RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/M/32
25 April 2002
(02-2369)
Committee on Subsidies
and Countervailing Measures
MINUTES OF THE SPECIAL MEETING
HELD ON 28 SEPTEMBER 2001
Chairman:  Mr. Remo Moretta (Australia)
1. The Committee on Subsidies and Countervailing Measures held a special meeting
on 28 September 2001.
2. The purpose of the meeting, as set forth in WTO/AIR/1629, was to continue discussion of the
implementation-related issues referred to the Committee in the 15 December 2000 decision of theGeneral Council and 31 July 2001 request from the Chairman of the General Council.
3. The Chairman indicated that he hoped very much that the Committee could make substantive
progress at the meeting in its discussion of all of the issues before it.  He stated that, because this was
the Committee's last opportunity to meet before the 30 September 2001 deadline for his report to the
General Council on the Committee's work on the implementation-related issues, he envisioned themeeting as an opportunity for Members to make any statements for the record regarding their position
in respect of any, or all, of the issues under discussion.
4. The Chairman noted that a document had been received by the Secretariat the previous day
from the Dominican Republic, on behalf of Bolivia, Ecuador, El Salvador, Guatemala, and Honduras.
Copies were available in the room.  The Chairman was not sure in which specific context this
document had been submitted, so the delegations involved were requested to introduce the document
at whatever point in their interventions they believed it to be the most appropriate.
5. The Chairman recalled recent activity in th e Committee on the implementation-related issues,
in particular, the informal meeting of the Committee of 18 September 2001.  He recalled that the
Committee had discussed proposals under three main topics: firstly, countervailing duty investigation
procedures; secondly, developing country Members with a small share of world trade; and, thirdly,
export competitiveness.  The Chairman indicated that he had faxed out to the Committee a non-papersummarizing the main points and questions raised at that meeting.  Shortly after the meeting, he was
requested by the Chairman of the General Council to  consult intensively with Members to see if the
Committee could reach agreement on any recommendations on the implementation-related issues
before it.  The Chairman of the General Council was hoping to be able to include draft decisions on at
least some of the issues before the Committee in  the implementation package that he was in the
process of drafting.  It was in response to that request that the Chairman of the Committee had
organised an extensive round of consultations with a large number of delegations the previous
Friday, 21 September 2001.  During those consultations, the Committee Chairman emphasized to
Members that he was focusing on only two issues: the issue of developing countries with a small
share of trade and the determination of export competitiveness.  The Committee Chairman chosethose issues for that round of consultations based on the Committee's discussions
through 18 September 2001, because he was of the view that these were the two that were ripest for
possible agreement and thus conceivably might have yielded some concrete outcomes for theG/SCM/M/32
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implementation package.  He had emphasized at the consultations, however, and he emphasized
again, that his focusing on only two issues during that particular round of consultations was without
prejudice to other proposals under consideration by the Committee.
Developing country Members with a small share of world trade
6. Turning to the proposal on developing country Members with a small share of world trade, in
order to provide a structure and a concrete basis for the consultations, the Chairman had prepared a
brief, informal document containing a list of possible elements that he had put forward for discussion
and reactions.  Copies of this document were also available in the room.  In the document, he had
suggested a number of ideas that might form a possible basis for moving forward on this issue.  These
ideas were his attempt to bring together elements of both Jamaica's and El Salvador's proposals as
well as to take into account certain ideas and suggestions put forward by some Members during the
18 September 2001 informal meeting.
7. In the first place, at that meeting, a number of Members had made it clear that they were
willing to work constructively to try to find a solution for developing country Members with a small
share of world trade within the framework of the mechanism set out in Article 27.4 for extension of
the transition period for the elimination of export subsidies.  While they indicated a reluctance to
consider indefinite extensions or outright suspension of the rules of the Agreement on Subsidies andCountervailing Measures ("SCM Agreement"), they  pointed to the already existing mechanism in
Article 27.4 as having the potential to address the main concerns of the proponents on this issue.  In
that context, they mentioned transparency and standstill mechanisms as well as time-limits, all of
which, in their view, figure in Article 27.4 and would need to be elaborated and made operational.
That said, these Members were willing to consider  the development of a set of objective criteria,
among them the country share of world trade, by which eligible countries could be identified and
which could form the substantive basis of the Committee's decision to grant an extension for those
countries of the transition period for the elimination of export subsidies.
8. Certain additional elements had been mentioned, among them the idea set out in Jamaica's
paper that a product would graduate from the extended transition period if the country in questionreached 3.25 per cent share of world trade in that product.
9. In his consultations, and again at the meeting, the Chairman emphasised the informal nature
of the document under discussion.  That is, he wanted to make absolutely clear to all that this
document was intended simply as a possible starting-point for further discussion, and it did not
constitute a Chairman's proposal as such.  While a number of Members indicated that any final
package based on an approach such as the one the Chairman had outlined would need to have other
elements, he had not pursued those additional elements in detail.  Rather, during the consultations, hehad sought more general reactions from Members as to whether they could continue their discussion
of the issue of developing countries with a small share of world trade on the basis of the general
approach outlined, with the details to be negotiated among Members.  That said, and no matter what
specific elements might eventually be included in a package along those lines, the Chairman and all
participating Members had emphasised that any such framework would be without prejudice toArticle 27.4 itself.
10. In general, the Chairman was pleased with both the tone and the outcome of the consultations.
All Members had exhibited a great deal of understanding of the high-pressure situation that everybody
was in, and all had participated very constructively and with open minds.  That said, the specific ideas
the Chairman had put forward for Members' consideration were detailed and complex, and noMember had been able to give the Chairman a comprehensive and final reaction during the
consultations, but they had indicated that considerably more work and time would need to be put in
before any final package could be developed for action by Members.  Indeed, even on the moreG/SCM/M/32
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general question of whether the approach outlined might be a basis for further discussion, Members
were unable to provide specific views at the consultations.
