by Chakravarthi Raghavan

Geneva, 1 Nov 99 -- Some provisions of the Subsidies Agreement that have benefited the developed countries and used for their so-called 'regional development programmes', will lapse at the end of this year, unless a formal positive decision is taken after Seattle by the Committee on Subsidies and Countervailing measures.

And the possibility of such an extension after Seattle may in turn depend on one of the decisions on 'implementation' issues sought by developing countries in putting into a 'green box' or a 'development box' some subsidies provided by developing countries linked to export performance or local content.

India and other members of the 'Like-Minded Group' (LMG) of developing countries have proposed in respect of implementation problems a set of decisions to be taken at Seattle by the WTO Ministerial meeting and another set of issues to be addressed and resolved in the first year of any negotiations that may be launched at Seattle.

One of the proposals to redress the imbalances of the Uruguay Round agreements, and on which a Ministerial decision is sought at Seattle, is to expand the list of 'non-actionable subsidies' to include subsidies provided by developing countries that are contingent on export performance and those contingent on use of domestic goods over imported goods.

These types of subsidies, very widely used in the past by the present developed countries, are viewed by developing countries and development economists as a development tool to prod foreign investors to establish backward linkages into an economy by using local content, as well as to provide incentives for exports.

Such subsidies now fall into the category of 'prohibited subsidies'.

In the current preparatory phase of agreeing on a draft declaration for adoption by Ministers, the proposal for a decision by Ministers on the subsidies agreement has been steadfastly opposed by the US and other industrialized countries on the ground that these would upset the balance achieved in the Marrakech agreement.

And in turn, the developing countries have opposed extending the life of some of the provisions of the subsidies agreement that have been of benefit only to the developed countries.

Under Article 31 of the subsidies agreement, three provisions of the agreement -- Art. 6.1 -  serious prejudice or 'deep amber' provisions, Art. 8 -  identification of non-actionable subsidies or so-called 'green light' provisions and Art. 9 - consultations and authorized remedies, will end on 31 December 1999, unless extended.

At a meeting of the subsidies committee Monday, Canada, the European Community, Korea, Czech Republic, Turkey and Hong Kong China supported an extension of the life of these provisions.

However, India, Brazil, Thailand, the Philippines and New Zealand opposed the extension.

The EC argued that these provisions of the subsidies agreement were part of an overall balance of the subsidies agreement and the UR agreements and hence should be extended.

But India argued that these provisions had been of benefit only to the developed countries, and was one of the elements of the imbalances of the WTO's Uruguay Round Agreements.

The United States said that it could support an extension if there was a consensus which was absent.

The Committee however agreed to hold a special meeting (after Seattle) before end of the year if the situation warrants.

Art. 31 of the subsidies agreement, titled 'provisional application', provides that the provisions of Art. 6.1, Article 8 and Article 9 shall apply for a period of five years beginning from entry into force of the WTO. Six months before this period, the subsidies agreement is to review the provisions and determine whether these provisions or those in a modified form should be extended for a further period.

Under Article 5, subsidies that seriously prejudice the interests of another member is actionable. And serious prejudice is to be deemed to exist, under Article 6.1, when certain specified subsidies are provided.

And Article 8 lists the subsidies that are 'non-actionable', the so-called 'green-box' subsidies.

Several Third World trade experts and critics have noted that all the subsidy practices of the developed countries have been put into this box, while the subsidies that developing countries use to promote industrialization and exports have been banned. (SUNS4543)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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