RESTRICTEDWORLD TRADE
ORGANIZATIONWT/GC/50
2 October 2001
(01-4711)
General Council
REPORT OF THE CHAIRPERSON OF THE COMMITTEE ON MARKET ACCESS
TO THE CHAIRMAN OF THE GENERAL COUNCIL
The following communication, dated 28 September 2001, has been received by the Chairman
of the General Council from the Chairperson of the Committee on Market Access.
_______________
I would like to take the opportunity to respond to your letter of 2 August 2001 in which you
requested me, in my capacity as Chairperson of the Committee on Market Access, to hold
consultations on the issue of "substantial interest" in Article XIII of GATT 1994 (Tiret 4).
I would like to inform you that I have held such open-ended consultations with WTO
Members.  The first such consultations were held on 20 September, and at the suggestion of Members,further consultation was held on 26 September 2001.
In order to commence work on this issue, I asked the Secretariat to prepare a background note
in order to clarify the matter and present other background information.
1  Based on the paper of the
Secretariat, Korea circulated a proposal.2  This helped the Members focus on the real issue and to
clarify the situation.  In particular, there was some confusion with respect to this proposal and its
possible linkage to Article XXVIII.  However, the consultations made it clear that this matter solelyconcerned Article XIII of GATT 1994.
My consultations were quite constructive and led to further clarification of the issue at hand,
but due to the limited time that was available to address important points raised by other Members, no
consensus could be reached.
I would like to elaborate on the following key points which helped in a better appreciation of
the proposal:
1. The proponents clarified that the matter solely concerned Article XIII of GATT 1994, and
specifically referred to the meaning of "substantial interest" in terms of paragraph 2(d) of this Article.
This clarification allayed the concern of other Members as to a possible linkage to Article XXVIII of
GATT 1994.
2. It was clarified by the proponents that if Members were to take such a Decision or further
elaboration on the term "substantial interest", these provisions would only apply in the case of future
quota allocations.  Thus, there would be no retroactivity.
                                                     
1 Reproduced as Annex I.
2 Reproduced as Annex II.WT/GC/50
Page 2
3. There appeared to be unanimous support by Members that this was a legitimate issue and a
real problem for some Members, especially those who are small and dependent on a few key export
products into limited export markets Members expressed willingness to examine it in further detail
with a view to finding a good solution.
However, the main problem I encountered in the consultations was over the issue of timing.
Some Members had hoped that this could be achieved by the Doha Ministerial, while others could not
agree to such a time-frame.  A few others had mentioned the fifth Ministerial meeting for a possible
outcome.  Obviously, discussions broke down over this aspect.
Thus, I believe my consultations were very constructive and have led us down the path
towards hopeful eventual consensus on this matter.  Like I pointed out above, these consultations werevery useful and were able to clarify a number of important matters.  I wanted to inform you that I also
circulated a possible draft text for this issue
3, as the original texts were quite divergent in their
approach to the issue.  There seemed to be significant flexibility on behalf of the proponents in order
to achieve something by Doha, as they were willing to accept an additional notification obligation for
this matter in order to provide transparency in the process (see last sentence of text).  However, others
were not willing to discuss a possible text without studying all the ramifications of the matter in detail
beforehand.  They noted that such an examination could not be initiated and concluded before Doha.
My personal assessment as Chairperson is that if Members want to take this matter forward
after Doha, there are many possibilities to achieve a positive outcome.  I would suggest that withsome concrete analytical work in the coming mont hs, especially in respect of economic impact and
legal examination, this is something achievable by end 2002 at the latest.
In the event that Members agree to pursue wo rk on this matter in the future,  the text I
circulated would likely serve as a good starting-poi nt.  However, further points that I believe may
need to be considered in any future consultations would be to include: (1) further clarification of
wording that the Decision would apply only to new quota allocations (2) further definition or
elaboration on what is meant by "major part of total exports", and (3) amendments to the last sentence
of the text to make the notification optional and not mandatory.  These were issues that arose out of
my consultations.
In conclusion, I would like to note that I have provided this report in my personal capacity as
Chairperson of the Market Access Committee. Should you need me or the Market Access Committee
to carry out any further consultations, I would be glad to assist in this process in any capacity.
                                                     
3 Reproduced as Annex III.WT/GC/50
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ANNEX I
Background Secretariat Note
Consultations on the Issue of  "Substantial Interest" in Article XIII of GATT 1994
A. ORIGINAL PROPOSAL SUBMITTED BY ST-LUCIA ON 15 D ECEMBER 2000
"The phrase "substantial supplier" appearing in Article XIII of the GATT 1994 should be
defined  in a manner which would ensure security and predictability  of market access for traditional
small suppliers taking into account factors such as  the importance of the product to the exporting
Member as opposed to the percentage  share in the importing market."