11. Given that, the Chairman had requested Members to inform him as soon as possible after the
consultations of their views on this issue.  The Chairman had now heard from a considerable number
of delegations, and was pleased to report that virtually all had indicated a willingness to continue theirwork on this issue on the basis of the approach that the Chairman had outlined, on the understanding,
of course, that this would be without prejudice to their final positions and to any other proposals or
issues pending before this Committee or any other WTO body.
12. There remained, however, a number of delegations that, as of the previous afternoon, had not
informed the Chairman of their final views on whether they could agree to work on this basis.  The
Chairman therefore wished to open the floor to ask whether any Member would object to continuing
to work on the issue of developing country Members with a small share of world trade on the basis ofthe general approach that he had outlined.  The Chairman opened the floor for comments.
13. The delegate of Ecuador wished to state that this proposal had been sent to his capital for due
scrutiny, and he had received very precise instructions thereon.  He wished to remind the Committee
that the proposal submitted by the delegation of El Salvador, circulated as document G/SCM/W/461,
on the basis of Article IX, paragraph 2, of the WTO Agreement, had received Ecuador's support at thetime of circulation.  The proposal submitted by Jamaica, and circulated as G/SCM/W/463, referred to
developing countries with small economies as those which had a less than 5 per cent share of world
trade and whose share of world trade in a specific product was lower than 0.05 per cent.  This
proposal did not take into account Ecuador's interests and concerns.  Statistics submitted to the
Committee or provided by the Committee indicated that Ecuador, which had a world trade share of0.08 per cent, would be excluded from this special treatment which would be given to small
economies, which indeed Ecuador was.  Consequently, Ecuador could not give its support to the
amendments or proposal by Jamaica, as it ha d to the original proposal by El Salvador.
14. The delegate of Ecuador was of the view that the Chairman's approach reflected to a very
large extent the points and factors put forward in the Jamaican proposal, and added certain otherconcerns which other delegations had voiced during consultations.  Nevertheless, the establishment of
an index which confined or limited the number of countries which would be entitled to benefit under
the proposal was not acceptable to Ecuador, because such an index would be a discriminatory
measure, and fixing a percentage which excluded Ecuador from this benefit would also be
unacceptable.  Ecuador could not support any of the proposals which had been put before the
Committee which did not cover the interests of Ecuador.  The delegate of Ecuador would be grateful
if the Committee informed the General Council that the Committee needed more time to deal with thismatter which needed further treatment, because there was no consensus.
15. The Chairman indicated that the Committee was well aware of El Salvador's proposal and
Ecuador's support for that proposal. He noted that it had become clear in the consultations that the
0.05 per cent threshold would exclude certain Members, and thus the issue of the threshold remained
open, and decisions on where that threshold was going to be set and which Members would benefitwere still to be discussed and agreed upon.
16. Secondly, the Chairman's approach sought to include possible elements which could take the
Jamaican proposal as a basis and expand on it so that other countries might benefit from it.  Indeed, at
that moment, without having reached agreement on the criteria for not only the threshold but also the
criteria for eligibility, there was no suggestion that Ecuador would be excluded from being abeneficiary of any eventual proposal. Given the draft implementation decision that had been
circulated by the General Council, it was fairly clear, in the view of the Chairman, that the General
Council Chairman had recognized that the Committee did indeed need more time to discuss theseG/SCM/M/32
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issues.  What the Committee Chairman was seeking from the Committee was an agreement that it
would base further discussion on the elements he had put forward, without prejudice to the rights and
obligations or the positions of any Member. It appeared that the Committee wanted him to inform the
General Council that the Committee needed more tim e, as it was not going to be able to reach a
definitive conclusion on this or any of the implementation-related issues, at the present meeting.  Itwas on this basis that he was asking for an agreement by Members to proceed along these lines and
hopefully be able to move substantively forward.
17. With that in mind, the Chairman asked Ecuador if that was acceptable, given that Ecuador's
position was not compromised by this approach.  The Chairman emphasised that no decision had been
taken to exclude any Member from being able to benefit from the proposal if it was a small economy
with a small share of world trade, the threshold for which was yet to be determined.
18. The delegate of Ecuador expressed the view that some of the points that the Chairman had
raised were the result of a problem of interpretation.  Ecuador had noted 0.05 per cent as the
threshold; this threshold of 0.05 per cent was precisely the figure that was of concern and which
Ecuador could not accept, if it were to be made part of the proposal.  The Committee could not
establish 0.05 or 0.08 per cent as the threshold on an arbitrary basis.  Ecuador considered that the
Committee must first establish clearly that there was political will on the part of the Members toresolve the issue and to determine the most equitable threshold that would meet the needs of those
countries requesting the use of such a tool for the development of certain sectors of their economies.
The Chairman had mentioned that these were possible elements subject to later discussion and indeed
enrichment.  Ecuador believed that that was appropriate, particularly the possibility that these
elements be enriched by new ideas and new input, and Ecuador reserved the right to submit newelements within this exercise which the Chairman had indicated would take place in the future.
Ecuador would be in agreement with the Chairman on the understanding that this was an exercise to
which Members could contribute in due course in order to protect their interests and the possible
benefits they might enjoy in the future through the SCM Agreement.
