Citing the latest report prepared by the WTO Secretariat, the chair noted 79 members have yet to make their 2015 subsidy notifications, despite the mid-2015 deadline for making submissions, 60 had not yet submitted notifications for 2013, and 55 had not submitted notifications for 2011.  Many of these members either have never notified or have done so only in the distant past, the chair 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 declared.  “I strongly urge members that have not done so to submit their notifications as soon as possible.”

Several members echoed the chair’s concerns, with several saying the problem was not only missing notifications but the poor quality of some of those submitted.  Without proper notifications, it was difficult to assess the impact of subsidy programmes on members’ exporters and firms in the absence of details regarding the programmes.  All urged those with notifications outstanding to submit the information as soon as possible. 

Members renew call for talks on role of subsidies in contributing to industrial overcapacity

Four WTO members - Canada, the European Union, Japan and the United States – once again called for discussions within the WTO on the role of subsidies in contributing to industrial overcapacity. In presenting the group’s new paper on options for addressing the issue (G/SCM/W/572/rev.1), the European Union said it was important to examine the link between subsidies and overcapacity in various sectors. At their meeting in Hangzhou, China, last September, Group of 20 (G20) leaders recognized that overcapacity was a major problem for the global economy and one of the key causes for distortions in international trade. 

The SCM Committee has the capability and expertise to handle the subsidy side of the issue, the EU said. The range of subsidy measures is enormous, and once overcapacity is created, the problem is transmitted to other countries to the detriment of their industries. The SCM Agreement does not seem to offer remedy for such situations, and such subsidies should be subject to more stringent disciplines, the EU added. 

A half-dozen members expressed varying degrees of support for the proponents’ paper, although several questioned what the proponents meant by the need for more stringent disciplines. Many emphasized that the initial focus should be on improved transparency in subsidy notifications. One member said the problem was not only subsidies but also trade protectionism, and in particular the growing use of trade remedy measures.

China reiterated that the SCM Committee was not the appropriate forum for discussing the issue of overcapacity.  Subsidies were not the major cause of overcapacity – G20 leaders affirmed in Hangzhou that sluggish demand and the slow economic recovery since the 2008 financial crisis were the main cause; trade protectionism and trade remedies were making the situation worse, China said.  Focusing only on subsidies while ignoring other important elements will not help solve the problem, and could even trigger further protectionism, China added.

Fisheries subsidies

The United States once again highlighted the need to improve transparency in fisheries subsidies and circulated an informal paper with seven questions aimed at enhancing transparency and better understanding the possible trade effects of such subsidies. While members that intervened generally supported efforts to improve transparency, several said it was important not to duplicate work being carried out in other international organizations as well as within the WTO’s Negotiating Group on Rules, where negotiations on strengthening fisheries subsidies disciplines is currently under way.   

China, US subsidy programmes

The United States and the European Union questioned China about what they alleged were some 160 government subsidies or grants listed in the annual reports of six of the largest Chinese steel producers (G/SCM/Q2/CHN/70) which were not included in China’s WTO subsidy notifications. The United States also quizzed China about the non-notification of other alleged subsides in sectors such as steel, aluminium and fisheries, as well as the non-notification of subsidies under China’s “Internationally Well-Known Brand” programme. 

On fisheries, the United States said China had failed to notify 44 subsidy measures, including tax exemptions for certain operations such as deep water fishing and shipbuilding programmes at the provincial level. All in all, the United States said it has now submitted “counter-notifications” identifying over 470 Chinese subsidy measures that were not notified to the WTO. 

China said it had done its utmost to make information on subsidies available to the SCM Committee and believed the notifications on central and sub-central subsidy programmes submitted in October 2015 and June 2016 addressed most of the concerns raised by members. China said it does not have specific subsidy programmes for steel producers and that claims regarding alleged subsidies were groundless.

China for its part asked the United States to provide information about government support measures it said appear to provide subsidies in the steel sector, including pension insurance provided for steel producers through the Pension Benefit Guaranty Group (PBGC) as well as tax breaks and other support measures to steel producers in  Kentucky, North Carolina, Louisiana and Virginia.

The United States said no government funding has been provided to PBGC and that the state programmes in question related to worker training and building skills that were not limited to any particular industry.

India – export subsidies for textiles and apparel

The United States once again said India was required to eliminate export subsidies provided for producers of numerous goods in the textile and apparel sector. Seven years ago the WTO Secretariat released calculations showing that India had reached “export competitiveness”  in textiles and clothing no later than 2007, and that under Article 27.5  of the SCM Agreement, India had eight years from that date to phase out its export subsidies. 

The United States noted that India will soon be subject to an “Annex VII” calculation under the SCM Agreement under which, if it is determined that GNP per capita has reached $1000 per annum, India will be obliged to terminate all export subsidies in all sectors. The US is willing to discuss the issue further with India, but it is also content to wait for the updated Annex VII calculations, the US said.

India said it was committed to meeting its SCM Agreement obligations and ready to engage in discussions on issues such as when export competiveness is reached and when the phase out of the export subsidies would begin. India said it believed that export competitiveness had been reached in 2010, meaning that it had until 2018 to remove the programmes in question. Many of the benefits were in the form of remission of duties and were therefore not export subsidy schemes, India said.