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G/SCM/M/109

11 September 2019

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Committee on Subsidies and Countervailing Measures

MINUTES OF THE REGULAR MEETING

HELD ON 30 APRIL 2019

CHAIR: LUIS ADOLFO FERNÁNDEZ (COSTA RICA)

1. The Committee on Subsidies and Countervailing Measures ("Committee") held a regular meeting on 30 April 2019, convened in WTO/AIR/SCM/27 dated 18 April 2019.

2. Canada requested to be included as a co-sponsor for the agenda item 5.

3. Costa Rica requested to be included as a co-sponsor for the agenda item 9.

4. The Committee adopted the following agenda:

1 NATIONAL LEGISLATION............................................................................................. 2

1.1 Review of notifications of new or amended legislation or regulations not previously reviewed by the Committee (including Supplemental Notifications of existing provisions not previously

reviewed) .......................................................................................................................... 2

1.1.1 Angola (G/SCM/N/1/AGO/1) ....................................................................................... 2

1.1.2 Brazil (G/ADP/N/1/BRA/3/Suppl.10 – G/SCM/N/1/BRA/2/Suppl.13 – G/SG/N/1/BRA/3/Suppl.4) and (G/ADP/N/1/BRA/3/Suppl.11 – G/SCM/N/1/BRA/2/Suppl.14 –

G/SG/N/1/BRA/3/Suppl.5) ................................................................................................... 3

1.1.3 Madagascar (G/ADP/N/1/MDG/2 – G/SCM/N/1/MDG/1 – G/SG/N/1/MDG/2) .................... 3

1.1.4 United Arab Emirates (G/ADP/N/1/ARE/2/Suppl.1 – G/SCM/N/1/ARE/2/Suppl.1 – G/SG/N/1/ARE/2/Suppl.1) ................................................................................................... 3

1.1.5 Uruguay (G/SCM/N/1/URY/2) ..................................................................................... 3

1.1.6 Viet Nam (G/ADP/N/1/VNM/2 – G/SCM/N/1/VNM/1 – G/SG/N/1/VNM/2) and Corr.1 ......... 3

1.2 REVIEW OF NOTIFICATIONS OF NEW OR AMENDED LEGISLATION OR REGULATIONS WITH

OUTSTANDING WRITTEN QUESTIONS ................................................................................... 4

1.2.1 Cambodia (G/ADP/N/1/KHM/2 – G/SCM/N/1/KHM/2 – G/SG/N/1/KHM/2) ........................ 4

1.2.2 Cameroon (G/ADP/N/1/CMR/1/Suppl.1 – G/SCM/N/1/CMR/1/Suppl.1 – G/SG/N/1/CMR/1/Suppl.1) ................................................................................................... 4

1.2.3 El Salvador (G/ADP/N/1/SLV/3/Suppl.1 – G/SCM/N/1/SLV/3/Suppl.1 – G/SG/N/1/SLV/3/Suppl.1) .................................................................................................... 4

1.2.4 Liberia (G/SCM/N/1/LBR and G/SCM/N/1/LBR/Corr.1) ................................................... 4

2 SEMI-ANNUAL REPORTS OF COUNTERVAILING DUTY ACTIONS (ARTICLE 25.11) – G/SCM/N/342 AND G/SCM/N/342/SUPPL.1 ................................................................... 5

3 PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS: NOTIFICATIONS (ARTICLE 25.11) .............................................................................................................. 6

4 PROCEDURES FOR REVIEW OF 2019 NEW AND FULL SUBSIDY NOTIFICATIONS ......... 6

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5 SUBSIDIES AND OVERCAPACITY – ITEM REQUESTED BY CANADA, THE EUROPEAN UNION, JAPAN AND THE UNITED STATES......................................................................... 6

6 ARTICLE 27.4 EXTENSIONS OF THE TRANSITION PERIOD FOR THE ELIMINATION OF EXPORT SUBSIDIES .................................................................................................... 9

7 IMPROVING THE TIMELINESS AND COMPLETENESS OF NOTIFICATIONS AND OTHER INFORMATION FLOWS ON TRADE MEASURES UNDER THE SCM AGREEMENT ...... 11

8 CONSTANT DOLLAR METHODOLOGY FOR GRADUATION FROM SCM ANNEX VII(B) .... 15

9 IMPLEMENTATION OF PARAGRAPH 2 OF THE MINISTERIAL DECISION ON FISHERIES SUBSIDIES (WT/MIN(17)/64; 13 DECEMBER 2017) – ITEM REQUESTED BY ARGENTINA, AUSTRALIA, CANADA, COSTA RICA, THE EUROPEAN UNION, ICELAND, JAPAN, THE REPUBLIC OF KOREA, NEW ZEALAND, NORWAY, CHINESE TAIPEI AND THE UNITED STATES........................................................................................................................... 15

10 ARTICLE 25.8 QUESTIONS TO CHINA ON POTENTIAL STEEL SUBSIDIES – ITEM REQUESTED BY THE EUROPEAN UNION AND THE UNITED STATES ................................. 18

11 PERMANENT GROUP OF EXPERTS ............................................................................ 20

12 OTHER BUSINESS .................................................................................................... 21

13 DATE OF NEXT REGULAR MEETING .......................................................................... 22

14 ELECTION OF OFFICERS .......................................................................................... 22

1 NATIONAL LEGISLATION

1.1 Review of notifications of new or amended legislation or regulations not previously reviewed by the Committee (including Supplemental Notifications of existing provisions

not previously reviewed)

5. The Chair noted that, in accordance with the Committee's procedures (G/SCM/W/293/Rev.1), the new legislative notifications on the agenda were those that had been circulated in all three

languages not less than six weeks before the meeting. The deadline for written questions on these notifications was 8 April 2019. In accordance with the review procedures, legislative notifications of Cambodia, Cameroon, El Salvador, and Liberia were taken up under this item due to outstanding written questions about them.

6. Oral questions could be asked at the meeting, and any Member wishing to receive a written answer to any such question would have to submit its question in writing to the Member concerned

and to the Secretariat not later than 20 May 2019. Written answers were due not later than 11 June 2019.1

7. The primary review of these notifications was held in the Committee on Anti-Dumping Practices. Members were thus requested to limit their questions to issues specifically related to countervailing measures, and to save horizontal and anti-dumping-specific questions for the Anti-Dumping Committee.

1.1.1 Angola (G/SCM/N/1/AGO/1)

8. No written questions were posed with respect to this notification.

9. The Committee took note of the notification.

1 Relevant deadlines for written follow-up questions and written answers in May and June 2019,

respectively, can be found in section 1 of document G/ADP/W/503/Rev.1 – G/SCM/W/578/Rev.1 – G/SG/W/245/Rev.1.

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1.1.2 Brazil (G/ADP/N/1/BRA/3/Suppl.10 – G/SCM/N/1/BRA/2/Suppl.13 – G/SG/N/1/BRA/3/Suppl.4) and (G/ADP/N/1/BRA/3/Suppl.11 – G/SCM/N/1/BRA/2/Suppl.14 – G/SG/N/1/BRA/3/Suppl.5)

10. Written questions and responses regarding the first notification contained in G/SCM/N/1/BRA/2/Suppl.13 can be found in:

• G/ADP/Q1/BRA/39 – G/SCM/Q1/BRA/39 – G/SG/Q1/BRA/8 – Questions from Ukraine

• G/ADP/Q1/BRA/40 – G/SCM/Q1/BRA/40 – G/SG/Q1/BRA/9 – Questions from the United States

• G/ADP/Q1/BRA/43 – G/SCM/Q1/BRA/43 – G/SG/Q1/BRA/12 – Replies to Ukraine • G/ADP/Q1/BRA/44 – G/SCM/Q1/BRA/44 - G/SG/Q1/BRA/13 – Replies to the

United States

11. Written questions and responses regarding the second notification contained in

G/SCM/N/1/BRA/2/Suppl.14 can be found in:

• G/ADP/Q1/BRA/41 – G/SCM/Q1/BRA/41 – G/SG/Q1/BRA/10 – Questions from the United States

• G/ADP/Q1/BRA/42 – G/SCM/Q1/BRA/42 – G/SG/Q1/BRA/11 – Questions from the Dominican Republic

• G/ADP/Q1/BRA/45 – G/SCM/Q1/BRA/45 – G/SG/Q1/BRA/14 – Replies to the United States

• G/ADP/Q1/BRA/46 – G/SCM/Q1/BRA/46 – G/SG/Q1/BRA/15 – Replies to the Dominican Republic

12. The Committee took note of the notifications, questions and answers.

1.1.3 Madagascar (G/ADP/N/1/MDG/2 – G/SCM/N/1/MDG/1 – G/SG/N/1/MDG/2)

13. Written questions and responses with respect to this notification can be found in:

• G/ADP/Q1/MDG/1 – G/SCM/Q1/MDG/1 – G/SG/Q1/MDG/1 – Questions from the United States