19. The Chairman wished to make clear that, while the 0.05 per cent threshold was a formal part
of Jamaica's proposal, in the consultations in which Ecuador had participated along with other
countries, it had become clear that the Committee would need to consult, discuss, and negotiate an
appropriate threshold.  That was still open.  The Chairman was encouraged to hear that Ecuador
would be submitting new elements.  In fact, all Members were encouraged to submit any ideas or any
new elements that they felt were necessary in order to move this process forward. The Committee had
not yet determined the threshold, and the Committee had not yet determined the criteria. The
Chairman hoped Members would regard his possible elements not as an exhaustive list of theelements towards a possible solution, but rather as something on which the Committee could base its
discussions and elaborate.  It was on that basis that he was asking for Members' agreement to use it as
the basis on which to move forward, and to build in, where appropriate, any of Ecuador's suggestions
or new elements, and those of other Members as  well.  The Chairman enquired whether the
Committee could agree to proceed along these lines, without prejudice to the positions of Members.
20. The Committee so agreed.
21. The Chairman indicated that, as the Committee was aware, the draft implementation package
put together by the Chairman of the General Council contained no draft text on this issue, but rather
implied that such a draft might be developed on the basis of the report that the Committee Chairman
would make that weekend and further work to be conducted between then and the end of October, in
time for a decision at Doha.  Given the views that the Chairman had heard thus far on this issue, his
intention was to suggest in his report to the Gene ral Council that the Committee should continue its
work on this issue in the time remaining before D oha, as had been suggested.  The Chairman opened
the floor for comments.G/SCM/M/32
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22. The delegate of Costa Rica took note of the Chairman's statement that the Chairman's
approach might still be enriched by other elements.  Costa Rica was continuing internal consultations
as to the ideas that the Chairman had circulated, but had no objection to their being discussed.  In
conclusion, Costa Rica was in favour of the text of Article 27.4 on subsidies as it stood, and in
particular, an extension to be applicable during a given period of time, clearly defined;  theChairman's approach included this fundamental element.  No extension of the deadline for the
elimination of export subsidies could be indefinite.  Members must respect the spirit of the Agreement
as to the definition of that deadline, and in ensuring that that period is a short one.
23. The delegate of Costa Rica wished to add that whatever solution was achieved on this issue
could only be acceptable to Costa Rica if it did not in any way distort its policy of attracting
investment, as a result of new preferential treatment which might be created in respect of export
subsidies to the benefit of other countries.  Finally, the delegate of Costa Rica explained, in relation tothe document circulated by the Dominican Republic on behalf of other delegations from the Fifth
Latin American Conference on Free Zones, that the document reflected a private sector view and not
necessarily the opinions of the Government of Costa Rica.
24. The Chairman indicated that he was encouraged to hear that Costa Rica was continuing its
internal domestic consultations on this matter and was prepared to continue discussions.  Some of the
issues raised by Costa Rica were of a more substantive nature, and the Chairman encouraged
Costa Rica to raise them in the context of the Committee's discussions of the elements of this issue.
25. The delegate of Mexico expressed Mexico's wish to participate constructively in this
undertaking so that the Committee could find a satisfactory solution.  Mexico was, however,
concerned that increasing the flexibility of the su bsidy regime for the benefit of some developing
countries might be damaging to all developing countries, who would be competing in an undesirable
manner, and the final beneficiaries would be the consumers of the developed world.  Developing
countries would use scarce funds for subsidies rather than for more useful social undertakings.
26. Mexico indicated that it had taken specific and difficult steps in order to align its policies with
the SCM Agreement, within the deadlines established.  It had taken considerable effort on Mexico'spart and was costly for its industry.  It was, therefor e, very difficult for Mexico to justify the extension
of transition periods at the national level, particularly if there was no definition of such periods and
without being able to evaluate the likely impact on Mexico from the point of view of attracting
investment, competition in other markets, and i ndeed competition in the Mexican market.  Mexico
was willing to work with the other delegations to seek a compromise on this matter which would be
acceptable to all parties.  Mexico would welcome a discussion of a transition period which would be
clearly defined for those countries participating in the scheme, a clear definition of the programmeswhich would be covered by the scheme, and the necessary safeguards to cover the interests and
concerns of industries in developing countries which could be affected by these measures.
27. The Chairman commented that other Members had expressed similar views during the
consultation process, that is, that without a precise definition, or without precision to these elements,
Members found it difficult to assess the impact of such an extension and therefore to take a decision.Many Members were in a similar position, and that was the basis upon which the Chairman wished to
proceed, that is, to define more clearly the parameters of how the extension would operate so that
Members could undertake a very clear assessment of how it would impact on them and to what extent
they might be able to agree on a possible compromise solution.
28. The delegate of El Salvador indicated that, as a proponent in this area, El Salvador was
willing to work constructively, and accepted the elements the Chairman proposed as the basis for
discussion without prejudice to further discussion of its own proposal.  El Salvador reserved the right
to present its proposal at a higher level, as it considered it a political, not technical, proposal.G/SCM/M/32
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29. The delegate of the Dominican Republic recalled that, three years before, the Dominican
Republic had made a proposal to amend Annex VII(b) of the SCM Agreement, by raising the
threshold contained therein, because it had been set at  an arbitrarily low level, in a situation lacking
transparency, during the Uruguay Round.  The delegate also indicated that the Dominican Republic
had circulated a joint statement drafted and adopted by the Fifth Latin American Conference on FreeZones (G/SCM/W/467) held in Panama on 31 August 2001, where the private sector of the Southern
Hemisphere had set forth what it believed were the principal elements of a Ministerial Decision to be
adopted in Doha on this issue, particularly noting a series of very positive elements which had
resulted from the establishment of development programmes in the Dominican Republic.
Consequently, the private sector urged the WTO, through its Members, to protect the capacity of
those Members to continue along these lines.
