TWN Info Service on WTO and Trade Issues (Mar11/15)
28 March 2011
Third World Network

Subsidies, trade remedies discussed in WTO Rules group
Published in SUNS #7115 dated 24 March 2011

Geneva, 23 Mar (Kanaga Raja) -- The WTO Negotiating Group on Rules this week took up two proposals on the issue of anti-dumping and subsidies - one by the African, Caribbean and Pacific (ACP) Group on setting up a trade remedies facility, and the other by several developing countries on clarifying the transition period for the phase-out of export subsidies.

Both the proposals were discussed at an informal meeting of the Rules Group on 21 March.

The proposal by the ACP Group (TN/RL/GEN/175) is in the form of a Draft Decision regarding trade remedy measures.

The draft decision on the establishment of a trade remedies facility in the WTO notes that a number of developing countries, which are at higher stages of development and are pursuing open and liberal trade policies in order to promote export-oriented growth, have since the creation of the WTO established legal and institutional frameworks for applying such measures and have now become their important users.

It further notes, however, that the remaining developing countries, most of which are either least developed countries (LDCs), small and vulnerable economies (SVEs), or are countries at lower stages of development, are in the process of establishing or considering the establishment of such legal and institutional frameworks, and are apprehensive that the flexibility which is available to them at present to raise tariffs may be eliminated or greatly reduced in the post-Doha Round period, as a result of the commitments to bind them which they would assume in the Round.

The ACP Group recognizes amongst others that the rules providing for the applications of trade-remedy measures are technically complex and financially burdensome thereby depriving capacity-constrained developing countries, mainly LDCs and SVEs, the benefit of applying such measures and this perpetuates some of the existing imbalances in the multilateral trading system which the DDA (Doha Development Agenda) is mandated to redress.

The Draft Decision highlights several objectives of the proposed trade remedies facility.

According to the draft decision, the trade remedies facility is established, amongst others, for: "Ensuring greater coherence and coordination in the assistance that is being provided to developing countries in the area of trade remedy measures by WTO, other international organizations, intergovernmental and regional organizations, and by developed and developing countries on bilateral basis."

The facility is also to be established for providing technical assistance for developing technical capacities of the officials working in the investigating authorities in developing countries which have established or are planning to establish such institutions for the application of the rules of the Agreements on Trade Remedies by, amongst others: establishing in the WTO Secretariat a dedicated facility providing, specific needs-based and in-depth training to officials working in investigating authorities, particularly in developing countries which have newly established such investigating authorities in the application of the rules by practitioners in the area of trade remedy measures preferably from developing countries and experts from relevant international institutions on a long term basis.

In addition, supplementing such training by on-the-job training at practical level, in the investigating authorities of countries which are users of trade remedy measures and are willing to provide such assistance by entering into cooperation arrangements with them; and assisting regional economic bodies and other regional organizations in providing such assistance to their member countries, says the proposal.

The proposed trade remedies facility would also establish a focal point in the WTO secretariat which will promptly respond to requests for advice from officials working in investigating authorities and other officials associated with the application of the trade remedy measure. It would also establish an information database on trade remedy measures in the WTO Secretariat's Institute for Training and Technical Cooperation.

According to the ACP Group's proposal, the facility would be managed by the WTO Secretariat, in cooperation with relevant international and intergovernmental organizations; international financial institutions, the World Bank, IMF and donor agencies providing, or that could provide financial and technical resources; representatives of developed and developing countries which are providing technical and financial assistance; and representatives of developing countries particularly LDCs, SVEs and other countries at lower stage of development which need such assistance.

The Committee on Trade and Development shall provide oversight for monitoring the work of the Facility, as well as coordinate with the Committee on Anti-dumping Practices, Committee on Subsidies and Countervailing Measures, Committee on Safeguard Measures and the Committee on Agriculture with regard to the Special Safeguard Measures in agricultural products, says the proposal.

According to trade officials, in presenting the ACP Group proposal, Ghana said that the WTO agreements on anti-dumping and subsidies have become too complex for many developing countries, especially the LDCs and the small and vulnerable economies (SVEs) to implement.

Thus, Ghana added, only a few WTO members can take advantage of trade remedies, while in developing countries without an institutional framework, local industries are wiped out by unfair competition from abroad.

According to trade officials, Ghana further said that developing countries could no longer raise tariffs to counter unfair imports, and thus needed assistance in using anti-dumping and countervailing measures to protect their industries.

The ACP Group proposal was generally supported by Ecuador, India, China, Egypt and El Salvador, said trade officials.

The US sounded a note of caution at making technical assistance mandatory. It noted that some developing countries have attained capability in the trade remedies area, said trade officials.

Concern was also expressed by Korea that this facility could lead to the evangelization of protectionism. It pointed to the rise in anti-dumping actions between developing countries, trade officials added.

Brazil and Costa Rica voiced concern over the gradation among developing countries, said trade officials.

Several members, including the European Union, Japan, Australia, Canada and Mexico said that they were open to further discussions of the proposal, noted trade officials.