• G/ADP/Q1/MDG/2 – G/SCM/Q1/MDG/2 – G/SG/Q1/MDG/2 – Replies to the United States

14. The Committee took note of the notification, questions and answers.

1.1.4 United Arab Emirates (G/ADP/N/1/ARE/2/Suppl.1 – G/SCM/N/1/ARE/2/Suppl.1 – G/SG/N/1/ARE/2/Suppl.1)

15. Written questions with respect to this notification can be found in:

• G/ADP/Q1/ARE/3 – G/SCM/Q1/ARE/3 - G/SG/Q1/ARE/3 – Questions from the United States

16. The Committee took note of the notification and questions.

1.1.5 Uruguay (G/SCM/N/1/URY/2)

17. No written questions were posed with respect to this notification.

18. The Committee took note of the notification.

1.1.6 Viet Nam (G/ADP/N/1/VNM/2 – G/SCM/N/1/VNM/1 – G/SG/N/1/VNM/2)

and Corr.1

19. Written questions and responses with respect to this notification can be found in:

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• G/ADP/Q1/VNM/3 – G/SCM/Q1/VNM/3 – G/SG/Q1/VNM/3 – Questions from the United States

• G/ADP/Q1/VNM/4 – G/SCM/Q1/VNM/4 – G/SG/Q1/VNM/4 – Replies to the United States • G/ADP/Q1/VNM/5 – G/SCM/Q1/VNM/5 – G/SG/Q1/VNM/5 – Questions from the

European Union2

20. The Committee took note of the notification, questions and answers.

1.2 REVIEW OF NOTIFICATIONS OF NEW OR AMENDED LEGISLATION OR REGULATIONS WITH OUTSTANDING WRITTEN QUESTIONS

1.2.1 Cambodia (G/ADP/N/1/KHM/2 – G/SCM/N/1/KHM/2 – G/SG/N/1/KHM/2)

21. Written questions with respect to this notification can be found in:

• G/ADP/Q1/KHM/1 – G/SCM/Q1/KHM/1 – G/SG/Q1/KHM/1G/SCM/Q1/KHM/1 – questions from the United States

22. Cambodia stated that it was still in the process of preparing the responses which will be submitted in due course.

23. The Committee took note of the notification, questions and statements.

1.2.2 Cameroon (G/ADP/N/1/CMR/1/Suppl.1 – G/SCM/N/1/CMR/1/Suppl.1 – G/SG/N/1/CMR/1/Suppl.1)

24. Written questions with respect to this notification can be found in:

• G/ADP/Q1/CMR/3 – G/SCM/Q1/CMR/3 – G/SG/Q1/CMR/3 – questions from the United States

25. The Committee took note of the notification and questions.

1.2.3 El Salvador (G/ADP/N/1/SLV/3/Suppl.1 – G/SCM/N/1/SLV/3/Suppl.1 –

G/SG/N/1/SLV/3/Suppl.1)

26. Written questions with respect to this notification can be found in:

• G/ADP/Q1/SLV/8 – G/SCM/Q1/SLV/8 – G/SG/Q1/SLV/7 – questions from the United States

• G/ADP/Q1/SLV/9 – G/SCM/Q1/SLV/9 – G/SG/Q1/SLV/8 – questions from Mexico

27. Mexico noted that it awaited El Salvador's response to its questions.

28. El Salvador stated that the responses would be submitted as soon as possible.

29. The Committee took note of the notification, questions and the statements made.

1.2.4 Liberia (G/SCM/N/1/LBR and G/SCM/N/1/LBR/Corr.1)

30. Written questions with respect to this notification can be found in:

• G/SCM/Q1/LBR/1 – questions from the United States

31. Liberia noted that it was working on the responses which would be submitted as soon as possible.

2 Circulated on 2 May 2019.

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32. The Committee took note of the notification, questions and the statements.

33. The Chair, recalling the Committee's agreed procedures, informed Members that for new legislative notifications to be placed on the agenda of the fall 2019 meeting, they would have to be circulated in all three languages not later than six weeks before the meeting. Shortly after that date, the Secretariat would circulate a document informing Members of all legislative notifications to be reviewed at the next autumn meeting. Pursuant to paragraph 8 of document G/SCM/W/293/Rev.1,

all unanswered written questions pertaining to new legislative notifications reviewed at the meeting, as well as the subject notifications, shall automatically be retained on the agenda of the next Committee meeting and on the agendas of subsequent Committee meetings until written answers are submitted.

34. The Chair also noted that in order to place previously-reviewed legislation on the agenda of the autumn meeting for further review, written questions must be submitted to the Member

concerned and the Secretariat, not less than six weeks before the meeting; and written answers to such questions must be submitted to the Member concerned and the Secretariat, not less than two weeks before the meeting. The Secretariat would circulate the usual triple-symbolled document containing these and the other deadlines shortly after the meeting.3

35. Some Members had yet to submit any notification concerning legislations. The Chair underlined the importance of these notifications in terms of transparency, and recalled that for many Members all that would be required was a single nil notification. For any Members that conducted

countervailing duty investigations but had not yet notified their legislation, it was all the more important for the Committee to have the opportunity to review and ask questions about that legislation. Therefore, the Chair encouraged all Members that had not yet made a legislative notification to do so as promptly as possible.

36. The Chair referred to the document G/SCM/N/18/Add.47 which contained the latest revision of the list of authorities competent to initiate and conduct investigations within the meaning of

Article 25.12 of the SCM Agreement and invited all Members with such an authority to submit the

required notification pursuant to Article 25.12 of the SCM Agreement, or to review and update as necessary their previously-submitted notifications.

37. The Committee took note of the Chair's statement.

2 SEMI-ANNUAL REPORTS OF COUNTERVAILING DUTY ACTIONS (ARTICLE 25.11) – G/SCM/N/342 AND G/SCM/N/342/SUPPL.1

38. The Chair recalled that document G/SCM/N/342 and G/SCM/N/342/Suppl.1 had invited all

Members to submit no later than 15 February 2019, their semi-annual reports under Article 25.11 of the SCM Agreement of countervailing duty actions taken during the period 1 July through 31 December 2018. Document G/SCM/N/342/Add.1 provided the current status of Members' reporting for that period. Paragraph 1 of the document listed those Members reporting countervailing duty

actions during the period. Paragraph 2 listed Members that had notified having taken no countervailing duty action during the period. Paragraph 5 of the document listed the 40 Members that had submitted a one-time notification that they had no investigating authority, had taken no

countervailing actions to date, and did not anticipate taking any such actions in the foreseeable future.

39. One-time notifications served a useful transparency function, as they assisted non-active Members to meet their notification requirements in a streamlined way. Any eligible Member that had not already done so thus was urged to submit a one-time notification. The Secretariat was ready to assist any Member in this regard.

40. Unfortunately, as listed in paragraphs 3 and 4 of the document, 39 Members had not

submitted a semi-annual report for July-December 2018. The Chair urged those Members to submit their reports as soon as possible.

3 G/ADP/W/503/Rev.1 – G/SCM/W/578/Rev.1 – G/SG/W/245/Rev.1.

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41. No comments or questions were raised concerning the semi-annual reports of Australia, Brazil, Canada, China, European Union, India, Mexico, New Zealand, Peru, Chinese Taipei, Turkey, and Ukraine.

42. Regarding the semi-annual report of the United States, Korea raised concerns over the investigations against cold-rolled steel flat products and hot-rolled steel flat products. In October 2018, the US Department of Commerce had preliminarily determined that Korean steel

producers had received countervailable subsidies which, according to Korea, was not justifiable. Korea noted that the Demand Response Resource Program was not a countervailable subsidy, as it did not involve a financial contribution by the government, and therefore would not meet the conditions under Article 1.1 of the SCM Agreement. The US had deemed certain tax credit programs such as Korea's Restriction of Special Taxation Act to be countervailable subsidies although the eligibility and amount of those credits were determined through objective criteria that were clearly

spelled out in the relevant regulations. Therefore, the program would not meet the conditions of

specificity prescribed in Article 2.1 of the SCM Agreement.

43. Korea also noted that in February 2019, the US Department of Commerce had determined that countervailable subsidies were being provided to Korean producers of large diameter welded pipe. For similar reasons with the case of cold-rolled and hot-rolled steel flat products, Korea found the imposition of those measures inconsistent with the relevant WTO rules.

44. With respect to the demand resource programme, the United States indicated that the

Commerce Department had appropriately found that both the KPX and KEPCO are public bodies and therefore, provided a financial contribution under the programme. Regarding the tax credit programme, the United States noted that de facto specificity had been determined looking at actual recipients of the subsidy which were limited in number. Similar determinations had been made for the large diameter welded pipe from Korea. The United States asked Korea to provide written questions on those issues.

45. The Committee took note of all semi-annual reports submitted as well as the statements

made.