30. Further, the document was signed by a number of Members which showed that all of them
agreed with this position.  The leaders of i ndustry who were members of the Free Trade Zone
Committee would be part of the delegations in Doha  and would be watching very closely what their
governments did, particularly on this proposal.  Consequently, if the Committee did not make
progress along the lines indicated – and these were very important economic sectors which generated
a significant proportion of the earnings of the Dominican Republic – and if the rest of the WTO didnot welcome a concrete petition from these leaders, it would mean that their governments would be in
a difficult position at the Ministerial Conference in Doha.  The delegate of the Dominican Republic
urged the Committee to take note of this, because, whatever decision was to be taken, a consensus
was needed – among large countries and small ones, among those operating free zones and those not.
31. The Chairman indicated that he welcomed any written contributions to the process.
32. The delegate of Cuba indicated that Cuba supported proceeding on the basis of the
Chairman's suggestions, although it had certain doubts about some of them.  Cuba wished its support
for the statement of the Dominican Republic to be registered.
33. The delegate of Honduras expressed support, on behalf of the Dominican Republic and itself,
for the proposal to continue consultations based on the general scheme outlined by the Chairman, so
as to be able to reach a positive decision in Doha.  Honduras wished to point out, nevertheless, that
the informal document of 21 September 2001 was a starting-point for the Chairman's consultations.
Further, Honduras considered it relevant that, in his consultations, the Chairman should deal with the
situation of countries included in Annex VII(b) which had not yet achieved the threshold level of
$1,000 per capita.  Additionally, Honduras wised to emphasise its positive participation in these
consultations without prejudice to other proposals before the General Council.
34. The Chairman noted all of the views expressed by Members in consultations, and during the
meeting to that point, and considered that there was agreement to proceed along the said lines, again
without prejudice to positions of any Members in the hope that the Committee could find a solution
acceptable to all.
35. The delegate of Chile expressed Chile's understanding in respect of the problem raised by
El Salvador and Jamaica, and was of the opinion th at the Chairman had put forward a good basis for
continuing work on the issue.  Chile was, however, faced with the same situation as that of Mexico.
The message that Chile had conveyed to its private sector had been that of elimination of export
subsidies, for which the government was paying a political price.  The basis on which the Chairman
suggested proceeding was sound, but Chile would need to know specifically about the programmes
and the Members under discussion.  Chile seconded the idea voiced by El Salvador of a horizontalapproach.G/SCM/M/32
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36. The Chairman considered that he was starting to hear a few of the sorts of ideas that he would
have expected to be taken up in the next part of the discussion that he was about to introduce,
i.e., specific ideas that Members had in relation to his suggested approach.  Given that he had sensed a
general agreement in the Committee, and thanking  Members for their flexibility in agreeing to
proceed along the lines that he had suggested, taking on board Members' positions and their rights andtheir obligations, he believed that it would now be useful to hear Members' detailed reactions to the
ideas that he had put forward on the small developing country exporter issue.  As the Chairman's
report in respect of the Committee's consideration of this issue had to be as comprehensive as
possible, the Chairman invited detailed reactions fr om Members in relation to the core elements that
needed to be resolved under this framework, includ ing:  (1) definition of developing country Members
with a small share of world trade;  (2) identification of eligible programmes;  and (3) ensuring
transparency and standstill.
37. The delegate of the European Communities wished to confirm his understanding that the
Committee was in favour of continuing its work beyond the present deadline of 30 September 2001, a
point of view with which he was in agreement.  Tu rning then to the three core elements highlighted by
the Chairman, the definition of those countries which could benefit from any privilege in the context
of this issue, or from any extension, had to be established very carefully, and the result had to respondto the problem as it had been explained, and the problem had been explained as being that these were
very small economies which had particular problems and were in a particular situation.  The list the
Chairman had provided to Members, using as the parameter participation in world trade, was one
usable element for that purpose, although that list included a number of countries for which this
extension would either not be available or play no role because they were either least developedcountries, or they were in Annex VII(b), or they were developed countries, or they had committed not
to grant export subsidies in another context.  There were on that list countries which would not
necessarily fall under the grouping one might associate with "small" economies as described by El
Salvador and Jamaica.
38. The European Communities wondered whether it would be a usable or workable idea to
employ additional criteria, such as total GNP or GDP, and population.  It did not necessarily mean
that the Committee would use these criteria on a very restrictive basis, but if the Committee combined
three criteria and chose a sufficiently low cut-off, then it would more likely end up with countries for
which the description "small" was one that all Members could share.  Such an outcome might make it
easier for those countries which viewed themselves as being in a competitive situation with
beneficiary countries to accept the final solution.
39. With regard to the definition of the programmes, the notification obligations of Article 25 of
the SCM Agreement were sufficient guidance on su bstance and on procedure for what the Committee
would need to know, with one important differen ce.  Such a notification had to be a condition sine
qua non ; without a notification, there could not be an extension.  At present one could be an
honourable Member of this Committee for many years without making any notification.  The
European Communities deplored this situation, but it was a matter of fact.  In the context of theextension, however, it had to be made absolutely clear that an application without a proper
notification would not be sufficient, and a notification could follow the example and the rules of
Article 25.  If a Member notified and did so according to Article 25, the necessary transparency would
have been achieved.  The European Communities was of the impression that all Members agreed that
the Committee use the mechanism in Article 27.4 for purposes of this extension.  This would apply tothe annual reviews or discussions in the Committee as well, and they would thus take place on the
basis of transparency.  This meant an annual notification which had to demonstrate that the criteria
formulated by the Committee had been fulfilled.
