of the fast-track 
extensions based on the G/SCM/39 procedures.  He  recalled that the procedures in G/SCM/39 called 
for annual updating notifications to be provided by  the Members concerned, and reviewed by the 
Committee to verify that the standstill and transpar ency requirements in respect of the programmes 
were being met.  He recalled that, in 2002 th e Committee undertook an extensive transparency 
process which involved notifications as well as exch anges of written questions and answers, to 
determine whether the programmes for which exte nsions had been requested met the eligibility 
criteria of the procedures.  The original set of ex tension decisions had been taken at the Committee's 
autumn 2002 meeting.  At its autumn 2003 meeting, the Committee conducted its standstill and transparency review and adopted continuation decisions  in respect of calendar year 2004.  In addition, 
at that meeting Members had agreed on deadlines fo r the submission of this year's required updating 
notifications, as well as the exchange of questions a nd answers.  He reported that all of the Members 
with fast-track extensions had s ubmitted the required notifications and there had been an exchange of 
written questions and answers.  All the notificati ons had been open for discussion at the 22 October 
informal consultations.  He was confident that th e Committee would be in a position to complete its 
review of most, if not all, of the notifications th at had been submitted in a timely manner pertaining to 
the "fast-track" decisions.  If this was the case, the Committee would then be in  a position to take the 
decisions called for in the G/SCM/39 procedures namely  to continue the extensions for calendar year 
2005, on the same basis and subject to the same requirements as the original decisions and addenda. 
108. The delegate of the United States
 agreed with the comments of the EC delegate and 
emphasized that it was a transition period and that they  were looking at the elimination or termination 
of the export subsides at the end of the relevant pe riod.  It was important that countries should begin 
to think sooner rather than later about how they might want to phase out or terminate the programmes 
in question. 
109. The Committee then turned to the review of the following fast-track programmes: 
Antigua & Barbuda (G/SCM/N/114/ATG) 
• Fiscal Incentive Act Cap 172 (December 1975) (G/SCM/50 and Add. 1)  
• Free Trade and Processing Zone Act No. 12 of 1994 (G/SCM/51 and Add. 1)  
 
Barbados (G/SCM/N/114/BRB) 
• Fiscal Incentive Programme (G/SCM/52 and Add. 1) 
• Export Allowance (G/SCM/53 and Add. 1) 
• Research & Development Allowance (G/SCM/54 and Add. 1) 
• International Business Incentives (G/SCM/55 and Add. 1) 
• Societies With Restricted Liability(G/SCM/56 and Add. 1) 
 
Belize (G/SCM/N/114/BLZ) 
• Fiscal Incentives Act (G/SCM/57 and Add. 1) 
• Export Processing Zone Act (G/SCM/58/ and Add. 1) 
• Commercial Free Zone Act (G/SCM/59 and Add. 1) 
• Conditional Duty Exemptions Facility under Treat y of Chaguaramas (G/SCM/60 and Add. 1) 
Costa Rica (G/SCM/N/114/CRI)5 
• Duty Free Zone Regime (G/SCM/61 and Add. 1) 
• Inward Processing Regime (G/SCM/62 and Add. 1) 
 
                                                      
5Written questions and answers had been re ceived in documents G/SCM/Q3/CRI/6-7.  G/SCM/M/52 
 Page 21 
 
 
 Dominica (G/SCM/N/114/DMA) 
• Fiscal Incentives Program(G/SCM/63 and Add. 1) 
 
Dominican Republic (G/SCM/N/114/DOM)6 
• Law No. 8-90 to "Promote the Establishment of New Free Zones and Expand Existing Ones" 
(G/SCM/64 and Add. 1) 
 
El Salvador (G/SCM/N/114/SLV)7 
• Export Processing Zones and Marketing Act, as amended (G/SCM/65 and Add. 1) 
 