3 PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS: NOTIFICATIONS (ARTICLE 25.11)

46. The Chair reported that since the Committee's October 2018 regular meeting, notifications under Article 25.11 of the SCM Agreement with respect to preliminary and final countervailing duty actions had been received from Australia, Brazil, Canada, China, Mexico, Peru, Turkey, Ukraine, and

the United States. Those notifications were listed in documents G/SCM/N/340 and Corr.1, G/SCM/N/341, G/SCM/N/345, G/SCM/N/346, and G/SCM/N/347.

47. No Member took the floor regarding those notifications.

48. The Committee took note of the notifications.

4 PROCEDURES FOR REVIEW OF 2019 NEW AND FULL SUBSIDY NOTIFICATIONS

49. The Chair recalled that the 2019 new and full notifications were due on 30 June, and thus would be subject to review in special meetings beginning with the one in fall 2019. The Committee thus

needed to decide on procedures for reviewing those notifications. During the last six notification cycles, the new and full notifications had been reviewed on the basis of the procedures set forth in G/SCM/117, first adopted in 2005. The Chair proposed that the Committee agree to conduct the review of the 2019 new and full notifications on the basis of the same procedures.

50. The Committee so decided.

5 SUBSIDIES AND OVERCAPACITY – ITEM REQUESTED BY CANADA, THE EUROPEAN UNION, JAPAN AND THE UNITED STATES

51. The United States indicated that the OECD had recently completed a report entitled "Measuring Distortions in International Markets, The Aluminium Value Chain", which supported its more general

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work of measuring government support in different industries in order to ensure fair competition in the global economy.

52. The report used the OECD's matrix of government support measures and focused on individual firms throughout the stages of the aluminium value chain in order to assess government support within the aluminium industry. The support measures examined were wide-ranging and included everything from grants, to state-owned bank lending, to debt-forgiveness, to under-pricing of

natural resources. The report focused on the largest seventeen firms from aluminium producing countries who worked along the value chain, and together made up more than half of global smelting capacity. All those firms were found to have received some form of government financial assistance, estimated at USD70 billion between 2013 and 2017. One finding was particularly noteworthy: 85 % of all support is provided to five firms at the smelting stage of production. At least four of these firms appeared to be in China.

53. Support for China's industry was found to be provided predominantly through financial subsidies – via bank lending – provided to both SOEs and private firms by state-owned banks. The pairing of production subsidies and export restrictions on primary aluminium in China was found to support downstream producers of aluminium products, although the precise level of support was too difficult to quantify. In contrast, the majority of support to firms outside of China came through relatively smaller non-financial support channels, such as energy subsidies.

54. The report's method of examining value chains shed light on the need for trade rules to be

revisited as the financial support of one primary factor, such as coal, could lead to downstream benefits through cheaper electricity, cheaper primary aluminium, to more competitive downstream aluminium products.

55. Another important finding of the study was that government ownership and management of input prices in China and certain countries in the Middle East resulted in significant state influence of commercial decision-making.

56. Given the importance of transparency, the report outlined the need to improve the disclosure

of government support – both to, and by state enterprises, at a more meaningful level of detail.

57. The report suggested that improving information on subsidies might need to draw upon the estimation of price gaps, derived from a comparison of domestic prices to world reference prices. This approach was used by several international organizations, such as the International Energy Administration and International Monetary Fund. Such an approach was seen as useful in important areas such as energy inputs and concessional finance.

58. Overall, the report rightly pointed to the need to strengthen the current rules when it came to, for example, enhancing transparency and the need to better capture state influence in the economy, particularly through SOEs that were both grantors and recipients of subsidies. Those deficiencies in the global rulebook had to be addressed to get at the root cause of the overcapacity

problem.

59. The United States encouraged all Members to read the report and consider how the subsidy rules might be changed to address the government support issues that the OECD raised.

60. The European Union endorsed the statement made by the United States. The OECD report provided a useful and profound understanding of the most relevant distortions across the whole aluminium value chain. It also highlighted the subsidies were the most relevant distortion in that sector. Based on the robust methodology the report clearly showed that most of the subsidies were in the form of financial support provided by China's state-owned banks which predominantly benefited Chinese producers. The EU welcomed the empirical analysis in the report and called on other Members to carefully study the report and to take its conclusions into account when crafting

future government policies. The EU also highlighted the conclusion of the report that rules on subsidies needed to be revisited.

61. Japan echoed the statements made by the EU and the US. The OECD analysis was useful for deepening the discussion of that agenda. According to the report, there was a significant increase in capacity in the aluminium sector which has led to the depression of price and lowered the profit

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margin of the companies around the world. The report also showed various types of government support for aluminium sectors and it also pointed out the issue of transparency. It was noteworthy that the relevant subsidy information was gathered from companies' financial reports rather than the governments which implied that the current transparency rules might not work well. Japan highlighted the importance of having further discussions on the issue in the Committee. Japan expected to be able to remove market-distorting subsidies which were not necessarily covered by

the current SCM Agreement in order to help establishing a free and fair market.

62. Canada remained concerned with the role of government interventions with respect to the global excess capacity found in certain sectors which resulted in trade and market distortions affecting all manufacturing economies. The OECD report showed that financial support provided by governments was responsible for at least part of the recent increase in aluminium capacity. The report also made useful suggestions with respect to the improvements to the design of the WTO

rules to better address the distortion resulting from the subsidies and to better account the dual role

of the SOEs as both important recipients and providers of support. Those suggestions could benefit from being discussed in the Committee. The WTO and the Committee in particular, were uniquely situated to support discussions on the role subsidies play in contributing to global overcapacity as well as how to address them. Canada urged Members to engage constructively in those discussions and to make full use of the WTO forum to have a long-term solution to overcapacity.

63. China recalled that the Global Forum on Steel Excess Capacity had been established under

G20 system, where the discussion had been carried out on topics like production capacity and demand, strengthening policy coordination, resolving overcapacity, etc. Several Ministerial reports had been proposed based on the discussion. Overcapacity was not an issue relating to the operation of the Agreement or the furtherance of its objectives as referred in Article 24.1 of the Agreement. Therefore, the issue of overcapacity was not in the terms of reference of the Committee and it was not an appropriate forum for the discussion of that issue. To take such topics into the agenda was not helpful for an overall and exact understanding of the problem.

64. According to China, overcapacity was a universal, periodic and structural problem. The causes for overcapacity were complicated, including slow economic recovery, low market demand, macroeconomic policies by government, trade protectionism. All the factors above might influence capacity. Therefore, it was a prejudiced conclusion to take subsidy as the predominant factor that resulted in overcapacity. China worried that the increasing measures of trade protectionism would hinder Members' positive responses against overcapacity, which tended to shake the confidence of

Members all over the world to cope with overcapacity and increase the difficulty in solving the problem.

65. Regarding the independence of commercial banks, China noted that in China, SOEs, private enterprises and foreign-invested enterprises were all clients of commercial banks which independently choose their clients and issue loans according to their business planning, development orientation, and risk preference and management ability. Decision-making of the commercial banks was a market-oriented choice made based on their own development which was a market-oriented

behaviour.

66. China indicated that according to the US notification, the Regional Revolving Loan Funds programme offered interest rate below prime. In the Cohesion Fund programme of the EU China noted that the body that implements the financial instrument or the fund of funds (e.g. banks) is considered to be the beneficiary of the financial instrument. The beneficiary is distinct from the final recipients which can be public or private bodies, including individuals. China also referred to Japan's "Subsidy for Loans to Purchase Petroleum and LPG to be Stored" which was described as an interest

rate subsidy.

67. Mexico reiterated the urgency of developing effective solutions to combat distortions in international markets caused by overcapacity in various sectors. Mexico demonstrated its commitment in national legislation and other international commercial instruments to maintain legal frameworks that prohibit anti-competitive business practices and to ensure equal conditions. It is necessary that all Members commit themselves to develop the best solutions to combat that problem

and take the necessary measures to eliminate subsidies that distort the market, and other types of

support from governments that maintain or create overcapacity. Members had to strengthen cooperation, improve the exchange of information and find collective solutions in the development of solutions focused on reducing and avoiding overcapacity.

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68. Norway was of the view that the description of the aluminum value chain as well as the analysis of the market provided by the OECD report were correct. Although the analysis was a case study of only 17 companies, it covered the majority of the market. The OECD had gone into great detail on each company to make the evidence robust. The table with the description of types of subsidies was an important tool to analyze and understand government support to and through both private and government owned companies.

69. According to Norway, subsidies in a value chain could have effects on different parts of the cost structure that all add up in a downward pressure on prices. A very important result of the report was the description of the importance of financial support for many companies. On SOEs, what came out of the report was the different roles SOEs could have as well as how little transparency there was regarding both activities and ownership. Norway indicated, however, that it was not ownership in itself, but how ownership was implemented that created support and subsidization. Norway was

of the view that a "level playing field", meant no "special treatment" of state-owned enterprises –

the companies shall not have any advantage nor disadvantage from having the state as an owner. The report should be a major input to Members' reflections here at the WTO on the Agreement, and on whether the Agreement sufficiently covers the world of subsidies.