40. Regarding standstill, the European Communities understood that another delegation was of
the view that a standstill requirement was contained in Article 27.4 and that it relatedG/SCM/M/32
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to 1 January 1995.  While the European Communities considered that there was no doubt that that was
the case, it nonetheless considered that it would not be superfluous to have a clarification with regard
to the particular programmes in existence that would be eligible for an extension, so that Members
knew exactly which programmes were eligible and a specific standstill rule was applied to those
programmes.  The Chairman had suggested 1 September 2001 as a cut-off date.
41. The Chairman emphasised that 1 September 2001 was merely a suggested date for deeming
programmes to have been in existence.
42. The delegate of Switzerland considered that making Article 27.4 operational was the most
suitable procedure in relation to the question before the Committee.  On the issue of time-period, to
accommodate the need for certainty as had been requested by Jamaica, Switzerland considered that
three years, as had been suggested by Jamaica, was a possible period of extension.
43. Regarding criteria for Member eligibility, Switzerland found the Jamaican criteria a useful
starting-point but, like the European Communities, did not believe that these were sufficient criteria to
define "small" economies and also vulnerable economies.  The Committee had heard one proposal
which attempted to better define "small" economies, and Switzerland wished to support the idea of
including the criterion of total GDP.  The Committee would have to identify a benchmark to ensure
that Members, such as Iceland, which were not developing countries, would be excluded from thepossibility of an extension.  Switzerland wished to propose another criterion as it had given some
thought to the issue of vulnerable economies, which had been discussed often, and wished to suggest
to the Committee to include a criterion which would define vulnerable economies, that of GNP per
capita, in order to ensure that only vulnerable developing country Members could use this sort of
automatic exclusion from the prohibition on export subsidies.  The benchmark of GNP per capitawould of course have to be higher than that contained in Annex VII(b).  It was a proposal in order to
ensure that this list – which the Committee would have to attach to make clear which Members were
envisaged – was as concrete as possible so that only those Members would benefit from the automatic
extension
44. The Chairman noted that the criterion of total GNP had been suggested a number of times
during the intensive consultations the previous week.  The inclusion of the criterion of GNP per capita
had been raised for the first time at this meeting.   It was an element the Committee needed to reflect
on.
45. The delegate of Mexico reiterated that Mexico was ready to work constructively on the basis
of the elements outlined in the Chairman's 21 September 2001 document.  Mexico considered,
however, that there was a need to be clear on the core elements of the proposal.  With regard to the
definition of "small" economies, it was very important to know exactly the envisaged group ofbeneficiaries.  The threshold of 0.05 per cent was equally important.  The idea of additional criteria
was a useful one; GDP or population were possible additional criteria.  It had to be ensured that only
existing programmes would be eligible; a cut-off date of 31 July 2001 – 180 days prior to the
application deadline – might be appropriate.  Mexico was in favour of a standstill requirement if the
extension was for a short period, but a phase-out was preferable if the extension was for a longerperiod.  Further, if the extension was for a longer period, ex ante  continuation thereof might be
difficult, especially if Mexico's trade was affected.  The Committee also needed to be clear on the
definition of "product", and take into account the interests of importing developing country Members.
Mexico was continuing to consider the proposal.
46. The delegation of Canada indicated that Canada was willing to consider the 0.05 per cent
threshold, but was extremely reluctant to go above that figure.  Canada considered additional criteria
useful, one of which might be export subsidies expressed as a percentage share of export trade of aG/SCM/M/32
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Member.  The standstill requirement could be established as at 1995, not 2001, and this could also
function as a marker for initial identification of eligible programmes.
47. The delegate of Brazil expressed his country's willingness to study the Chairman's list of
possible elements, of which Brazil considered the definition of "small" economies the most important.
Brazil was concerned, however, about the creation of yet another category of Members in themultilateral trading system, and it did not consider the trend of increased segmentation amongst
Members a positive one.  It was in favour of the notion of additional criteria, and expressed the view
that the Committee needed to proceed with care on the question of the definition of "small"
economies.  Brazil agreed with Mexico on possible identification of specific sectors in establishing
programme eligibility criteria.  Finally, Brazil supported a standstill requirement as well as a cut-off
date for the identification of existing programmes.
48. The delegate of El Salvador expressed serious reservations on some elements of the
Chairman's proposal, but was willing to discuss it further.  El Salvador considered the Jamaican figure
of 0.05 per cent for the definition of "small" economies arbitrary, and could not accept it.
49. The delegate of the Dominican Republic was also in favour of additional criteria, perhaps
GDP or population, and a threshold higher than that  contained in Annex VII(b).  Sector-specific
elements might be considered for programme eligibility criteria.
50. The delegate of the United States emphasized the importance of identifying a basis for
consensus which would reflect the balance contained in the SCM Agreement.  The United States
would not agree to a weakening of subsidy discipli nes.  It was, however, willing to consider an
extension of the transition period for small economies.  Identification of beneficiary sectors might be
a useful element for programme eligibility as would share of world trade for Member eligibility.  TheUnited States would be very unlikely to agree to any further extensions.  A standstill requirement
must apply during the extension, and notification was an extremely important pre-condition to the
extension.
51. The delegate of Ecuador stated that beneficiaries should not be identified as small economies,
but as countries with a small share of world trade.  There were, after all, 22 least developed countries
whose trade indices were higher than those of non-least developed developing countries.  Further,
Ecuador supported an extension of eight years from 2003 onward.
52. The Chairman noted that, if the threshold were placed somewhere else, the Committee would
still run the risk of having the threshold considered arbitrary and not meeting the needs of all
concerned.  The Committee needed to come up with a reasonable approach, and that meant criteria in
addition to share of world trade which Members could accept.
