RESTRICTED
WORLD TRADE
G/SCM/M/75/Corr.1*
10 March 2011
ORGANIZATION
(11-1218)
Committee on Subsidies
and Countervailing Measures
MINUTES OF THE REGULAR MEETING
HELD ON 28 OCTOBER 2010
Chairman: Mr Robert Jui-song Fang (Chinese Taipei)
Corrigendum
Please note that paragraphs 67 and 69 of the original document G/SCM/M/75 should be
replaced by the following:
67.
The delegate of El Salvador stated that following the General's Council Decision of 2007
(WT/L/691) provisions on this matter and the guidelines of the Subsidies Committee of October and
April of last year, his delegation had notified on 30 July 2010 the annual update of the programme for
which El Salvador requested the continuation of the extension for the transition period, provided in
Article 27.4 of the SCM Agreement, for the Export Processing Zones and Marketing Act, commonly
called as the Free Zone and Inward Processing Warehouse Programme. In this notification,
El Salvador had included the action plan for complying with the General Council decision. He
referred to the economic and trade data which they understood continued to justify the transitional
period for the programme under review and the context in which El Salvador's action plan had been
submitted for the mid-term assessment being conducted as provided for under the General Council
decision. El Salvador had found that this programme was important to El Salvador as one of the tools
for stimulating the establishment of, increase in, investments in El Salvador and to improve the
well-being of the El Salvadorian population. Among the reasons for which it played an important role
in the Salvadoran economy they had found that: by the end of 2009, the programme was used by
256 companies, which directly employed 65,000 persons who were allowed to access social security,
education, healthcare and pensions. The programme also allowed for the creation of 130,000 jobs
indirectly. The programme, thus, benefited and contributed in 8.4 per cent of the labour force in
El Salvador. 80 per cent of the businesses that benefited from the programme were manufacturing
companies which contributed $1.487 million, i.e. 39 per cent of the value of El Salvador's exports. It
also contributed 2.5 per cent of El Salvador's GDP in 2008. Furthermore, the businesses operating
under this programme had strengthened the production chains which promoted better added value
through, e.g., a complete package which allowed for technological advances in this sector.
Furthermore, given the economic and financial crisis which negatively affected the national economy,
exports and remittances from Salvadorans abroad suffered an annual decrease of 19 per cent and
9 per cent, respectively. Like other Members, credits for private investments also dropped
substantially and exacerbated the contraction in strategic sectors such as construction, tourism,
manufacturing which further increased the effects of the economic recession and contributed to the
drop of the GDP by 3.5 per cent by the end of 2009. The delegate stated that unfortunately the crisis
would not be over in the near future so the recovery of El Salvadorian economy was responding to the
stimulation of markets, with which it had a strong relationship, predominantly with the US market,
*
In English only.
G/SCM/M/75/Corr.1
Page 2
with a backlog of a year approximately. He stated that the expected GDP growth for 2010 was
1 per cent of GDP, below the average growth of El Salvador's main trading partners and competitors.
The delegate explained that also the latest natural phenomena had negatively affected the entire
national territory and and had left damages amounting to $400 million which represented 9 per cent of
El Salvador's total exports and almost 2 per cent of its GDP for 2009. These natural catastrophes had
also created significant damage in public and private infrastructures which were at the service of
productive sectors. The delegate noted that El Salvador's action plan contained the following four
sections: 1) proposal from El Salvador to comply with the procedures for the continuation of the
extension of the transition period: where there's a description of the actions with respect to the
technical efforts to develop the recommendations for compliance with the General Council decision,
including the activities under the auspices of the "Inter-institutional Committee for the Analysis of the
Incentives Scheme for Free Zones and Inward Processing Warehouses", and the study of the law in
question, and a definition of the necessary legislative measures. In this section, there was also a
description and details about the strategic general lines to be applied in the technical activities
described before, developed by the relevant authorities of trade policy of El Salvador; 2) A section
containing information on legislative and administrative changes and other necessary procedures.