70. According to Chinese Taipei, overcapacity was an issue affecting all Members; however, the Agreement could not sufficiently address that issue which requires further discussions and exploring possible ways of addressing overcapacity and market distortions. Therefore, Chinese Taipei expected

to have further discussions on that issue in the Committee.

71. Australia noted the report's conclusions: (i) government support needed to be understood in the context of global value chains, as upstream support had the effect of supporting downstream production; (ii) subsidy rules needed to better account for the influence of government; and (iii) the dual role of SOEs as recipients and providers of support. Australia also indicated that current subsidy rules were insufficient which needed to be further clarified.

72. Another important conclusion in the report was that transparency of government support

policies was fundamental in order to understand impacts of those policies. Australia remained supportive of clarifying and improving subsidy rules indicating that it was a strong supporter of new, well-crafted rules on state-owned enterprises. SOEs should not be given advantages that were not available to private enterprises competing in the same market and they should act in accordance with commercial considerations. Australia remained willing to be involved in further work in the Committee which was the appropriate forum to discuss development and updating the rulebook on

subsidies.

73. The Russian Federation reiterated its readiness for further search of ways to overcome overcapacity. Need for cooperation in this sphere was obvious to ensure healthy international trade and greater economic stability. In order to succeed, the Membership should approach the excess capacity challenge from all possible avenues. Tangible results would be unlikely if Members face only one factor contributing to it in isolation. The Russian Federation also reiterated its warning against imposition of trade barriers to mitigate the effects of overcapacity which would ultimately prove to

be moving along a blind alley. If there was a need for new disciplines, it should be evaluated from all angles. It might be not only subsidies, but also other spheres where amendment of rules would benefit the struggle with overcapacity. Joint effort would enable to choose the best solutions. The Russian Federation remained ready for further discussion on that issue.

74. The Committee took note of the statements.

6 ARTICLE 27.4 EXTENSIONS OF THE TRANSITION PERIOD FOR THE ELIMINATION OF EXPORT SUBSIDIES

75. The Chair recalled that Members that had been granted extensions under Article 27.4 pursuant to the procedures in WT/L/691 were required, under paragraph 2(c) of the procedures, to submit transparency notifications in respect of each year of the final two-year phase-out period, i.e. calendar years 2014 and 2015. The deadline for the notification pertaining to 2014 was 30 June 2015. A

reminder to this effect had been circulated in document G/SCM/N/290/INF.

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76. Antigua and Barbuda, Belize, Costa Rica, Dominica, Dominican Republic, El Salvador, Guatemala, Jamaica, Jordan, Mauritius, Papua New Guinea, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines had submitted these notifications, which had been circulated in the G/SCM/N/290 series.

77. Furthermore, given that 2015 was the final year of the two-year phase-out period pursuant to the previously mentioned procedures, the Members with extensions needed to have completed

the elimination of their export subsidies by 31 December 2015. They also had to provide a final transparency notification in respect of calendar year 2015 not later than 30 June 2016. A reminder concerning that final round of Article 27.4–related notifications had been circulated in document G/SCM/N/299. For the information of Members, the Chair had asked Secretariat to prepare a room document indicating the current status of notifications and of actions reported by Members with extensions under Article 27.4.4

78. To date, fourteen of the beneficiary Members – Antigua and Barbuda, Belize, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Jamaica, Jordan, Mauritius, Papua New Guinea, Saint Kitts and Navis, and Saint Vincent and the Grenadines - had submitted those final notifications. The Chair reminded other Members with extensions to submit their final transparency notifications as soon as possible. The deadline for the elimination of the export subsidies had been three years earlier while for submitting the final notification had been more than two years earlier. He emphasized the importance for the system that both the Members benefit from

extensions complete their compliance with the corresponding substantive and transparency obligations.

79. Saint Lucia took the floor indicating that it would address the Committee on behalf of the member states of the Organization of Eastern Caribbean States (OECS). Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, and Saint Vincent and the Grenadines had submitted their final transparency notifications and Saint Lucia was actively working to fulfil that obligation. Antigua and Barbuda and Grenada had become fully compliant with their obligations as they had eliminated

the existing export subsidy programmes and repealed the related legislations. Dominica, Saint Kitts and Nevis, and Saint Vincent and the Grenadines had all notified that the authorities were reviewing their respective national legislation containing provisions that fall within the scope of that obligation.

80. Saint Lucia was yet to submit its final transparency notification, but it had previously notified that there were no beneficiaries of export subsidies within the meaning of Article 3.1 of the Agreement in relation to its Fiscal Incentives Act and the Micro and Small-Scale Business Enterprises

Act. Nonetheless, Saint Lucia remained committed to fulfilling its obligations with respect to Article 27.4 of the Agreement. To this end, Saint Lucia had commenced the process of reviewing the legislation, with a view to repealing and replacing all non-conforming provisions that fulfil the legitimate policy objectives of the authorities, while complying with existing WTO commitments. It would submit its outstanding notifications in short order.

81. Barbados updated the Committee about the action plan notified in G/SCM/N/275/BRB. The action plan had identified a number of subsidy programmes and a process to amend them. In line

with the action plan, the Government of Barbados had completed (i) repealing the Fiscal Incentives Act; (ii) making required amendments to the Societies with Restricted Liability Act; (iii) repealing the International Business Companies Act; and (iv) removing the Export Allowance Programme. The detailed notification would be submitted to the Committee in due course. Barbados reiterated its continued commitment to the multilateral process.

82. New Zealand noted that this agenda item had been before the Committee for a couple of years and that there were still outstanding notifications from several Members. New Zealand noted that

for many of them it might be an administrative matter given almost all of the Members concerned had previously reported the time limits and nature of the planned termination of their export subsidy programmes. New Zealand requested to keep this item on the agenda for the fall meeting.

83. The Chair noted that the Committee would revert to that issue at the next meeting.

4 RD/SCM/36/Rev.3.

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84. The Committee took note of the statements made.

7 IMPROVING THE TIMELINESS AND COMPLETENESS OF NOTIFICATIONS AND OTHER INFORMATION FLOWS ON TRADE MEASURES UNDER THE SCM AGREEMENT

85. The Chair recalled that since the request of the Chairman of the Trade Policy Review Body in spring 2009, the Committee had been discussing, at formal and informal meetings, "ways to improve the timeliness and completeness of notifications and other information flows on trade measures".

The substance of those discussions was reflected in the minutes of the previous meetings.

86. The Chair recalled that at Committee's October 2018 meeting a number of Members had indicated their willingness to continue discussions on ways to improve timeliness and completeness of notification obligations under the SCM Agreement, with the notification of subsidies being the most fundamental. In this regard, there were two topics to cover under this agenda item, (i) the

status of Members' notifications of subsidies and (ii) the US proposal regarding a written process for

questions and answers under Articles 25.8 and 25.9 of the SCM Agreement.

87. Regarding the status of subsidy notifications, the Chair noted that the Secretariat had prepared and updated a background note at the request of Members, providing a snapshot of the level of compliance with the various notification obligations under the SCM Agreement since 1995, the most recent of which had been circulated in document G/SCM/W/546/Rev.10.

88. Since the October 2018 meeting of the Committee, only Montenegro had submitted its 2017 new and full notification. In addition, India had provided an additional notification to its previously

submitted notification.

89. The Chair also noted that he had sent individual reminder letters to those delegations with pending notification obligations and invited them to provide their subsidy notifications as soon as possible.

90. Unfortunately, compliance with the obligation to notify subsidies remained low. 77 Members had not made their 2017 new and full subsidy notifications for which the deadline had been 30 June 2017. Sixty-two Members still had not made their 2015 new and full subsidy notification,

although the deadline had been almost four years earlier. Further, fifty-five Members still had not made their 2013 notifications, which had been due six years earlier. Many of these Members either had never notified or had done so only in the distant past. The chronic low compliance with this fundamental transparency obligation constituted a serious problem in the proper functioning of the Agreement.

91. The Chair invited the Members that had not yet submitted their 2017 notifications to provide

an update to the Committee on their progress in preparing those notifications. No such delegation took the floor.

92. The Chair urged Members that had not yet submitted their notifications to do so and recalled that the Secretariat continued to be available for enquiries about compliance with notification obligations. The Secretariat had assisted many Members in the past and Members finding themselves unable to comply with their obligations were encouraged to consult the Secretariat. There was a range of resources that delegations could draw upon in working to rectify the situation, including the

Secretariat Handbook on Notification Requirements for the SCM Agreement and the two Geneva-based Internship Programmes coordinated by the Secretariat. The Secretariat had recently modified the handbook as well as the mock examples for the notifications to be submitted which could be found on the WTO webpage.