53. The delegate of Japan considered that the Co mmittee had to make it absolutely clear that it
was not inviting a competition of deep pockets.  The Committee had to ensure that those countries
which were not competitive were the ones to benefit, and not those countries which had funds to grant
subsidies.  Japan supported Mexico in this context.  Further, the Committee had to support those
countries which had eliminated export subsidies.  On the Chairman's question relating to the
definition of "small" economies, Japan agreed that multiple elements were needed.  The frameworkwas to be limited to those countries in a special situation.  Japan could accept 0.05 per cent as a
possible threshold figure, but was reluctant to go any higher.  Finally, Japan emphasized the
importance of knowing precisely to which programmes the extension would be granted, and
considered that a notification was necessary for an extension.
54. The delegate of Australia was of the view that it was clear, especially from the discussion at
the meeting, that the Committee would be able to reach a consensus on a solution based onG/SCM/M/32
Page 10
Article 27.4 only if the fundamentals of the SCM Agreement were upheld, particularly the elimination
of export subsidies, and only if strict conditions we re set.  In that regard, the Chairman's framework of
21 September 2001 provided a good basis for developing such parameters.  In terms of the definition
of small economies, Australia was willing to cons ider the 0.05 per cent threshold, but would agree
with others that the development of additional criteria would be useful, including those suggested byCanada, Switzerland, and the European Communities.  In terms of the eligible programmes and the
standstill and transparency requirements, Australia agreed with Canada's point that the conditions of
Article 27.4 must be respected, so that the eligible programmes would be programmes which had been
in place in 1995, and there had to be no increase above the level in 1995.  Australia also agreed with
the point made by the European Communities that there would need to be a notification for this
framework to kick in, and, finally, on the time-period, Australia could not agree to an indefinite
extension.  The time-period would have to be cl early defined, and any "automaticity" would only
apply within that defined period, and even then the standstill and transparency requirements would
still have to be demonstrated to be met at the annual reviews.
55. The delegate of Costa Rica emphasised the need for a very short time-period as well as for
averting any distortion of the investment policies of other countries.  This was a very important pre-
condition as far as Costa Rica was concerned.  Costa Rica also supported what other delegations hadsaid about standstill.  A cut-off date must be established whereby the framework would only cover
programmes which currently existed.  On this, Costa Rica agreed with Mexico.  Costa Rica also
believed that it was appropriate that these programmes be notified.  Furthermore, Costa Rica agreed
with the United States' comment regarding the balance contained in the Agreement; anything the
Committee did had to be in light of the disciplines within this and other Agreements.  Finally, anyflexibility the Committee might be able to show in respect of the subsidies of countries which were
making requests for extensions had to exist within the general balance of the decisions to be reached
in Doha.
56. The delegate of Chile considered that the more the Committee enlarged the category of
beneficiaries, the more problematic the framework would become for Members such as Chile and the
more difficult it would become to determine the impact of the extensions.  Chile was concerned about
the increasing fragmentation amongst Members.  It considered that specific Members and
programmes had to be identified to address the problems of particular Members.  Chile, therefore,
considered that it needed detailed information on the beneficiary programmes before it could agree to
any framework.
57. The Chairman noted that one of the concerns that had been expressed during the intensive
round of consultations the previous week was the need to avoid creating a list, or some kind of new
annex, of countries, because the Committee would then run the risk of some excluded countries
considering that they had to have been included in  the list when compared to others included therein.
On the other hand, there was the problem that certain developed countries might actually be included
by virtue of simply meeting statistical requiremen ts.  The Chairman invited Members to react to the
suggestion of Chile of an alternative approach to the one of rigidly defined criteria, the drawing upwhich could be a long drawn-out process in the Committee.
58. The delegate of the Dominican Republic expressed understanding of the problem raised by
Chile, but first the Committee had to think about how the three criteria – population, GDP, and share
of world trade – applied simultaneously would function.  Once the Committee had those figures, it
could reach a decision on that basis.  The Dominican Republic proposed a simultaneous tripleumbrella, a given per cent of world trade, GDP  less than $500 billion, and a maximum population
of 20 million.  The three criteria taken simultaneously would be a sufficient filter through which to
address, for instance, the problem which Chile had just raised.G/SCM/M/32
Page 11
59. The Chairman indicated that the Committee w ould need to examine the suggestion of the
Dominican Republic in a concrete way.  Thus, if the suggestion could be submitted in writing, it
would be circulated on Members' further reflection.
60. The delegate of the Dominican Republic noted that it had rejected the Jamaican proposal,
which took into account the share of world trade, because the Dominican Republic simply did not
agree with it.  If it took the position of a large number of countries, of using a higher threshold for the
share of world trade, other countries such as the European Communities would point to the need for
additional criteria.  The Dominican Republic did not consider that eligibility criteria were something
for the Dominican Republic to develop.  It was for the Secretariat to come up with fresh statistics; the
Committee would examine them and make a decision on that basis.  The Chairman could perhaps
convey this request of the Dominican Republic to the Secretariat.
61. The Chairman indicated that he did not wish to put the Secretariat in the position of having to
develop specific criteria for the consideration of the Committee.
62. The delegate of Costa Rica submitted that he did not see why the Committee could not work
in parallel with the proposal of the Chairman and the suggestion of Chile.  A good overall and focused
approach to the problem might be an approach which would cover the wide range of positions stated
at this meeting.
63. The Chairman encouraged Members to come forward with any possible solutions which they
thought could be applied to this particular pr oblem of small economies, and indicated that he
welcomed any contributions to this process.
64. The delegate of Ecuador supported the suggestion proposed by Chile.  In the view of Ecuador,
Chile's suggestion met the concerns expressed by several Members.  Defining the scope of the
"umbrella" was important; if it was arbitrarily drawn, the outcome would be unfair and unbalanced.