Fiji (G/SCM/N/114/FJI) 
• Short-Term Export Profit Deduction (G/SCM/66 and Add. 1) 
• Export Processing Factories/Export Processing Zones Scheme (G/SCM/67 and Add. 1) 
• The Income Tax Act (Film Making and Audio Visual Incentive Amendment Decree 2000) 
(G/SCM/68 and Add. 1) 
 
Grenada (G/SCM/N/114/GRD) 
• Fiscal Incentives Act No. 41 of 1974 (G/SCM/69 and Add. 1) 
• Statutory Rules and Orders No. 37 of 11149 (G/SCM/70 and Add. 1) 
• Qualified Enterprises Act No. 18 of 1978 (G/SCM/71 and Add. 1) 
 
Guatemala (G/SCM/N/114/GTM)8 
• Exemption from Company Tax, Customs Duti es and Other Import Taxes for Companies 
under Special Customs Regimes (G/SCM/72 and Add. 1) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process Relating to Activities of Managers and Users of Free Zones (G/SCM/73 and Add. 1) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process of Commercial and Industrial Enterpri ses Operating in the Industrial and free Trade 
Zone (G/SCM/74 and Add. 1) 
 
Jamaica (G/SCM/N/114/JAM)9 
• Export Industry Encouragement Act (G/SCM/75 and Add. 1) 
• Jamaica Export Free Zone Act (G/SCM/76 and Add. 1) 
• Foreign Sales Corporation Act (G/SCM/77 and Add. 1) 
• Industrial Incentives (Factory Construction) Act (G/SCM/78 and Add. 1) 
 
Jordan (G/SCM/N/114/JOR)10 
• Partial or Total Exemption from Income Tax of Profits Generated from Exports under Law 
No. 57 of 1985, as amended (G/SCM/79 and Add. 1) 
 
Mauritius (G/SCM/N/114/MUS)11 
• Export Enterprise Scheme (G/SCM/80 and Add. 1) 
• Pioneer Status Enterprise Scheme (G/SCM/81 and Add. 1) 
• Export Promotion (G/SCM/82 and Add. 1) 
• Freeport Scheme (G/SCM/83 and Add. 1) 
                                                      
6Written questions and answers had been rece ived in documents G/SCM/Q3/DOM/10-11. 
7Written questions and answers had been re ceived in documents G/SCM/Q3/SLV/8-9. 
8Written questions and answers had been received in documents G/SCM/Q3/GTM/11-12. 
9Written questions and answers had been  received in G/SCM/Q3/JAM/9-10. 
10Written questions and answers had been rece ived in documents G/SCM/Q3/JOR/10-11. 
11Written questions and answers had been rece ived in documents G/SCM/Q3/MUS/9-10. G/SCM/M/52 
Page 22  
 
  
Panama (G/SCM/N/114/PAN) 
• Official Industry Register (G/SCM/84 and Add. 1) 
• Export Processing Zones (G/SCM/85 and Add. 1) 
 
Papua New Guinea (G/SCM/N/114/PNG) 
• Section 45 of the Income Tax (G/SCM/86 and Add. 1) 
 
St. Kitts & Nevis (G/SCM/N/114/KNA) 
• Fiscal Incentives Act No. 17 of 1974 (G/SCM/90 and Add. 1) 
 
St. Lucia (G/SCM/N/114/LCA/Rev. 1) 
• Fiscal Incentives Act No. 15 of 1974 (G/SCM/87 and Add. 1) 
• Free Zone Act, No. 10 of 1999 (G/SCM/88 and Add. 1) 
• Micro and Small Scale Business Enterprises Act,  No. 19 of 1998 (G /SCM/89 and Add. 1) 
 St. Vincent & Grenadines (G/SCM/N/114/VCT) 
• Fiscal Incentives Act No. 5 of 1982, as amended (G/SCM/91 and Add. 1) 
 
Uruguay (G/SCM/N/114/URY)
12 
• Automotive Industry Export Promotion Regime (G/SCM/92 and Add. 1)  
 