93. In addition, the Secretariat had launched a series of regional technical assistance activities with a specific focus on the notification of subsidies. The first of such events had been organized in July 2018 in Singapore for developing Members in the Asia-Pacific region. Three additional activities

had been scheduled in 2019 for Latin American countries as well as French and English-speaking African countries.

94. Morocco indicated that it was working with different departments and agencies in order to gather information on subsidies and it would provide its notification. Recalling the Ministerial Decision

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taken in Buenos Aires on fisheries subsidies, Morocco reminded that its notification on fisheries programmes had already been circulated.

95. New Zealand expressed concerns with the low levels of compliance with WTO notification obligations. Without those notifications it would be difficult to assess what programmes were in place which might be affecting the trade interests of other Members. New Zealand appreciated the opportunity to ask questions of other Members particularly regarding their notified fisheries subsidies

programmes and the timely responses to those questions. New Zealand had also provided responses to Members' questions in previous meetings regarding changes in New Zealand's domestic countervailing duty legislation. Those questions had given New Zealand an opportunity to get external perspectives on its legislation. New Zealand also noted that many Members had not submitted a nil notification although they did not have any subsidy programmes in place. New Zealand encouraged those Members who had not submitted their notifications to do so as soon

as possible. Those facing difficulties should seek assistance from the Secretariat.

96. The European Union stressed that the notification of subsidies was a key element to the work of this Committee and an essential part of the SCM Agreement. It was imperative that Members made their best effort to notify all their subsidies granted in their territories. Referring to a previous discussion on completeness of notifications, the European Union reiterated that all Members were required to provide full notifications of all those subsidies that were specific. Members could not wait for the WTO to determine whether or not the subsides were specific; rather they should make this

judgement by themselves. It was of great concern that the level of compliance between 2015 and 2017 had dropped. Only 45% and 41% of Members had notified in 2015 and 2017, respectively despite the very extensive efforts made by the Secretariat to hold technical assistance and to update the Handbook.

97. Chinese Taipei expressed its concerns regarding the low level of compliance with the notification obligations and urged those Members which had not yet provided their notifications to do so in a timely manner.

98. Canada shared the concern of the Chair and other Members with respect to the low level of compliance with notification requirements. Canada agreed that the subsidy notification process was a resource intensive but fundamentally important transparency exercise and encouraged Members to take best efforts to fulfil their requirements and seek assistance from the Secretariat, if necessary.

99. Australia echoed the concerns raised by previous speakers noting that the statistics were worsening rather than improving. It reiterated that the transparency obligation was a core provision

of the Agreement. Without notifications it would be very difficult for exporters and producers to know what was going on in other markets. Australia urged those Members who were in the process of compiling the notifications to do so as soon as possible. It also appreciated the support provided by the Secretariat.

100. The United States associated itself with the previous speakers and expressed its concern over declining number of notifications that had been provided. The United States applauded the work of

the Secretariat in providing technical assistance and particularly, the regional seminars on

notification obligations. The United States also asked to keep that item on the agenda.

101. China echoed the previous statements noting that transparency and notification requirements constituted fundamental elements of many WTO Agreements and compliance with the existing notification requirements had been chronically low. All Members should make their efforts to improve the performance of notification requirements. Developed Members, having adequate technical capacities and administrative resources, should take the lead role in performing the transparency obligations. Developing Members should also fulfil their obligations within their abilities. In addition,

the Secretariat should play a vital role in the process of improving transparency. The lack of capacity had always been a challenge for developing Members to fulfil their notification obligations, especially for those facing practical limitations in terms of administrative resources and technical conditions.

102. Japan echoed the statements made by the previous speakers and noted that transparency

through the notification obligation was one of the most important foundations to make the WTO system work more effectively. All Members should make their notifications within the specified

deadlines.

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103. The Russian Federation thanked the Secretariat for the surveillance of subsidy notifications noting that notification of subsidies was a fundamental obligation.

104. Pakistan indicated that notifying subsidies in a timely and complete manner was very important to address issues of distortion in the global market. If Members were not following the obligations, it would create inefficiency in the performance of the Agreement. The support from the Secretariat was very important for Members who needed technical assistance to meet this obligation.

105. Norway emphasized the importance of transparency sharing the concerns expressed by previous speakers. Notification obligations had to be completed within the deadlines and Norway stood ready to engage in efforts in addressing the situation.

106. Tajikistan informed the Committee that it was in the process of completing its notification working with the Secretariat. The notification would be submitted soon.

107. Referring to the statement made by China, the European Union noted that all Members were

facing similar resource limitations and lack of capacity in dealing with that issue. Members had to make better efforts to meet with their obligations. There were more complexities for certain Members. The European Union had to coordinate, not only on subsidies granted at EU level, but also granted at 28 Member States level. Some of the Member States then, in turn, had further complex federal structures – all of which had to be coordinated. Nevertheless, the European Union still managed to get its notification done in time every second year despite tight resource limitations. The European Union suggested those members who had not made yet to make a nil notification.

108. With respect to the second topic under this agenda item, the Chair recalled that at the Committee's October 2018 regular meeting, a number of Members had indicated their willingness to continue discussions on the proposal from the US regarding procedures for questions and answers under Articles 25.8 and 25.9 of the SCM Agreement.5

109. The United States recalled that previously it had introduced its formal proposal that written answers to initial questions under Article 25.8 be provided within sixty days and that follow-up questions be answered in thirty days. Although the mandatory deadlines for written answers to

questions under Article 25.8 were necessary for the proper functioning of the provision, it recognized the concerns raised by some developing countries. Since no consensus had been reached on mandatory deadlines previously, the United States proposed an alternative under which Members would agree to non-mandatory deadlines for responses to Article 25.8 questions.

110. Under that proposal, Members would only agree to make their best efforts to submit written responses to Article 25.8 questions within sixty days and written responses to follow-up questions

within thirty days. According to the United States, such guidelines would signal that Members of the Committee were committed to making the important transparency provisions contained in the SCM Agreement function properly. While that was a less ambitious outcome it would be an important, initial step to enhance a critical transparency tool.

111. Although it had been reluctant to reconsider its position, the United States had heard certain Members' comments and modified its position to take into account those concerns. Where written responses to questions posed under Article 25.8 are not provided in a timely manner, or not at all,

that important tool would be rendered ineffective and thus undermine transparency and the proper functioning of the SCM Agreement. The idea of Members committing to providing written responses to Article 25.8 questions within a specified time was not a radical one and was in fact rooted in the accepted practices of the Committee.

112. According to the United States, there was nothing extraordinary about the proposal because it mirrored the existing practice of providing answers to questions on regular notifications and reflected the practice most Members had followed when answering Article 25.8 questions. The

United States would ask that the proposal be adopted in the same manner as the procedures for review of regular notifications and expected that the new proposal would overcome Members'

5 G/SCM/W/557/Rev.3.

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concerns. The United States indicated that it remained open-minded noting that it had made very significant modifications to the proposal to reach agreement.

113. The United States reminded that this provision was used infrequently – less than once a year on average – which suggested it was not being abused. It was, however, an important transparency tool and the new proposal would advance its proper functioning. Finding ways to enhance transparency was a goal that all Members should embrace, considering the outcome at the Ministerial

Conference in Buenos Aires, where Ministers had re-committed to the implementation of existing notification obligations under Article 25.3 of the Agreement.

114. The United States remained flexible in finding a pragmatic solution that would satisfy the underlying objective of enhancing the exchange of information.

115. Japan supported the new proposal noting that the title of the proposal had changed from

procedure to guideline meaning that it was not mandatory. Members should respect and follow the

proposal as a best effort base. That guideline would be a good practice for transparency. Different from measures such as laws and regulations it was not easy for other Members to access subsidy information. Therefore, the transparency of subsidy was very important for the implementation of the Agreement.

116. Canada agreed that the subsidy notification process was a fundamentally important transparency exercise and expected that Members would make every effort to provide their notification and respond to questions from Members in a timely and complete manner. Canada

further noted that the information request process contemplated under Articles 25.8 and 25.9 of the SCM Agreement were important pillars for achieving the transparency objectives of the Agreement and supported the proposal.

117. The European Union supported the US proposal indicating that the revisions should fully address the concerns that had been made by certain Members. The question and answer process

under Article 25.8 and 25.9 was an imperative complementary aspect to the notification of subsidies. The European Union invited other Members to fully support the proposal.

118. Australia supported the proposal and the revisions made which indicated that Members were listening to each other. It appreciated the US' flexibility in looking at ways to accommodate the concerns raised by some Members. This was a very important part of Article 25 and it was within the gift of the Committee to agree on the guidelines being used.

119. Korea expressed its support for the revised proposal of the US which could serve as a useful guideline in operating Article 25.8 of the Agreement.