Drawing up rigid criteria could be a time-consuming process with perhaps no consensus in the end.
Chile's suggestion of identification of specific Members and programmes was therefore a good one.
65. The Chairman pointed out that the Committee had to be careful not to fragment this process.
He understood Chile to be saying that the Committee needed to avoid potential problems presented by
an elaborate discussion of eligibility criteria in respect of the identification of the beneficiaries of the
framework.  There were other elements of Chile's suggestion which were not dissimilar to the ideas
currently on the table, in relation to the need for understanding the programmes that would benefit
under the approach, how the Committee would ensure transparency and standstill, what the
Committee meant by an extension, and how long an extension the Committee was envisaging.  There
did not need to be a parallel discussion process as such.  The Committee might consider whether the
very useful idea put forward by Chile could be folded  into, or be an alternative to, the first element in
terms of criteria.
66. The Chairman proposed the following work plan: assuming the Committee's mandate was
extended, ba the General Council, it would need to meet in plenary session, either informally,
formally, or both, during the month of October 2001.  Having anticipated this possibility, the
Chairman had reserved meeting rooms for 12 and 26 October 2001.  In order to prepare for those fullCommittee meetings, it was clear that the Committee would need to intensify work in the informal
consultations.  In this regard, the Chairman proposed to hold another round of informal consultations
on 4 October 2001.  His aim was to include as many delegations as possible and he would make every
effort in that regard.  Members who might not have participated in the most recent round of
consultations and who wished to be included were invited to contact him or the Secretariat.  Inpreparation for those consultations, the Chairman's request was that every Member come prepared to
describe and explain the specific elements or changes that the Member would like to have introducedG/SCM/M/32
Page 12
into the draft framework that the Committee was tryi ng to develop, as well as any reactions that the
Member might have to comments and suggestions made by delegations at this meeting.  To further
advance the Committee's thinking on the issue of  small economies, leading up to the Committee's
informal meeting of 12 October 2001, the Chairman anticipated that the Committee would probably
need to hold a second round of consultations after those on 4 October 2001, and he intended to holdthis second round on 9 October 2001.  In particular, he hoped at that time to be in a position to put
concrete proposals to Members for detailed consideration and further refinement.  Between the
Committee meetings of 12 and 26 October 2001, the Committee would clearly need to have additional
rounds of consultations.
Export competitiveness
67. The Chairman recalled that the issue of export competitiveness, and in particular the
determination thereof, was the second issue that the Chairman had pursued in his consultations with
Members the previous week.  It was the Chairman's view that this element was perhaps more ripe for
possible early decision than the other element of the proposal, that is, the possibility to resume export
subsidization after the loss of export competitiveness, and the other proposals pending before the
Committee.  The Chairman had made this judgement on the basis of the positive reactions of a
number of Members, at the 18 September 2001 meeting, to Chile's suggestion to use moving averagesto determine export competitiveness.  That is, the assessment of whether the 3.25 per cent threshold
had been reached in two consecutive years would be determined on the basis of moving multi-year
averages for each of those years, rather than on data for two individual consecutive years.  This
proposal had had a relatively positive reception, because it would operate through an agreed
interpretation and thus would avoid making any chan ge to the text of the Agreement, which a number
of Members had indicated they could not accept.
68. The idea behind the proposal was to try to address, through a statistical method, the potential
problem that a determination of export competitiveness based on two consecutive single years' data
might not reflect stable conditions.  A moving average for each of the two years, because it would be
a composite of several years' data, would smooth out  any fluctuations and temporary aberrations, and
thus in practical terms would tend to delay the date  as of which a Member would be deemed to have
reached export competitiveness in a given product.  One important clarification that it had been
necessary to make during the consultations was that no Member should be made worse off by the
application of such a methodology.  In particular, under certain circumstances, moving averages for
two consecutive years might be at or above 3.25 per cent even if, on the basis of data for individual
years, there would be no two consecutive years at that  level.  Thus it would seem necessary to clarify
that the moving averages would be applied only once there were two consecutive individual years'
data showing trade shares for a product at or above 3.25 per cent.
69. In his consultations with Members, the basic question that the Chairman had posed was
whether Members would be willing to work on the basis of the moving average idea to try to resolve
the first element of the export competitiveness proposal.  If Members were willing to proceed on that
basis, such future work would focus on the number of years over which the moving averages wouldbe calculated, clarification to ensure that the moving average approach would not leave any Member
worse off, and any other operational aspects.  The Chairman wished to emphasize that, during the
consultations, the proponents had made it clear that, for them, finding a possible solution in respect of
the first element of their proposal did not mean that the second element was no longer being pursued.
The Chairman had assured the proponents that this was not the case and that the Committee wouldcontinue consulting on both elements of the proposal.  The Chairman then enquired as to whether any
Member would object to working on the basis of the moving average idea, in respect of the
determination of export competitiveness, again without prejudice to their final position on it, or on
any other issue.G/SCM/M/32
Page 13
70. The delegate of the United States indicated that it continued to be the United States' position
that proposed changes to the initial calculation of export competitiveness and allowing flexibility for
the phase out obligations were mutually exclusive.  With respect to the use of the rolling average, he
recalled that he had indicated some interest in that concept at an earlier meeting.  Given the reaction at
the last meeting, however, the United States did not believe that it would be acceptable to allconcerned.  If the concept had re-entered the discussion, the delegate would have to go back and
consult with capital.
71. The Chairman took from this that the Committee agreed to continue discussing this proposal
on the basis of the rmoving average approach.