110. The delegate of the European Communities  thanked Uruguay for its answer, and asked for 
some clarifications in connection with the last para graph of their response and also a reference to a tax 
rebate scheme. 
111. The delegate of Uruguay  recognized that wording of the reply could have been more precise, 
but that Uruguay's policy was in line with the final objective of eliminating the instrument at the end 
of the period.  He informed Members that Uruguay ha d been in contact with the Secretariat regarding 
this issue and that his delegation was going to submit a document containing each and every one of 
the tariff headings, which should clarify the situation. 
112. The Chairman  thanked all delegations for their cons tructive participation in the review 
process.  He went on to say that the full and open engagement of all delega tions concerned went a 
long way to fulfil not only the letter, but also the spir it, of the procedures agreed by Ministers at Doha.  
Based on the valuable exchange and given the very  few questions that remained outstanding, it was 
his perception that the Committee had completed its  required transparency and standstill review in 
respect of all of the programmes just discussed. 
113. He proposed, as was foreseen in the fast-track procedures, that for the programmes for which 
the review had been completed, the Committee adopt  the decision to continue the extensions for a 
further year, calendar year 2005, on the same basis and subject to the same  requirements, as the 
original decisions. 
2. Committee decisions in respect of the continua tion of extensions for certain developing 
country members for 2005 
114. The Chairman  turned to the issue of continuation fo r the 2005 fast-track extensions pursuant 
to the procedures in G/SCM/39.  A draft decision text  was available in the room for each of the fast-
track extensions concerned.  He advised Members th at the text of the draft decisions was based on the 
                                                      
12Written questions and answers had been rece ived in documents G/SCM/Q3/URY/10-11.  G/SCM/M/52 
 Page 23 
 
 
 generic text that was sent to them by fax on 15 October 2004, and discussed at the open-ended 
information consultations held on 22 October.  He reiterated that the draft decisions pertained 
exclusively to the "fast-track" extensions that were  granted by the Committee la st year on the basis of 
the procedures contained in G/SCM/39, and only to those programmes for which the Committee had 
completed its review.  He stated that as the Co mmittee was dealing with the same programmes under 
the fast-track procedures as last year, there was no n eed to introduce further ch anges in the text apart 
from modifying the relevant time periods and specifying that this decision was a continuation of an original decision, plus its Addendum 1 of 2003.  The text was therefore almost verbatim of that of the 
decisions taken last year, except for (i) the s ubstitution of "2004" for "2003" in the penultimate 
paragraph, (ii) the substitution of " 2005" for "2004" in the last paragr aph, and (iii) the insertion of the 
words "and continuation thereof" and "and Add.1" in th e last paragraph.  He further noted that when a 
decision was made at the meeting, the current  date should be inserted just below the title. 
115. He stressed the importance of continuing, on the same basis and terms and conditions, the 
fast-track extensions that were granted in the past .  This was explicitly in accordance with the fast-
track procedures.  It was his intention to simply  check whether there were any further comments or 
suggestions, since the text had been reviewed in  detail last year, and in the October informal 
consultations. 
116. The delegate of Costa Rica
 stated that the date in the decision concerning the Inward 
Processing Regime of Costa Rica should be am ended to read November 2004 and not 2005. 
117. The Committee then turned to th e proposed decisions to continue the extension as detailed 
below: 
Antigua & Barbuda 
• Fiscal Incentive Act Cap 172 (December 1975)  (in draft document G/SCM/50/Add. 2) 
• Free Trade and Processing Zone Act No. 12 of 1994 (G/SCM/51/Add. 2) 
 
Barbados 
• Fiscal Incentive Programme (G/SCM/52/Add. 2) 
• Export Allowance (G/SCM/53/Add. 2) 
• Research & Development Allowance (G/SCM/54/Add. 2) 
• International Business Incentives (G/SCM/55/Add. 2) 
• Societies With Restricted Liability(G/SCM/56/Add. 2) 
 Belize 
• Fiscal Incentives Act (G/SCM/57/Add. 2) 
• Export Processing Zone Act (G/SCM/58/Add. 2) 
• Commercial Free Zone Act (G/SCM/59/Add. 2) 
• Conditional Duty Exemptions Facility under Tr eaty of Chaguaramas (G/SCM/60/Add. 2) 
 