120. China recalled its position at the previous meetings noting that Articles 25.8 and 25.9 did not dictate that Members should submit written replies, nor did it specify that the deadline for submitting answers. The requirement for making written answers would impose new substantive obligations on

Members. China recalled that many questions raised by the Members pursuant to Article 25.8 had been incorporated into the normal questions upon subsidies notifications. Therefore, the proposal would not only cause difficulties to the LDC Members but would also pose challenges to many developing Members by increasing their workload and distracting their focus on preparing their

notifications. China reiterated the importance of transparency expected that the relevant discussions could be conducted in a pragmatic manner.

121. Brazil supported the proposal and thanked the United States for its flexibility. It had become a balanced proposal which would be helpful to improve transparency. The revised proposal would provide more predictability to the process established in Articles 25.8 and 25.9 ensuring the necessary flexibility in terms of deadlines that might be needed for Members to submit written answers to questions posed on their programmes.

122. India thanked the United States for the revised proposal and appreciated its efforts to bring in new elements in the revised proposal taking into account the discussions and concerns raised by

Members. The US proposal, in various forms, had been under discussion in the Committee for some time, and Members had raised certain basic and fundamental concerns with the proposal. The US in its revised proposal had tried to bring in the concerns of Members by linking the timelines with the

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best endeavour clause. India agreed that transparency was an important component of the SCM Agreement and was essential for the smooth functioning of the multilateral trading system. However, the strict timelines for notifications imposed certain burdens for developing Members. Thus, pragmatism was needed in imposing such enhanced obligations. Developing and LDC Members had capacity constraints and challenges in meeting those enhanced obligations. First of all, the proposed time limits for the submission of replies to the questions under Article 25.8 needed to be

examined from the point of view of practicality and pragmatism. Most developing and LDC Members had capacity constraints in compiling information from different central or sub-central agencies. One of the Members stated that the information collection from the sub-federal level, particularly the state governments or the Member states was not an easy job. Therefore, India was not completely convinced with this strict time frames, even though it was the best endeavour clause which could yield effective results. Noting that the proposal used the phrase "appropriately answered", India was

not sure who would determine whether the question has been "appropriately answered". India also indicated that it would look forward to bilateral discussions with the United States on the revised

proposal.

123. Chinese Taipei thanked the United States for the proposal which was necessary and essential for transparency and expected to work together with Members on the proposal in the future.

124. The Russian Federation reiterated its welcome for the efforts to increase timely responsiveness of Members but recalled the concerns raised by some Members at previous meetings. It also

reiterated that the interests of Members with complex state structure should be taken into account. For those Members it might be a challenge to collect and process the relevant information from regional authorities.

125. The United States noted the comments raised by India and the Russian Federation and indicated that it would discuss those issues with them bilaterally.

126. The Chair stated that it appeared that Members wished to continue discussions on those issues

at the next regular meeting of the Committee.

127. The Committee took note of the statements made.

8 CONSTANT DOLLAR METHODOLOGY FOR GRADUATION FROM SCM ANNEX VII(B)

128. The Chair recalled that, pursuant to the Doha Ministerial Decision on Implementation-Related Issues and Concerns (document WT/MIN (01)/17, paragraph 10.1), Annex VII (b) to the SCM Agreement listed Members until their GNP per capita reached US$1,000 in constant 1990 dollars for three consecutive years. As of 1 January 2003, the methodology set forth in G/SCM/38,

Appendix 2 had applied for making those calculations. In accordance with that Decision, since then the Secretariat had circulated annual notes in document series G/SCM/110 updating the GNP per capita figures for the Members listed in Annex VII (b) based on that methodology. The most recent version, Addendum 15, had been circulated in 2018 and the Secretariat would circulate the updated

calculations as soon as the necessary World Bank data became available.6

129. No Member took the floor and the Committee took note of the Chair's statement.

9 IMPLEMENTATION OF PARAGRAPH 2 OF THE MINISTERIAL DECISION ON FISHERIES

SUBSIDIES (WT/MIN(17)/64; 13 DECEMBER 2017) – ITEM REQUESTED BY ARGENTINA, AUSTRALIA, CANADA, COSTA RICA, THE EUROPEAN UNION, ICELAND, JAPAN, THE REPUBLIC OF KOREA, NEW ZEALAND, NORWAY, CHINESE TAIPEI AND THE UNITED STATES

130. The United States recalled the Ministers' recommitment at the Ministerial Conference in Buenos Aires in 2017 to the implementation of existing notification obligations under Article 25.3 of the Subsidies Agreement, with a view toward strengthening transparency with respect to fisheries

subsidies. It noted that Members' record in meeting their subsidy notification obligation under

6 Document G/SCM/110/Add.16 was circulated on 14 May 2019.

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Article 25.3 was abysmal and seemed to be getting worse. Almost half of all Members had not submitted their subsidy notification in 2017.

131. For example, one of the largest fisheries producers had not provided a notification since 1996.

Even when some Members had provided a notification, not all of their fisheries subsidies were

reported. The United States called on Members to correct course and submit their complete subsidy

notifications, including their fisheries subsidies information, by the 30 June deadline. In light of the

Ministerial directive from Buenos Aires, all Members had to seriously re-commit to meet their existing

notification obligations – or risk missing the first important deadline set at MC11. This was an

opportunity to demonstrate that Members could carry out one of the most basic transparency

obligations that they had in the WTO.

132. According to the United States, Members also had to ensure that their notifications provided

greater transparency, where needed, that was unique to fisheries subsidies programs, and allowed

a better understanding of the operation of notified programs. At fisheries subsidies negotiations in

the Rules Negotiating Group, discussions had all too often devolved into abstract debates on

definitions, fisheries management regimes, and jurisdictional issues. The subsidy notifications called

for by Ministers were straightforward and served as an important reality check on those discussions.

Meeting the ministerial mandate with full and comprehensive notifications of fisheries subsidies could

provide important context and benchmarks for finding ways to break longstanding stalemates.

133. The previous year, the United States had asked what practical impediments might be in

submitting timely and comprehensive notifications of fishery subsidies. Several Members had

indicated the difficulties in meeting their notification requirements in a timely manner, and that in

some instances this could be attributed to capacity, internal coordination challenges, and resource

constraints. For those Members, the United States suggested alerting the Secretariat, to help

expedite submission of a "nil" notification. For those facing practical challenges, the WTO Secretariat

was in a position to help, and was immediately available to help provide advice concerning the

gathering and notification of fisheries subsidies information.

134. The United States also noted that it was willing to share experiences and prepared to help to

ensure capitals were well informed of the need to meet the deadline. It was open to any further

ideas that would help to ensure that all Members comply with the Ministerial directive from

Buenos Aires to provide fisheries subsidies notifications under Article 25.3 by June 30th.

135. New Zealand reiterated the directions from Ministers at MC11 reaffirming existing obligations to notify fisheries subsidies under the Agreement by 30 June 2019. Unfortunately, Members were not fulfilling their obligations to notify. The lack of comprehensive implementation of this obligation

was unfortunate and Members did not have a transparent picture of distorting subsidies which

created substantive and systemic problems, not only for Members' work and engagement in the Committee, but also for the ongoing fisheries subsidies negotiations. If Members fail to achieve a critical mass of notifications and meet this time-frame, Members need to ask themselves, what signal does this send to the stakeholders who are watching the fisheries subsidies process so closely. If Members fail on this fundamental restatement of their existing obligations, what does it say about going to the next step and remove harmful fisheries subsidies. New Zealand is aware of the

legitimate and genuine challenges facing some Members in preparing notifications and encourages them to be open about these challenges and engage with the Secretariat and other Members.

136. Chinese Taipei echoed the statement made by New Zealand and recalled Ministers' recommitment to the implementation of existing notification obligations under Article 25.3 of the Agreement. This was not a new but rather an existing obligation. For the difficulties of Members, in preparing fisheries subsidy notifications, Chinese Taipei welcomed the suggestion made in the previous meeting that Members could ask technical assistance from the Secretariat. In addition,

Members could share expertise in the Committee. Chinese Taipei urged Members who had not

submitted the relevant information on fisheries subsidies to do so.

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137. Argentina recalling the decision by Ministers in Buenos Aires noted that in particular when there was a lot of turbulence in the multilateral system – better efforts in notifications would be a real opportunity to improve visibility of the Organisation and to enhance its internal work. Argentina fully agreed with what had been said by Canada in October 2018 that complete and precise information on existing programmes of fisheries subsidies were necessary, so that Members could properly deal with the challenges relating to the illegal, unreported and unregulated fishing as well

as overfishing. They could also meet the Sustainable Development Goal 14.6. Argentina invited Members to double their efforts to meet their transparency obligations and noted that Members could exchange ideas which would be useful for those Members that were finding it difficult to achieve this.

