Jin-dong Kim, the chair of the WTO’s Committee on Subsidies and Countervailing Measures (SCM Committee), told members at a committee meeting that compliance with the obligation to notify subsidies “remains discouragingly low.”

“As of today, a total of 89 members have not yet made their 2015 new and full subsidy notification, for which the deadline was 30 June 2015,” Mr. Kim noted.  “And 63 members still have not made their 2013 new and full subsidy notification, although the deadline was more than three years ago.” 

Fifty-seven members still have not submitted their 2011 notifications, which were due five years ago.  Many of these members “either have never notified or have done so only in the distant past,” the chairman said.

“The chronic low compliance with the fundamental transparency obligation to notify subsidies constitutes a serious problem in the proper functioning of the (SCM) Agreement,” he added.

Under Article 25 of the SCM Agreement, members must notify any subsidy — as defined under Articles 1.1 and 2 of the Agreement — that is granted or maintained within their territories.  Members must submit subsidy notifications no later than 30 June of each year.

Both Australia and the United States put forward proposals which they said would help improve transparency with regards to subsidy notifications. The Australian initiative would add a new annex to the WTO Secretariat document on the status of subsidy notifications listing export competitiveness calculations for developing countries,¹ while the US initiative would set out procedures for questions and answers when members ask other members about subsidy programmes not included in their notifications.

Neither initiative received consensus support from members at the 25 October meeting.

 

Call for WTO talks on role of subsidies in contributing to industrial overcapacity

The SCM Committee also considered a joint call from the European Union, Japan, Mexico and the United States for WTO discussions on the role of government subsidies in contributing to industrial overcapacity.  The issue was raised and addressed at the Group of 20 Leaders’ Summit in Hangzhou, China, in September, where the G20 issued a statement in support of increased information sharing and cooperation regarding excess industrial capacity in the steel and other sectors.

The proponents called for discussions within the committee on three questions:

• To what extent have subsidies contributed to the creation of excess capacity?
• What are the specific government or business practices that have contributed to the creation of excess capacity?
• In what areas are current disciplines under the WTO’s SCM Agreement incomplete or inadequate to address these practices?

The EU, which presented the initiative, said it was an “unescapable fact” that certain types of subsidies play a role in industrial overcapacity, which has become a major problem for the global economy.  Canada, Korea and Australia also expressed support for the proposal. Several members intervening said the problem was particularly acute in the steel and aluminium sectors.

Other members raised questions about the initiative.  China said overcapacity is a problem but that it believed the root cause was the slow global economic recovery.  The G20 is already working on the issue, and China does not believe the SCM Committee is the proper forum for such discussions, it said.  Brazil said it believed the issue deserved a wider approach and that it was willing to discuss with proponents other alternatives to analyse the issue in a more complete manner.  The Russian Federation said it agreed with the EU and others that overcapacity was an issue but that other global fora should be used to address the problem.

Following the interventions, the chair said it seemed there was some interest among members to take up the proposed initiative, but given that a large number of members did not take the floor on the issue, it would be useful for members to engage in further discussions outside of the committee.

 

Enhanced transparency for fisheries subsidies

The United States once again put forward its proposal for enhanced transparency in fisheries subsidies.  The world’s fish stocks continue to decline but governments continue to spend billions of dollars on harmful fisheries subsidies, it said.  The world needs ambitious and effective disciplines on fisheries subsidies and the United States was ready to discuss what could realistically be done in the WTO to move this issue forward. 

Around a dozen members intervened, most of them supportive of the initiative.  Some members expressed caution, saying that a careful examination was needed of the specific elements to be notified, while others stressed the need to ensure that the principle of special and differential treatment for developing and least developed countries would be respected.

WTO members agreed in 2001 to launch negotiations to clarify and improve WTO disciplines on fisheries subsidies.  The United Nations’ new Sustainable Development Goals (SDG) commit governments, by 2020, to prohibiting certain forms of fisheries subsidies which contribute to overcapacity and overfishing, eliminate subsidies that contribute to illegal, unreported and unregulated fishing, and refrain from introducing new such subsidies.

 

China — notification, counter-notification

The chair thanked China for submitting a new notification on subsidies provided at the sub-central level.  He said the notification would be translated and then placed on the agenda for review at the SCM Committee’s next meeting in April 2017.

The United States raised the counter-notifications submitted by the US under Article 25.10 of the SCM Agreement regarding subsidies that it believed existed in China but which the Chinese government has failed to report.² The most recent counter-notification circulated in April identified more than 40 non-notified subsidy programmes, many of them in the fisheries sector.  The US said that it had now counter-notified a large number of Chinese legal measures, many of them at the sub-central level.  

China responded that it attaches great importance to its transparency obligations under the SCM Agreement and that it has previously responded to questions regarding supposed under-reporting.  China said that many of the measures identified by the United States are not even subsidies, such as China’s five-year plans, which are of a guiding nature only.

 

Notes:

1. Under Article 27.5 of the SCM Agreement, a developing country member which has reached export competitiveness in any given product shall phase out its export subsidies for such product(s).back to text

2. Article 25.10:  Any Member which considers that any measure of another Member having the effects of a subsidy has not been notified in accordance with the provisions of paragraph 1 of Article XVI of GATT 1994 and this Article may bring the matter to the attention of such other Member. If the alleged subsidy is not thereafter notified promptly, such Member may itself bring the alleged subsidy in question to the notice of the Committee.back to text