Costa Rica 
• Duty Free Zone Regime (G/SCM/61/Add. 2) 
• Inward Processing Regime (G/SCM/62/Add. 2) 
 
Dominica 
Fiscal Incentives Programme (G/SCM/63/Add. 2) 
 G/SCM/M/52 
Page 24  
 
 Dominican Republic 
• Law No. 8-90 to "Promote the Establishment of New Free Zones and Expand Existing Ones" 
(G/SCM/64/Add. 2) 
 
El Salvador 
• Export Processing Zones and Marketing Act, as amended (G/SCM/65/Add. 2) 
 
Fiji  
 It was noted that, in the case of Fiji, the text of the decision contained footnotes as they 
appeared in the decision of last year. 
• Short-Term Export Profit Deduction (G/SCM/66/Add. 2)  
• Export Processing Factories/Export Processing Zones Scheme (G/SCM/67/Add. 2) 
• The Income Tax Act (Film Making and Audio Visual Incentive Amendment Decree 2000) 
(G/SCM/68/Add. 2) 
 
Grenada 
• Fiscal Incentives Act No. 41 of 1974 (G/SCM/69/Add. 2) 
• Statutory Rules and Orders No. 37 of 1999 (G/SCM/70/Add. 2) 
• Qualified Enterprises Act No. 18 of 1978 (G/SCM/71/Add. 2) 
 
Guatemala 
• Exemption from Company Tax, Customs Duti es and Other Import Taxes for Companies 
under Special Customs Regimes (G/SCM/72/Add. 2) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process Relating to Activities of Managers a nd Users of Free Zones (G/SCM/73/Add. 2) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process of Commercial and Industrial Enterpri ses Operating in the Industrial and free Trade 
Zone (G/SCM/74/Add. 2) 
 
Jamaica 
• Export Industry Encouragement Act (G/SCM/75/Add. 2) 
• Jamaica Export Free Zone Act (G/SCM/76/Add. 2) 
• Foreign Sales Corporation Act (G/SCM/77/Add. 2) 
• Industrial Incentives (Factory Construction) Act (G/SCM/78/Add. 2) 
 
Jordan 
• Partial or Total Exemption from Income Tax of Profits Generated from Exports under Law 
No. 57 of 1985, as amended (G/SCM/79/Add. 2) 
 
Mauritius 
• Export Enterprise Scheme (G/SCM/80/Add. 2) 
• Pioneer Status Enterprise Scheme (G/SCM/81/Add. 2) 
• Export Promotion (G/SCM/82/Add. 2) 
• Freeport Scheme (G/SCM/83/Add. 2) 
 
Panama 
• Official Industry Register (G/SCM/84/Add. 2) 
• 
Export Processing Zones (G/SCM/85/Add. 2) 
 
Papua New Guinea (G/SCM/N/114/PNG) 
• Section 45 of the Income Tax (G/SCM/86/Add. 2)   G/SCM/M/52 
 Page 25 
 
 
  
St. Lucia 
• Fiscal Incentives Act No. 15 of 1974 (G/SCM/87/Add. 2) 
• Free Zone Act, No. 10 of 1999 (G/SCM/88/Add. 2) 
• Micro and Small Scale Business Enterprises Ac t, No. 19 of 1998 (G/SCM/89/Add. 2) 
 
St. Kitts & Nevis 
• Fiscal Incentives Act No. 17 of 1974 (G/SCM/90/Add. 2) 
 
St. Vincent & Grenadines 
• Fiscal Incentives Act No. 5 of 1982, as amended (G/SCM/91/Add. 2) 
 