138. Canada emphasised the importance of fisheries subsides recalling Ministers' decision at MC11. Many Members, however, had not notified any fisheries subsidies. In anticipation of the upcoming

June deadline for subsidy notifications, Canada urged all Members to comply with their obligations

and provide information on their fisheries subsidies programmes. Having a clear picture of the fisheries subsidies maintained by Members was a necessary first step, if Members were truly committed to delivering on our commitment to deliver new rules addressing harmful fisheries subsidies. Members had discussed previously, both in the Committee and on the Negotiation Group on Rules, possible ways to facilitate compliance by Members with their notification requirements. Canada was prepared to engage constructively on any new suggestions to that end and expected all

Members would strive to fully notify their fisheries subsidies and comply with the Ministerial Decision.

139. The European Union noted that transparency with regard to all subsides, including those relating to fisheries, was of utmost importance to the EU. The EU has provided comprehensive information about its subsidy programmes at both the EU and national levels, as shown in all of its subsidy notifications, including the last one in 2017. The Ministerial Decision of 13 December 2017 provided that Members recommitted to implementation of existing notification obligations under Article 25.3 of the Agreement on Subsidies and Countervailing Measures, thus strengthening

transparency with respect to fisheries subsidies. However, when looking at the factual paper

provided by the Secretariat in document RD/TN/RL/49/Rev.3 the situation looked somewhat different. In fact, it looked downright dismal. The Secretariat had analysed notifications from the two cycles in 2015 and 2017 and it turned out that a mere 25% of Members had notified any fisheries subsidies; and only Morocco had provided its notification on fisheries subsidies after the Secretariat's factual paper. The EU was concerned that a significant number of Members had failed to observe

fundamental rules that the WTO was based on. The EU called on those Members to heed to the commitment taken at the MC11 and implement existing notification obligations in the field of fisheries subsidies.

140. Japan attached great importance to improving Members' compliance with the notification obligations in the area of fisheries subsidies. Improving the implementation of existing notification obligations through paragraph 2 would significantly contribute to the proper functioning and operationalization of fisheries subsidies disciplines.

141. Norway referred to the Ministerial Decision made in Buenos Aires in 2017 and recalled the

discussions on that issue at the last meeting of the Committee. Members' record in meeting their subsidy notification obligation under Article 25.3 was dismal. Some Members that had provided a notification had not notified all of their fisheries subsidies which had been indicated by various Trade Policy Reviews.

142. According to Norway, transparency was not only an obligation in itself but also essential as the basis for building good rules. In light of the Ministerial directive from Buenos Aires, and since

the Membership was soon entering the final stage of the negotiations on fisheries subsidies, Members should deliver on their existing notification obligations by 30 June 2019. Given how far the fisheries subsidies negotiations had come, Norway presumed that most Members now had in depth knowledge about their subsidies.

143. Norway urged those Members who had indicated difficulties in meeting their notification requirements in a timely manner to ask technical assistance from the Secretariat. Norway's ultimate

goal was to ensure that notifications provide greater transparency, where needed of Members'

fisheries subsidies programs, and that the notifications allow a better understanding of the operation of the programs. Norway's first, immediate step would be to adhere to the Ministerial Decision from MC11 and to submit complete and timely notifications of its fisheries subsidies by June 2019.

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144. China attached great importance to the protection and sustainable development of the marine fisheries resources and supported carrying out the decision of the MC11 to complete the fisheries subsidies negotiations as scheduled and improve the transparency concerns. China expected that the transparency concerns would not place excessive burdens on developing and especially, least developed Members.

145. Korea emphasised the importance of the implementation of Paragraph 2 of the Ministerial

Decision and urged all Members to implement the existing notification obligations under Article 25.3 of the SCM Agreement, thus strengthening transparency with respect to fisheries subsidies.

146. Australia reiterated the importance of the transparency obligations particularly with regard to fisheries subsidies which was more important given the recommitment made by Ministers at the MC11. Those notifications were necessary for the negotiations on developing disciplines on fisheries subsidies. Australia would normally be submitting its notification around September or October due

to its financial year. Recognizing the importance of meeting the 30 June 2019 deadline for fisheries subsidies, however, it would submit a separate fisheries subsidies notification by 30 June. Australia urged other Members with similar circumstances to follow a similar approach.

147. Pakistan, referring to the Ministerial Decision at the MC11, endorsed the views expressed by Members and noted that the notification obligation under the Agreement as well as the pursuance of the Ministerial Decision was very important for all Members.

148. The Committee took note of the statements made.

10 ARTICLE 25.8 QUESTIONS TO CHINA ON POTENTIAL STEEL SUBSIDIES – ITEM REQUESTED BY THE EUROPEAN UNION AND THE UNITED STATES

149. The United States recalled that it had been concerned with the lack of transparency of China's industrial subsidy regime since 2001. To prompt a more fulsome disclosure of China's subsidy

programmes, it had raised questions to China under the old Transitional Review Mechanism, pursuant to Article 25.8 of the Agreement, under the normal Committee procedures and also counter-notified subsidy measures under Article 25.10.

150. As steel was a vital sector in the US, it had raised questions and counter-notified numerous possible steel subsidy measures in China. Notwithstanding its claim to the contrary at prior meetings, however, China had not notified the vast majority of its steel subsidy programmes over the last eighteen years of its WTO Membership.

151. The growth of the steel industry in China had been remarkable since China had become a WTO Member. Its steel capacity had grown over 500% since 2001 and it accounted for half of the global

steel production. The growth of capacity in China had outpaced the growth in demand. Its steel capacity exceeded domestic demand by approximately 300 million tons.

152. In a market economy, when capacity outpaced demand, the owners of that capacity were threatened by financial loses which forced them to reduce capacity or exit from the market. In a market economy, when there was excess capacity in an industry it would be difficult to obtain commercial financing for even more capacity investments. However, those market dynamics did not appear to apply in China.

153. The financial crisis in 2008 had led to a severe drop in global demand for steel. In China, however, the financial crisis had not affected the increase in capacity. Steel capacity in China had increased by 500 million tons or by 78% between 2008 and 2015 while its internal demand for steel had increased by only half of that amount.

154. Ministry of Industry and Information Technology of China and many market analysts agreed that China's steel demand had peaked, and it had been declining since 2013.

155. China's excess production had spilled over to export markets while there was insufficient

domestic demand. China's exports had grown from less than 7 million tons to 70 million tons between 2001 and 2017 which had led to a rise in trade remedy cases in both developed and developing countries against Chinese steel products.

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156. According to China, the growth in capacity and exports – in both good and bad times – had been accomplished with little or no government subsidy support, even for those companies owned by the government, while a superficial examination of the annual reports of several of the largest steel companies in China indicated otherwise. In those reports, under the title of "government subsidies" or "government grants", many of China's top steel companies listed dozens of government-funded projects through the provision of grants.

157. The Article 25.8 questions co-submitted by the European Union and the US enquired about 160 government subsidies or government grants listed in the annual reports of six of the largest steel companies in China. More recent annual reports indicate the same general level of government subsidies. All of the listed government subsidies or government grants might not be subject to the notification requirements of Article 25 of the SCM Agreement; however, there were certainly more than the three non-specific programmes China had claimed to be the exclusive instances of

government intervention in the steel industry or the few other programmes that China claimed it

had notified under different names or had not been specific. It had taken China sixteen years to submit its first sub-central subsidy notification however it was clear how deficient the notification was.

158. According to steel company annual reports, several of China's steel companies had received relatively large government equity investments which were not surprising given that most of the largest steel companies in China were government-owned. The US and the EU had asked China to

explain whether those government investments could be commercially justified; however no response had been provided by China, even orally at previous meetings.

159. The European Union noted that it fully associated with the US statement. It also thanked China for some of the clarifications that had been provided at previous Committee meetings. According to the EU, while some of the schemes referred to in the questions might already have been notified, that was not clear. The EU remained very concerned that the most recent notification of China in July 2018 did not mention any steel-specific subsidies, even though both the US and EU had

identified specific steel subsidies granted to steel companies in China. Submission of a complete or full notification on subsidies was an essential part of the Agreement therefore the EU urged China to note that their next notification should include steel subsidies and asked China to provide written answers to those questions in the interests of transparency.

160. China had noticed the sustained concern of the US and the EU about its steel industry policies which China would like to clarify. China also indicated that its efforts in improving the transparency

of the steel subsidy policies should not be ignored or underestimated. In its latest subsidy notification for the period of 2015-2016, China had incorporated subsidies involving the steel sector. Although those policies were not specific to steel industry China had included them in the notification for the purpose of improving transparency.

161. For example, at the central governmental level there were preferential tax treatment for environmental protection, water and energy conservation, clean development mechanism, fund for energy conservation and emission reduction, fund for air pollution prevention and control, R&D super

deduction for enterprises, and reward and support fund for the structural adjustment of industrial enterprises.