Article XIII – Non-discriminatory Administration of Quantitative Restrictions – Article 2(d)
"In cases in which a quota is allocated among supplying countries the contracting party
applying the restrictions may seek agreement with re spect to the allocation of shares in the quota with
all other contracting parties having a substantial interest in supplying the product concerned. In
cases in which this method is not reasonably practical, the contracting party concerned shall allot to
contracting parties having a substantial interest in supplying the product shares  based upon the
proportions, supplied by such contracting parties during a previous representative period, of the total
quantity or value of imports of the product, due account being taken of any special factors which mayhave affected or may be affecting the trade in the product.  No conditions or formalities shall be
imposed which would prevent any contracting party fr om utilizing fully the share or any such total
quantity or value which has been allotted to it, subject to importation being made within any
prescribed period to which the quota may relate."
B. D
URING THE CONSULTATIONS THE CHAIRMAN OF THE GENERAL COUNCIL HELD ON THIS
ISSUE THE FOLLOWING PROPOSALS WERE MADE
(a) Alternative proposal (G7 text) by Uruguay and six other countries – proposal to be examined
by the Market Access Committee:
"The words "substantial interest in supplying the products concerned" in Article XIII
of GATT 1994 shall be understood to have the same meaning as the phrase "principalsupplying interest" in the Understanding on Article XXVIII.
(b) Proposed Chair/DG text:
"Members instruct the Committee on Market Access to consider the proposal that  a
Member should be considered to have a s ubstantial interest  in a product when that
product constitutes  a significant share of its total exports, with a view to devising a
formulation  which will take into account the interests of small suppliers  which are
dependent on a particular product and report to the General Council before the Fourth
Ministerial Conference".
The following other proposals were examined during the consultations:WT/GC/50
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(c) LMG text:
"Members agree that the text  "substantial interest in supplying the products concerned" in
paragraph 2 (d) of Article XIII of GATT 1994, shall be understood to have the same meaning
as the phrase "contracting parties with a supplying interest" in the interpretative note 5 ofparagraph 1 of Article XXVIII".
(d) ACP text:
"Members instruct the Committee on Market Access to devise a formulation that captures the
proposal that a Member should be considered to have a substantial interest in a product when that
product  constitutes a significant share of its total exports , with a view to taking into account (of) theinterests of small suppliers  which are dependent on a particular product and to report to the General
Council before the Fourth Ministerial Meeting."
C. S
ECRETARIAT 'S REMARKS
Interpretative note 5 to Article XXVIII:
["Notwithstanding the definition of a principal supplying interest in note 4 to paragraph 1,
the CONTRACTING PARTIES may exceptionally determin e that a contracting party  has a principal
supplying interest  if the concession in question  affects trade  which constitutes a major part of the
total exports of such contracting party ."]
Interpretative note 7 to Article XXVIII:
[The expression "substantial interest" is not capable of a precise definition and accordingly
may present difficulties for the CONTRACTING PARTIE S.  It is, however, intended to be construed to
cover only those contracting parties which have, or in the absence of discriminatory quantitative
restrictions affecting their exports could reasonable be expected to have, a significant share in the
market of the contracting party seeking to modify or withdraw the concession.]
Understanding on the Interpretation of Article XXVIII to the GATT 1994, paragraph 1
"For the purpose of modification or withdrawal of a concession, the Member which has the
highest ration of exports affected by the concession (i.e. exports of the product to the market of the
Member modifying or withdrawing the concession) to its total exports shall be deemed to have a
principal supplying interest if it does not already have an initial negotiating right or principal
supplying interest as provided for in paragraph 1 of Article XXVIII.  …"
The second part of the text of this provision had envisaged the revision of this paragraph " five
years from the date of entry of the WTO Agreement  with a view to deciding whether this criterion had
worked satisfactorily in securing a redistribution of negotiating rights in favour of small and medium-
sized exporting Members ."  It further envisaged that if this was not the case, " consideration would be
given to possible improvements, including, in th e light of the availability of adequate data, the
adoption of a criterion based on the ratio of exports affected by the concession to exports to all
markets of the product in question".
In May 2000 consultations took place on this item under the auspices of the Market Access
Committee and the Chairman invited delegations to submit to the Secretariat any proposal in writing;the item remained on the agenda of the Market Access Committee for a few months, but due to the
fact that this paragraph had not been invoked by any Member during the period under consideration,WT/GC/50
Page 5
no formal proposal has been submitted to amend this provision.  The Committee conducted the review
and did not alter any provision, nor did it make any recommendations.
No precise definition for "substantial interest" has ever been agreed.  During the meeting of
the Committee on Tariff concessions in July 1985, it was stated that the "10 per cent share" rule hadbeen generally applied for the definition  of "substantial supplier" for the purposes of determination
under Article XXVIII.