Uruguay 
• Automotive Industry Export Promotion Regime (G/SCM/92/Add. 2)  
 
118. There were no further questions or co mments on this item, and the Chairman  thanked all 
Members for their constructive co-operation in the adoption  of the above-mentioned decisions. 
119. The next item on the Committee's agenda concer ned the review of Colombia's standstill, 
transparency and other commitments undertaken in the extension decisions which were adopted last 
year pursuant to the procedures in G/SCM/39 and paragraph 10.6 of the Ministerial Decision on 
Implementation (G/SCM/93 & Add.1 a nd G/SCM/94 & Add.1).  The Chairman  recalled that in this 
connection Ecuador had submitte d written questions and that Colombia had submitted written 
answers in documents G/SCM/Q3/COL/30 and 31, r espectively.  Peru had also submitted questions 
last week which were circulated as room docum ents in Spanish only (G/SCM/Q2/COL/32).  He 
recalled that, pursuant to the terms of the existing decisions, Colombia's extension had entered into 
the final two-year transition period under Article 27.4 at the end of this year.  Thus, beyond the 
mandated review, the Committee was not called upon to  take any further action in respect of the 
programmes of Colombia.  He invited comments on Colombia's programmes, starting with the Free-
Zone Regime (G/SCM/93 & Add.1) and followed by  the Special Import-Export System for Capital 
Goods and Spare Parts (SIEX) (G/SCM/94 & Add.1). 
120. The delegate of Ecuador  noted that his delegation had subm itted a series of questions that had 
subsequently been answered con cerning the two Colombian programmes.  Colombia's replies had 
been given to the authorities in his country and he recognized that Colombia had undertaken to 
dismantle the subsidy programmes. 
121. The delegate of Peru  referred Members to their request for information from Colombia which 
could be found in document G/SCM/Q3/COL/32.  Th is document was only available in Spanish at the 
time and the delegate proceeded to make his requ est for information orally.  This document has 
subsequently been circulated in English and French. 
122. The delegate of Colombia  apologised that he was not able to give an immediate response to 
the questions from Peru, but that his delega tion would respond in writing as soon as possible. 
123. The review having been completed, the Committee took note  of the statements made. 
124. The Chairman  then turned to the required transparency  and standstill review of the extensions 
based on Article 27.4 alone that were granted in 2002.  He recalled that, pursuant to Article 27.4, the 
Committee had granted extensions for certain progr ammes of four Members on the basis of a "one 
plus two" approach, with the "one" being an exte nsion for calendar year 2003 and the "two" being the 
final two year phase-out period referred to in Artic le 27.4.  The Committee was called upon to carry G/SCM/M/52 
Page 26  
 
 out a review of standstill and transparency commit ments pursuant to the decisions taken in 2002, in 
respect of 2004.   
125. The Chairman recalled that the four Members with programmes that were extended for 2003 
on the basis of Article 27.4 alone were Barbados, El Salvador, Panama, and Thailand.  He also 
pointed out that there had been no written questions  posed in respect of many of these programmes 
during the period following the 30 June deadline for the submission of updating notifications.  Written 
questions and answers were, however, exchanged concerning certain programmes of El Salvador and Thailand.  The programmes were th en reviewed in turn as follows: 
Barbados (G/SCM/N/114/BRB  
• Export Grant and Incentive Scheme (G/SCM/95) 
• Export Rediscount Facility (G/SCM/96) 
• Export Credit Insurance Scheme (G/SCM/97) 
• Export Finance Guarantee Scheme (G/SCM/98) 
 