162. At the local governmental level, there were;

i. Fund for environmental protection, Jiaozuo city of the Henan Province. ii. Fund for prevention and control of air pollution, Jiaozuo and Xinxiang city of the Henan

Province. iii. Fund for environmental protection, Hu nan province.

iv. Fund for energy conservation, Tianjin Municipality. v. Reward and support fund for dissolving overcapacity, Yunan province. vi. Fund for prevention and control of air pollution, He Bei Province vii. Fund for energy conservation, emission reduction and ecological protection, Jilin Province viii. Fund for pollution prevention and control and environmental monitoring and supervision,

Jilin Province

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163. China had sent the annual report of the six steel enterprises mentioned in the documents to the competent local governments for further verifications. In the meantime, the 2017-2018 local subsidy notification were in the process of drafting. If the related steel subsidy policies fell within the scope of notification based on China's understanding, it would include those in the coming subsidy notification.

164. With regard to the programs indicated in the annual report, China noted that the annual report

was formulated upon supporting programs, while its notification was based on policies. Therefore, different programs sometimes might come from the same policy and there was no one-to-one correlation between those two. Even with the same program, there could be duplication of statistics among different subsidiaries. According to the SCM Agreement, however, not every program released in the annual report shall be notified. As a result, not every program disclosed in the enterprises' annual reports corresponded to one of China's submitted subsidy notifications. For this

reason, it was pointless to compare the number of subsidy policies notified with the programs

disclosed in the annual reports.

165. With respect to the issue of overcapacity, China noted that over-capacity of steel was a global problem which required joint efforts to cope with. With the rapid economic development and the organisation in China, the production of steel had increased quickly. The increased capacity was attributable to domestic development as China's exports of steel in 2018 only accounted for six per cent of the total steel production. In contrast, the export production of some EU members had been

as high as 60%, while Japan's production had been higher than 30%.

166. China also indicated that the economic development of developing Members definitely needed an increased production of steel which had been proven evidently by the rapid increase of steel productivity in such Members. Therefore, it was outrageous that China should take the major responsibility for over-capacity. In the meantime, China had taken positive efforts to fulfil the commitments of G20 summit according to which the outdated capacity would be eliminated in a way to improve the environmental protection standards as well as safety and quality standards. From

2016 to 2018, China had eliminated 150 million tonnes of outdated capacity, resettled 270,000 laid-off workers and made a significant contribution to sustainable development of steel industry.

167. The Chinese Government pushed structural reform of the supply side in depth. In November 2008, eleven departments including the National Development and Reform Commission and the Ministry of Industry and Information Technology had jointly published a Circular forbidding the preserving of some enterprises through financial subsidies by the government.

168. Japan stated that, in the interest of transparency, Members should continue the discussion on this issue in the Committee.

169. The Committee took note of the statements made.

11 PERMANENT GROUP OF EXPERTS

170. The Chair recalled that the terms of Mr Welber Barral and Mr Chris Parlin as members of the Permanent Group of Experts (PGE) expired in April 2017 and April 2018, respectively. The previous Chairperson of the Committee had held consultations with a view to fill those vacancies and she had

informed the Membership that Rabih Nasser of Brazil had received the greatest number of expressions of support, followed by Mr Jaemin Lee of Korea. Due to some issues raised following the consultations, however, the Committee had not been able not finalize the election process at its previous meetings.

171. Following the Chair's conducts, those Members, which had previously raised concerns, agreed to join the consensus to fill those vacancies. Accordingly, in document G/SCM/153, the Chair informed the Committee and proposed that the Committee elect Mr Rabih Nasser and Mr Jaemin Lee

to fill the vacancies on the PGE created by the expiry of the term of office of Mr Chris Parlin and Mr Welber Barral, respectively. Since no Member raised any reactions to that proposal the election process was finalized as explained in document G/SCM/154.

172. The Chair also recalled that the term of office of Mr Subash Pillai as a member of the Permanent Group of Experts was expiring and the Committee should elect a new member to replace

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him. The Secretariat received only one nomination, Ms Marina Foltea from Moldova and no objection was raised against her nomination during the Chair's consultations. The Chair recalled that he had explained the procedures he had followed and shared the results of the consultations with the Membership in a transparency session held on 18 April 2019. On that date, he had circulated an email to Members summarizing the process and the outcome of his consultations. In that fax, he had asked any Member that had not been able to join a consensus around Ms Marina Foltea to so

inform him in writing via the Secretariat by 25 April 2019. He also had noted that Members not expressing any view would be considered to agree to join the proposed consensus.

173. Since no objection had been raised, it appeared that there was a consensus to elect Ms Marina Foltea to the PGE. The Chair thus proposed that the Committee elect Ms Marina Foltea to the Permanent Group of Experts, for a term of office to expire in spring 2024.

174. The Committee elected Ms Marina Foltea to the Permanent Group of Experts.

12 OTHER BUSINESS

175. Mexico expressed its concern over the recent anti-dumping and anti-subsidy investigations carried out by the United States against the imports of steel structures.

176. As also pointed out during the investigation, Mexico was concerned about the lack of clarity of the information used to initiate the investigation. Mexico referred to the deficiencies in the application, deficiencies in the determinations made by both the Department of Commerce and the International Trade Commission, and the deficiencies in the preliminary determination of the

Commission.

177. In particular, it was not clear which products were investigated. Mexico had indicated during the investigation that the customs information used by the US included products that did not meet the description of the products subject to investigation, so it was not clear whether they were subject

to investigation or not. Obviously, this caused serious doubts about the compatibility of other aspects involved in the investigation with the applicable provisions of the WTO Agreements. According to Mexico, these deficiencies should be sufficient to reconsider the initiation of the present

investigation.

178. No explanation was provided as to the type of analysis that was carried out to make a determination on whether imported and US products were like.

179. Before the initiation of the investigation, the applicant could not prove that it was representing the domestic industry, and once the investigation had been initiated, it tried to remedy this defect by simply changing the name of the case. The applicant did not prove that it represented the

domestic industry, thus allowing it to submit an application on its behalf. Mexico reiterated that no investigation could be initiated if the applicant's representativeness was not clear.

180. Despite those deficiencies, on 25 March 2019, the US International Trade Commission issued its preliminary determination where it indicated that there was sufficient evidence to conclude that the investigated imports caused damage to the US industry producing like products. On the same day the Commission issued its preliminary determination, noting that the deadline for interested parties to submit comments to the Department of Commerce to determine which products should

be considered as investigated had been concluded. On 11 April 2019, after a preliminary determination regarding injury, the applicant submitted additional comments on what should be considered as investigated products.

181. Thus, while the Department of Commerce was still analysing what products were under investigation, the International Trade Commission had already determined that the importation of these unknown products had caused injury to the US domestic industry. Mexico indicated that given the situation, it was clear that the interested parties' right of defence were negatively affected.

182. The United States noted that the proceedings were at a very early stage and the investigation

had been initiated in February 2019. The notice of initiation provided a description of the products subject to investigation and explained the process to submit any comments about the scope of the investigation. Numerous scope-related comments had been submitted by the deadline and the

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Department of Commerce had extended the deadline to submit comments. The Department of Commerce would consider all the comments received and had conducted all the necessary consultations prior to the initiation. The United States would remain open for bilateral consultations.

183. The Chair raised the issue of the deadline for requesting items to be placed on the final agenda. The Chair reminded Members that the deadline for requesting items to be placed on the final agenda is indicated at the end of the annotated draft agenda which is made available several weeks prior to

the meeting. The Chair urged Members to observe the specified deadlines.

184. The Committee took note of the statements made.

13 DATE OF NEXT REGULAR MEETING

185. The Chair recalled that the proposed date for the autumn meeting was the week of

21 October 2019. At the SCM Committee meeting held in May 1995, it was agreed that the Committee meetings will be held twice a year in the last weeks of April and October of each year.

However, during this spring's meeting of the Safeguards Committee on 29 April, Members had agreed ad referendum to hold the Safeguard Committee's meeting in the week of 4 November 2019, pending approvals from capitals. The Chair therefore proposed to schedule ad referendum the next regular meeting of the Committee for the week of 4 November 2019.

186. The Committee so decided.7

14 ELECTION OF OFFICERS

187. The Chair explained that the election of the new Chair and Vice-Chair for the Committee cannot

take place at this meeting, as discussions were still underway in the CTG. The Chair noted that the Secretariat would send a communication to Members once the CTG has completed its work, indicating the name of the new Chair appointed by the CTG. The new Chair would be deemed to be

elected by the Committee absent any objection. The Chair proposed to postpone the election of the Vice-Chairperson until the new Chair is appointed.

188. The Committee so decided.

__________

7 On 9 May 2019, the outgoing chairs of the Committee on Anti-Dumping Practices, the Committee on

Safeguards, and the Committee on Subsidies and Countervailing Measures jointly sent a fax to all Members confirming that no objection was received. Subsequently on 15 July 2019, the newly-appointed chairs of the three Committees jointly sent another fax to all Members informing that due to a conflict with the meetings of the Negotiation Group on Rules (fisheries negotiation) they propose that the meetings of the three Committees be held during the week of 18 November 2019. No objection was received.