The second proposal is from Bolivia, Egypt, Honduras, India, Nicaragua and Sri Lanka on amending Articles 27.2 and 27.4 of the Agreement on Subsidies and Countervailing Measures (ASCM) in relation to developing countries covered under Annex VII.

(Under Annex VII, the least-developed countries that are members of the WTO and developing countries with GNP per capita of less than US$1,000 per annum are exempted from the prohibition on export subsidies.)

According to the proposal (TN/RL/GEN/177/Rev. 2), in accordance with the provision of Article 27.2(a) of the ASCM, the prohibition of paragraph 1(a) of Article 3 does not apply to developing country Members referred to in Annex VII of the ASCM.

The proposal notes that Annex VII contains the list of developing country Members that are not subject to the provisions of Article 3.1(a) under two parts, i. e. (a) Least-developed countries designated as such by the UN; and (b) developing countries viz. Bolivia, Cameroon, Congo, Cote d'Ivoire, Dominican Republic, Egypt, Ghana, Guatemala, Guyana, Honduras, India, Indonesia, Kenya, Morocco, Nicaragua, Nigeria, Pakistan, Philippines, Senegal, Sri Lanka and Zimbabwe.

(Article 3.1 of the ASCM states that except as provided in the Agreement on Agriculture, the following subsidies, within the meaning of Article 1, shall be prohibited: (a) subsidies contingent, in law or in fact, whether solely or as one of several other conditions, upon export performance, including those illustrated in Annex I; (b) subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods.)

The proposal from the six developing countries says that subparagraph (b) of Annex VII states that each of the above developing countries, which are the Members of the WTO, shall be subject to the provisions which are applicable to other developing Members according to paragraph 2(b) of Article 27 when GNP per capita has reached US$1,000 per annum.

Article 27.2(b) of the ASCM states that the prohibition of Article 3.1(a) shall not apply to other developing country Members for a period of 8 years from the date of entry into force of the WTO Agreement, subject to compliance with the provisions in Article 27.4.

According to the proposal, the text of Article 27.2(b) lacks clarity as regards its application to those developing countries who graduate out of Annex VII when their GNP per capita has reached US$1,000 per annum. The language and conditions prescribed under paragraph 2(b) is in the context of a particular point of time i. e., the entry into force of the WTO Agreement.

"It is obvious that the said condition cannot be applied to those developing country Members who join paragraph 2(b) at a subsequent point of time after graduating out of Annex VII."

Further as per Article 27.4, says the proposal, any developing country Member referred to in paragraph 2(b) shall phase out its export subsidies within the 8-year period, preferably in a progressive manner.

Article 27.4 also envisages, inter-alia, that if a developing country Member deems it necessary to apply such subsidies beyond the 8-year period, it shall not later than one year before the expiry of this period enter into consultation with the Committee (on Subsidies and Countervailing Measures), which will determine whether an extension of this period is justified, after examining all the relevant economic, financial and development needs of the developing country Member in question.

The provisions of Article 27.2 and 27.4 need to be read harmoniously in respect of developing countries graduating out of Annex VII, says the proposal.

Therefore, it adds, it needs to be clarified that (i) the developing countries graduating out of Annex VII when their GNP per capita has reached US$1,000 per annum, shall have a period of 8 years from the year of graduating out of Annex VII to phase out their export subsidies covered under Article 3.1(a), and (ii) such developing country Members will also be subject to similar conditions as in paragraph 4 of Article 27.

The six developing countries propose two textual amendments through footnotes to Article 27.2(b) and Article 27.4.

On the footnote to Article 27.2(b), the proposal states: Footnote (x): "In the case of developing country Members included in Annex VII, the 8-year period shall commence from the year in which they graduate out of Annex VII."

On the footnote to Article 27.4, whereby "Any developing country Member referred to in paragraph 2(b) (y) shall phase out its export subsidies within the eight-year period, preferably in a progressive manner....", the proposal states: Footnote (y): "This will also include developing country Members who may graduate out of Annex VII."

According to trade officials, India, on behalf of Bolivia, Egypt, Honduras, Nicaragua and Sri Lanka, in presenting the proposal, stressed that the proposal was not renegotiating the current provisions, but only clarifying them.

The proposal was supported by Egypt, Honduras, Bolivia, Nicaragua, Nigeria, Sri Lanka, Ghana, China, the Dominican Republic and Brazil, said trade officials.

According to trade officials, the US said that some of the Annex VII countries account for sizeable shares of world trade. It added that the proposal, in addition to a previous proposal, would mean that they would not be obliged to remove export subsidies for decades in the future.

The US further said that it could not support a proposal that would change the rules of the game, said trade officials, adding that the US view was also supported by the EU and Turkey.

An informal plenary session of the Rules Group will be held on 28 March, where the Chair, Ambassador Dennis Francis of Trinidad and Tobago, is expected to report on the plurilateral discussions taking place this week.

According to trade officials, at this meeting, members will also be given the opportunity to respond to the reports of the Contact Groups and the "Friends of the Chair". +