126. The delegate of Barbados
 expressed his appreciation to the Members of the Committee and 
the Secretariat for their support since 2002 with regard to the export programmes under both the 
Article 27.4 fast-track and the ordinary Article 27.4 process.  He noted that based on informal discussions with certain Members, the Barbados dele gation had taken the decision to briefly elaborate 
on the Government's proposed course of action to ensure that Members were clear on what its 
intention was for the four above-mentioned progr ammes.  The Barbados delegation recalled the 
decision taken at the December 2002 meeting and the concerns raised by some members, both formally and informally, as to whether or not one or more of Barabdos’ four programmes did indeed 
contain any export subsidy component.  The Barbados delegation stated at that meeting, that although 
the Barbados government did also have reservations as to whether the schemes were export subsidies, 
the Barbados government would still wish them to  enjoy the legal protection of the Article 27.4 
decision until such time as the appropriate analysis could be carried out to determine the exact nature 
of the benefits conferred under the four programmes.  In response to th is situation, the Chair of this 
group at that time stated that 'he believed any determination of the existence and nature of a subsidy 
could only be made in terms of the relevant provis ions of the ASCM.  The decisions taken were related 
only to extending periods during which the art. 3. 1 (a) prohibition did not apply to certain notified 
programmes .'  Thus he believed that the shared view of members was that the Committee's decision to 
grant extension of the transition period of the schemes was without prejudice as to whether the programmes involved export subsidies.  It was and remains the understanding of the Barbados 
government that this statement was a general principl e.  The Barbados delegation’s decision to request 
the protection of the Committee for these four progr ammes was a ‘conservative and preventative’ one.   
One of the fundamental components of the December decision was the firm intention of the Members 
concerned to take all necessary steps with the view to phasing out export subsidies under the 
programmes not later than 31 December 2005.  Barb ados had made clear it s intention to conduct 
further work to determine whether the schemes did contain export subsidy components and, if so, how 
they could be modified to comply with WTO regula tions.  In this regard, Barbados had requested and 
received technical assistance from the WTO in April 200 3 to assist in those determinations.  Further 
to a number of internal consultations, the Governme nt had concluded that three schemes administered 
by the Central Bank of Barbados, namely the Ex port Rediscount Facility, the Export Credit Insurance 
Scheme and the Export Finance Guarantee Scheme did not contain export subsidies and hence would 
no longer require the legal protection of Article 27.4 for the remaining period.  With regard to the 
scheme administered by the Barbados Investment and Development Corporation, namely the Export 
Grant and Incentive Scheme, it was determined that fu rther work would be undertaken to remove the 
export contingent component of the provisions in th at specific programme and that it was anticipated 
that these components would be completely phased out by December 2005.  G/SCM/M/52 
 Page 27 
 
 
 127. The delegate of Barbados stated that the purpose of the Export Rediscount Facility was to 
ensure that exporters had access to shipment financi ng, especially in periods of tight liquidity in the 
commercial banking system.  The facility remained  unused in 2001 and 2002, simply because the 
normal level of liquidity in the commercial banking  system was sufficient for companies to utilize 
these commercial avenues rather than resorting to  the Export Rediscount Facility. However, despite 
the programme not being used in 2001-2002 it does not  in any way negate its potential importance to 
small and micro enterprises in Barbados in the even t that international financial realities result in low 
liquidity and thus limited funds in the commercia l banking sector.  Both the Export Credit Insurance 
Scheme and the Export Finance Guarantee Sche me had been operational since 1978 and were 
supported by a specifically created fund to which pr emiums were credited and claims charged.  The 
former programme was designed to provide insu rance cover for exports of Barbadian goods and 
services, particularly for small enterprises who were  unfamiliar with the export market, and the latter 
scheme provided guarantee cover for co mmercial banks in respect of any pre- or post-shipment loans 
extended to exporters who did not have the necessary collateral.  These loans were neither direct or 
indirect subsidies.  He stressed that these schem es played a vital role assisting these enterprises and 
concluded that the Barbados delega tion was confident that it had remained completely transparent and 
had acted in good faith on this procedure.  Th e recommended technical assistance had been carried 
out and the findings indicated that the three sch emes administered by the Central Bank were not 
export subsidies.  He was therefore of the view that  Barbados would no longer need to avail itself of a 
transition period under Article 27.4 of the SCM Agreement .  With regard to the scheme administered 
by the Barbados Investment and Development Corp oration, it was found that the scheme did contain 
an export subsidy component and the authorities were  working to phase out this particular component 
by December 2005. 
128. The delegate of the United States  thanked Barbados for the in formation it had provided and 
stated that, in their view, it remained an open legal question as to whether or not those programmes 
constituted to be export subsidies. 
129. The Chairman  reminded Members that it was not for the Committee to take any action or 
decision on this issue.  The Committee took note  of the statements made. 
130. The Chairman then turned to the following notification: 
El Salvador (G/SCM/N/114/SLV)13 
• Export Reactivation Law (G/SCM/99) 
 131. The delegate of the European Communities
 recalled that there had been a firm intention to 
phase out this programme by the end of 2005 and th at he looked forward to receiving more detailed 
information from El Salvador in next year's review. 
132. The delegate of El Salvador  thanked the EC for their interest and took note of the comments 
made. 
133. The next notifications on the Committee's agenda were as follows: 
Panama (G/SCM/N/114/PAN) 
• Tax Credit Certificate (G/SCM/100)  
Thailand (G/SCM/N/114/THA)14 
• Industrial Estate Authority of Thailand (G/SCM/101)  
                                                      
