RESTRICTED
WORLD TRADE G/SCM/Q2/AUS/11
6August 1997
ORGANIZATION(97-3335)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Questions from theEUROPEAN COMMUNITY
Regarding theNewandFullNotification ofAUSTRALIA1
Thefollowing communication, dated 4August 1997, hasbeenreceived from thePermanent
Delegation oftheEuropean Community.
_______________
Indocument G/SCM/Q2/AUS/10 of23April 1997, Australia replied toquestions posed by
theEuropean Community onitssubsidy notification under Article 25oftheSCM Agreement.
The Community notes thatthese questions were submitted bytheCommunity on
19September 1996, within thedeadline fororalanswers tobegiven during thereview meeting of
theCommittee starting 28October 1996. Attheendofthismeeting, theChairman fixed thedeadline
forwritten answers as10January 1997. Australia 'swritten answers werenotsubmitted totheWTO
until15April 1997.
ThedelayinprovidingthewrittenanswersisamatterofregrettotheCommunity.Itundermines
oneofthemainpurposes ofnotification; toallow other Members toevaluate thenature andoperation
ofsubsidy programmes.
TheCommunity doesnotfindtheanswers tothequestions tobesatisfactory overall, butdraws
Australia 'sattention inparticular tothefollowing programmes:
(a) Passenger Motor Vehicle Export Facilitation Scheme (PMVEFS) andTextile Clothing and
Footwear Import Credits Scheme (TCFICS)
Australia claims thatneither ofthese schemes constitutes asubsidy. TheCommunity cannot
accept thisconclusion andwould askAustralia toanswer thefollowing questions:
(1) Dotheschemes involve afinancial contribution fromtheGovernment? (Forexample,
Government Revenue foregone ornotcollected -Article 1.1(a)(ii)).
(2) Isabenefit thereby conferred (Article 1.1(b))? Ifnot,whynot?
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(3) Isthesubsidycontingentuponexportperformance(Article3.1(a))andthereforespecific
(Article 2.3)?
(4) Inviewoftheabove, doesthesubsidy notfallintotheprohibited category (Article 3)?
Subject toAustralia 'sanswers totheabove questions, itseems possible thatboththeschemes
involve theprovision ofexport subsidies, which aretherefore prohibited under Article 3oftheSCM
Agreement. Since bothschemes involve exemptions from import dutyconditional upon exports, it
isdifficult toseehowanyother conclusion canbereached.
Could Australia therefore givefulldetails ofitsplans tophase outthesubsidies, indicating
thelevelofsubsidy tobeprovided eachyearuntilphase out?
DidAustralia consider notifying either scheme under Article 28oftheAgreement?
(b) TheFactor (f)Scheme
Australia claims thatthisscheme doesnotconstitute asubsidy. TheCommunity cannot accept
thisconclusion andwould askAustralia toanswer thefollowing questions:
(1) Doesthescheme involve afinancial contribution fromtheGovernment? (Forexample,
Article 1.1(a)(iii) oftheAgreement.)
(2) Isabenefit thereby conferred (Article 1.1(b))? Arethegoods purchased formore
thanadequate remuneration (Article 14(d))?
(3) Isthesubsidy specific (Article 2.1(a))?
(4) Isacommitment toincrease domestic value-added acondition ofreceiving thesubsidy?
Ifso,isthesubsidy prohibited under Article 3.1(b)?
Subject toAustralia 'sanswers totheabove questions onthisprogramme, itseems possible
thattheFactor (f)scheme constitutes asubsidy, andthat,totheextent thatitiscontingent upon
increasing domestic value-added, itistobeprohibited under Article 3.1(b). CanAustralia provide
details ofplanstophase outthissubsidy ortobring itintocompliance withtheAgreement byeliminating
thedomestic content requirement?
(c) Sub-federal programmes
WhenwillAustraliabeinapositiontonotifyallspecificsubsidiesgrantedbystategovernments?
TheAustralianIndustryCommissionindicatedthatconsiderableamountsofinvestmentincentives
andothersubsidies aregranted bystates. Article 25oftheSCM Agreement provides forthenotification
ofthesesubsidies; notification wasdueon30June1995. Until nowtheCommunity hasbeendeprived
oftheopportunity toreview sub-federal subsidies.