Now, according to the Chair/Director Genera l's mandate, the Committee should examine the
various proposals made during the consultations held by the Chairman of the General Council
regarding the proposal that a Member should be considered to have a substantial interest  in a
product when that product constitutes a significant share  of its total exports and try to work out a
formulation which will take into account the interests of small suppliers which are dependent on a
particular product.
As mentioned above, this matter has been the subject of intensive discussion in the past and
more recently in the context of Article XXVIII and the Uruguay Round.  The outcome of thosediscussions was the text of paragraph 1 of the Understanding on the Interpretation of Article XXVIII
which was never invoked by any Member.
What would small suppliers need in order invoke this possibility?
Does the issue of principal supplier in Article XXVIII mean the same as a substantial interest
in terms of Article XIII?
When the renegotiation of a concession takes place under the provisions of Article XXVIII,
the following two groups of Members have negotiating rights and are entitled to claim compensation
for the trade affected.:
(1) the Members which have an initial negotiating right  on the concession (product), and
(2) the Member(s) which have a principal (main) supplier interest;  in principle, there is only one
country which is the principal supplier  (Member having the largest share of the market in
the country or group of countries concerned, unless there are several Members which haveclose volumes of trade and which can be considered as sharing the largest part of the market);
The Members considered to have a substantial interest according to the various existing
provisions described above in the paper also have certain rights and can carry out consultations with
the Member modifying a concession.   If the Member having a substantial interest is not satisfied withthe compensation offered to the principal supplier, it can in turn request compensation.  It can also
retaliate, in terms of the provisions outlined in paragraph 3 of Article XXVIII.WT/GC/50
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ANNEX II
The Korean delegation agrees to the proposal in the Chair/DG text which requires the
Committee on Market Access to consider the matter of substantial interest, taking into account smallsupplying countries' interest, and report to the General Council before the 4
th Ministerial Conference.
With regard to the two issues raised in the Background Note, the following consideration
could be possible.
(1) The text of paragraph 1 of the Understa nding on the Interpretation of Article XXVIII
which was never invoked by any Member.  What would small suppliers need in order to invokethis possibility?
-  It would be difficult for the modifying of the concession to have trade data of all the other
countries exporting the product concerned to their country in order to determine all principal
suppliers pursuant to the Understanding.
-  Therefore, the small suppliers that are affected by the withdrawal or modification of the
concession would have to report to the WTO Secretariat the export statistics.  And the WTO
Secretariat may have to introduce a system to compare this report with other statistics to
determine principal supplying interest.
(2) Does the issue of principal supplier in Article XXVIII mean the same as a substantial
interest in terms of Article XIII?
- According to the text of Interpretative Note 4 and 7 of Article XXVIII, paragraph 1, the two
concepts cannot be construed to have the same meaning, in a legal sense.  Especially, it is
noted that the Note 7 refers to only the "signi ficant share in the market of the contracting
party seeking to modify or withdraw the concession."
- Thus, on the concept of substantial interest in  Article XIII of GATT, a further review should
be conducted, taking into account the purposes of the Article and proposals made so far.
One of the possible ways to define the substantial interest in Article XIII of GATT in a
manner that takes into account small supplying countries' interest would be:
- When the share of the export of the product concerned in the total export of a small supplying
country is larger than that of any other exporting Member country, of which market share inthe importing country is considered to be significantly high, 10 per cent for instance, then the
small supplying country could be determined as having substantial interest for the purpose of
Article XIII.
(example)
Country Market share in the importing
countryShare of export of the produce
concerned to total exportO/x
A
B
C
D
E
F20%
17%
15%
11%
7%5%3%
5%
4%
7%
1%2%O
O
O
O
XXWT/GC/50
Page 7
Country Market share in the importing
countryShare of export of the produce
concerned to total exportO/x
G
-
X
Y
Z-
-
3%
1%
0.5%-
-
10%
4%
1%-
-
O
O
X
Total 100% -
Note: X and Y countries will be considered to have substantial interest, because their shares are higher
than 3 per cent of Country A, the smallest among the ratio of the four countries that are considered to
have substantial interest because of the share of 10 per cent or more in the importing country.WT/GC/50
Page 8
ANNEX III
Possible Text on "Substantial Interest" in Article XIII of GATT 1994
The provisions of this Decision shall apply to allocations made under Article XIII of GATT
1994 as from the date of this Decision.  Suppliers with a "substantial interest" in a particular market
include those Members whose trade in the product constitutes a major part of such Members' total
exports.  Members shall submit to the Secretariat on an annual basis a list of exports of any products
to a particular market which it considers constitute a major part of its total exports for purposes of this
provision.
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