72. The Committee so agreed.
73. The Chairman indicated that, as the second element of the export competitiveness had not
been discussed during the previous week's consultations, Members might have nothing to add beyondwhat they had said thus far during the September 2001 series of consultations.  The Chairman
nevertheless opened the floor for any Member that wished to make a statement on this second
element.  While there was no basis upon which the Committee had reached agreement, Members had
said during the consultations that they were willing to proceed along the lines of further discussion,
including on the European Communities' stop-the-clock proposal.  The Chairman reiterated hisintention to pursue this second element in a systematic manner in his next round of consultations.
74. The delegate of Japan wished to indicate that, since Japan was the Member that had initially
mentioned the idea of moving averages, although Chile was the one that had formally put it on the
table, he thought it might be useful to clarify what Japan meant by "moving averages".  He indicated
that Japan had prepared a brief simulation paper to this end, which was available to Members in theroom.
Countervailing duty investigation procedures
75. Onn countervailing duty investigation procedures, the Chairman recalled first that, at the
Committee's 18 September 2001 meeting, he had asked the proponents – India and Brazil – to identify
in writing which of their respective proposals they considered would require an amendment of theAgreement and which arose from silence or ambiguity in the Agreement.  The Chairman thanked both
delegations for their rapid responses, which had been circulated in documents G/SCM/W/465
and 466.
76. The Chairman wished to note, before opening the floor, that in respect of this issue the draft
implementation text foresaw a decision by the General Council to instruct the Committee to continue
work until Doha.  Thus here again, it appeared likely that the Committee's work would continue
during the month of October 2001.  It was clear fr om the discussions, however, that the proposals
raised a large number of very complex issues and, therefore, even a month's extension left very little
time for consideration.  Nonetheless, the Committee had to do its best to give these proposals full and
due consideration in the time it had available.
77. The Chairman asked the proponents to introduce their new papers, categorizing the issues that
they had raised and making any additional comments, including on any further specific thinking onpossibilities of merging or rationalizing any of the issues that they had respectively raised.  Any
suggestions that they had on how the Committee could try to organize its work on these issues during
October 2001 -- assuming that its mandate was extended by the General Council -- were also
welcome.G/SCM/M/32
Page 14
78. The delegate of Brazil indicated that Brazil had identified some of the points that it had raised
which probably required an amendment of the Agreement.  The other points that Brazil had raised
could be resolved by means of interpretation of the text of the Agreement.
79. The delegate of India stated that certain aspects of India's proposal would require additional
disciplines to be developed and others would requir e clarifications.  No change was sought in the
Agreement.  India wished to steer clear of the debate of what constituted an amendment at this stage,
before the Committee had the substance of the issues before it.
80. The Chairman indicated that the Committee would likely continue its work on this issue
during the month of October 2001, including in the meetings he had outlined earlier, to take up not
only the small economies issue, but also the export competitiveness issue and the Brazilian and Indian
proposals.
81. The Chairman summarized by noting, for the record, a number of procedural points.  First,
Members had indicated a willingness to pursue the Committee's work on the issue of developing
country Members with a small share of world trade on the basis of the approach outlined by the
Chairman, namely using the Article 27.4 extension mechanism and developing criteria for
determining country eligibility and operational requirements.  In addition, useful suggestions had been
made by some others as to a possible alternative on the first element.  Any such work would beundertaken without prejudice to any Member's final position with respect to any issue.  Second, on the
issue of determining export competitiveness, Members had expressed a willingness to pursue work on
the basis of the moving average idea and again without prejudice to their final positions, including in
respect of the second element of the export competitiveness proposal, that is, the resumption of
subsidization in the event of loss of competitiveness.  Members had indicated that they believed that agood deal more time would be needed to pursue su ch work, however, and were of the view that the
best possibility for success in this regard would be  to continue intensive work on these issues in the
Committee in the time remaining before Doha.  Third, Members had taken note of the General
Council Draft Implementation Decision which foresaw the Committee continuing its work on the
countervailing duty investigation procedures issue in the time remaining until Doha.
82. In light of these considerations, the Committee had identified a schedule of meetings and
informal consultations that it would pursue if the General Council extended the Committee's mandate
to work on these issues.  First, the Chairman would hold broad rounds of informal consultations on
4 and 9 October 2001.  Second, the Committee would meet on 12 and 26 October 2001 in informal
and/or formal mode (to be determined based on the circumstances at that time).  The Chairman's
report to the General Council, which was due on 30 September 2001, would convey these views and
would also contain a technical summary of the Committee's discussions on all points since thesubmission of the Chairman's 31 July 2001 report to the General Council.  This summary of
30 September 2001 would be similar to the non-paper summaries that the Chairman had faxed to
Members of the Committee following the informal meetings of 11 and 18 September 2001.
83. The delegate of Colombia expressed concern over the systemic implications of any
categorization of developing countries.  The SCM Agreement, in Colombia's view, had a structure
which sought to determine which incentives could be retained in order to promote exports and which
could be defined as export subsidies and had to be eliminated.  Colombia wished to note that any
proposal to determine criteria for extension of th e transition period for the elimination of export
subsidies had to consider that original structure and architecture.  Colombia welcomed the statement
of Chile along the same lines.
84. The Chairman indicated that, if the Committee's mandate was extended by the General
Council, the Committee would be very busy over the month of October 2001, and he wished to ask all
Members to prepare for that work by carefully reflecting on the issues that had been raised at thisG/SCM/M/32
Page 15
meeting, and at the Committee's previous meetings, and by attempting to formulate very specific
views on the issues that remained to be resolved between then and 4 October 2001.
85. The Committee took note of all the statements made, and the meeting was adjourned .
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