13 Written questions and answers receive d in documents G/SCM/Q3/SLV/8-9. 
14Written questions and answers received in documents G/SCM/Q3/THA/24 & 25. G/SCM/M/52 
Page 28  
 
 • Board of Investment Programme (G/SCM/102)  
134. The Chairman
 thanked all delegations for their comment s and clarifications.  Before turning 
to the next item on the agenda, he noted that the Committee's understanding in respect of these 
programmes was that with the expiry of the one-y ear extension on 31 December 2003, the final two-
year phase-out period provided for under Article  27.4 had begun on 1 Ja nuary 2004 and would 
terminate on 31 December 2005. 
135. The Committee took note  of all the statements made and c oncluded its review of the relevant 
notifications. 
3. Procedure for 2005 Committee review of tran sparency and standstill obligations 
relating to Article 27.4 process 
136. The Chairman  proposed that, as indicated in the draft annotated agenda, the Committee 
follow the same deadlines and pro cedures that had been used in the Article 27.4 process in 2003 and 
2004.  Thus, the required notifications in respect  of all programmes covered by the Article 27.4 
extensions, including those programmes in the fina l two-year phase-out period, would be submitted 
no later than 30 June 2005.  An y questions pertaining to such notifications would be submitted by 
1 September 2005, and the responses would be s ubmitted by 6 October 2005.  The review of 
transparency and standstill would therefore ta ke place at the Committee's autumn 2005 regular 
meeting.   
137. The Committee took note  of the Chairman's statement and agreed to proceed accordingly. 
L. OTHER  BUSINESS 
138. There were no issues raised under Other Business. 
M. DATE  OF NEXT  REGULAR  MEETING 
139. The Chairman informed Members that the orig inally proposed dates for the next regular 
meeting coincided with the 10-year celebrations of the WTO, and that the dates for the next meeting 
of the Committee had been rescheduled to 14 and 15 April 2005. 
140. The Committee took note  of the Chairman's statement and agreed to proceed accordingly. 
N. ANNUAL  REPORT  TO THE  COUNCIL  FOR  TRADE  IN GOODS  (ARTICLE 32.7) 
141. The Chairman  informed Members that pursuant to Article 32.7 of the Agreement, the 
Committee was required to review annually the im plementation and operation of the Agreement, 
taking into account the objectives thereof, and to in form annually the Council for Trade in Goods of 
developments occurring during the period covered by the review.  A draft text of the annual report 
and statistical annexes had been prepared by the S ecretariat and had been made available to Members 
earlier in the week.   
142. The Committee adopted  its annual report and this was sub sequently circulated to Members in 
document G/L/711. 
The meeting was adjourned . 
 
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