This section detailed the process foreseen under Salvadoran law for the elimination and/or
modification of the legal instruments regarding the free zones and inward processing warehouse
programme for its due consideration by the Legislative Assembly. 3) A section describing measures
which had been adopted or were being adopted. This section was for the follow up that had been
consistently and systematically given to the actions and processes meant to comply with the General
Council decision with sufficient time before the end of 2015. In this sense, it also described the
creation of the Inter-institutional Committee as well as its participants and the competencies of this
Committee. More importantly, the Inter-institutional Committee had the task to review the Export
Processing Zones and Marketing Act, and had to observe strictly the rights and obligations under the
current legal framework of El Salvador; and considered the best practices in other countries and
description of compliance situations with international trade law which informed the state of play of
the work of the Inter-institutional Committee. 4) Finally a last section of the action plan contained the
description of the way in which each beneficiary had been notified. This included information on
how the notification for each beneficiary was carried out, in conformity with section (e) of paragraph
1 of the General Council decision, as well as actions that had been taken by El Salvador to strengthen
this notification through a permanent notification campaign adopted since the General Council
decision. In the framework of the preparatory meetings for this review at this meeting, some
delegations had expressed their interest in El Salvador's notification. Thus the delegate of El Salvador
wanted to expand on some of the points raised by some Members on El Salvador's programme. In
this regard, he wished to inform the Committee of the recommendations that would come out of the
Inter-institutional Committee on the analysis of the free zones and inward processing warehouses,
referred to in sections 1 and 3 of the Action Plan, of the actions recommended to phase out the
program by the deadline set out in the General Council Decision, and of the legislative measures
adopted or in the process of being undertaken as a result of these recommendations. The delegate
stated that the Inter-institutional Committee was working in order to issue by 2011 a first draft of
recommendations for the legislative measures necessary in order to comply with the General Council
decision to eliminate and/or modify the law under discussion. These recommendations would take
into account the guidelines drawn up by the relevant trade policy authorities of El Salvador, which
were focussing on a series of key processes which would fully and complementarily facilitate the
implementation of the legislative measures necessary to guarantee compliance with El Salvador's
international commitments. This included strengthening public investment generally for the
productive process; incorporation of innovation and transfer of technology in Salvadoran trade
process; developing a marketing production strategy and attracting investment in order to create
quality jobs; strengthening the inclusion of the productive sector and taking advantage of market
access. The delegate also noted that these recommendations would provide the executive branch with
the basis upon which to begin the process of developing the bills which would be submitted to the
Congress of El Salvador for their analysis and approval in order to ensure compliance with the
G/SCM/M/75/Corr.1
Page 3
commitments undertaken pursuant to the General Council decision. On the basis of the
Inter-institutional Committee's recommendations, the delegate explained that it was foreseen that the
Ministry of Economy in 2012 would create a draft legal text necessary in order to comply with the
General Council decision and this would be circulated for consultation to the rest of the relevant
agencies and governmental bodies. In 2013-2014 or if possible before, the delegate expressed hope
that El Salvador would be able to submit the President's initiative through the Ministry of Economy of
El Salvador for the due consideration and approval of the bill by the legislative branch of El Salvador
necessary to comply with the General Council decision.
69.
With respect to the status quo and standstill, the delegate of El Salvador stated that this
Free Zone and Inward Processing Warehouse Programme did comply with the requirements set out in
the General Council decision. The standstill therefore had been maintained since the granting of the
extension up until the day of the meeting. With respect to the second question, i.e., as regards the
measures for eliminating subsidies, the delegate pointed out that in accordance with section 3 of its
action plan, El Salvador had set up an Inter-institutional Committee as one of its recommended
activities and would come forward with recommendations on the draft bills and legal requirements in
order to be in compliance with the General Council decision. Such recommendations would also take
into account some of the guidelines that had been given by the authorities in charge of trade policy.
The delegate stated that on the basis of recommendation made by the Inter-institutional Committee,
El Salvador envisaged that in 2012 the draft legal bill would be elaborated in order to abide by the
General Council decision and that this would be discussed with other agencies and governmental
bodies competent in this field. Lastly, the delegate stated that it was planned that during 2013-2014,
and if possible before that, El Salvador would present the President's initiative through the Ministry of
Economy of El Salvador for consideration and approval by Legislative body. This draft with
necessary legislative measures for compliance with the General Council decision would be submitted,
covering the programme.
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