RESTRICTED
WORLD TRADE G/SCM/Q2/CHE/5
10April 1997
ORGANIZATION(97-1512)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies toQuestions posed byARGENTINA1,JAPAN2,KOREA3
andtheUNITED STATES4Regarding theNew
andFullNotification ofSWITZERLAND5
Thefollowingcommunication,dated3April1997,hasbeenreceivedfromthePermanentMission
oftheSwitzerland.
_______________
Asageneral remark, Switzerland would liketodraw Members 'attention tothefactthat
Switzerland never pursued anactive industrial policy andthatallamounts ofsubsidies granted bythe
Swiss Government areextremely small and,therefore, theireffects ontrade arenegligible, ifnotnil.
ARGENTINA
1. Switzerland hasnotified subsidies infavour ofareas whose economy isthreatened, during the
period 1992-1994.
1.1 What willbethetotalduration ofthese programmes, oruntilwhen doestheSwiss
Confederation foresee thatitwillbenecessary tomaintain them, inaccordance with
Article 25.3(iv) oftheSubsidies Agreement?
Reply
Intheperiod covered byitsnotification, Switzerland wasmaintaining tworelevant regional
policy programmes, bothappearing under section Iofournotification: (i)thefirstprogramme, referred
toinsubsections I.1andI.2ofournotification isbased ontheFederal Order onFinancial Assistance
1G/SCM/Q2/CHE/3,2G/SCM/Q2/CHE/2+Rev.1,3G/SCM/Q2/CHE/1,4G/SCM/Q2/CHE/4.
5G/SCM/N/3/CHE+Suppl.1.G/SCM/Q2/CHE/5
Page2
inFavour ofAreas Whose Economy isThreatened1of1978(theso-called Bonny-Decision) which has
beenextendedon17June1994;(ii)ThesecondregionalpolicyprogrammeisnotifiedundersectionI.3.
Itisbased ontheFederal LawonGuarantees andLoan Service Contributions toMountain Regions2
of25June1976. Werecognize thatweshould havemade thedistinction between thetwoprogrammes
clearer.
TheProgramme inFavour ofAreas Whose Economy isThreatened expired inJune1996.
Ithasbeenreplaced byaProgramme inFavour ofRegions Whose Economy isUndergoing Renewal.
Thedefinitionofan"economyundergoingrenewal"isverysimilartotheoneofa"threatenedeconomy".
Inthedrafting ofthisnewdefinition, theSwiss legislators havetaken intoaccount therelevant provisions
oftheSubsidies Agreement. Weshall provide thedetails ofthisprogramme inournextupdate
notification.
1.2 While theeffects ofthese subsidies onthelabour market arenotified, there areno
accompanying statistical datathatwould permit theirtrade effects tobeassessed, as
provided forinArticle 25.3(v) oftheSubsidies Agreement. Could Switzerland provide
information inthisrespect?
Reply
Weshould liketoremind Members ofthefactthattheamounts ofsubsidies involved under
Swiss regional aidprogrammes areextremely small. Thesumofallthese subsidies amounted to
CHF 13.6, 14,7and9.8million intheyears 1992to1994, respectively. Taking, moreover, intoaccount
thatthese subsidies areneither product norsector specific, theirtrade effects cansafely beassumed
negligible, ifnotnil.
1.3 What arethegeographical areas benefiting under theprogrammes? Please clearly
identify theCantons inaccordance withArticle 8.2(b)(i).
Reply
Thefourteen following regions werebenefitting from Swiss regional aidprogrammes inthe
period covered bythenotification (inbrackets appears thesizeoftheregion 'spopulation in1990):
1. JuraSudandBienne (156,857)
2. Glarner Hinterland (11,058)
3. Grenchen/Thal (54,367)
4. Solothurn (60,339)
5. Oberbaselbieter Jura(26,216)
6. Toggenburg (23,919)
7. Biasca (14,095)
8. Vallée deJoux(9,426)
9. Nord-Vaudois (53,627)
10. Neuchâtel (163,985)
11. Jura(Jura; 66,163)
12. Oberthurgau/Rorschach (80,530)
13. Murten (13,071)
14. Wynental (23,782)
1Thetitleintheoriginal isArrêté fédéral concernant uneaidefinancière enfaveur desrégions
dontl'économie estmenacée (RS951.93).
2Thetitleintheoriginal isLoiFédérale encourageant l'octroi decautionnements etdecontribution
auservice del'intérêt danslesrégions demontagne (RS901.2).G/SCM/Q2/CHE/5
Page3
1.4 Given thatthereisonlyareference totheFederal LawEncouraging Credit Guarantees
inMountain Regions, of25June1976, could Switzerland notify thelaworregulation
making itpossible toverify thelegal basis fortheother aidsmentioned infavour of
threatened economies, inaccordance withArticle 8.2(b)(ii) oftheSubsidies Agreement?
Reply
(i) Asmentioned inourreply toquestion 1.1.,theprogramme infavour ofareas whose
economy isthreatened, referred toinsubsections I.1andI.2ofournotification, is
based ontheFederal Order onFinancial Assistance inFavour ofAreas Whose Economy
isThreatened3of1978 (theso-called Bonny-Decision) which hasbeenextended on
17June1994.
(ii) Theprogramme infavour ofmountain regions, referred toinsection I.3ofour
notification isbased ontheFederal LawonGuarantees andLoanService Contributions
toMountain Regions4of25June1976. Thedefinition ofa"Mountain Region" is
contained intheFederal LawonInvestment AidforMountain Regions5of28June1974,
andthecorresponding Federal Ordinance6of9June1975. ThatLawprovides for
assistance forinvestment inthegeneral infrastructure ofmountain regions. Such
assistance doesnotconstitute asubsidy according toArticle 1.1(a)(1)(iii) oftheSCM
Agreement and,therefore, hasnotbeennotified.
Copies ofthese Laws andOrdinances aresubmitted totheSecretariat, together with
these answers.*
1.5 What criteria didSwitzerland useforgranting these aids? Which ofthefollowing
indicators weretaken intoaccount: income percapita, household income percapita,
GDP percapita and/or unemployment rate? (The above inaccordance with
Article 8.2(b)(iii) oftheSubsidies Agreement).
Reply
(i) Withrespect totheprogramme notified insections I.1andI.2ofournotification, the
FederalOrderonFinancialAssistanceinFavourofAreaswhoseEconomyisThreatened7
clearly specifies thefollowing objective criteria foreligibility: guarantees, loanservice
contributions ortaxreductions aregranted toenterprises which introduce process or
produce innovations orincrease production capacities inanareawhose economy is
3Seefootnote 1,above.
4Seefootnote 2,above.
5Thetitleintheoriginal isLoiFédérale surl'aideenmatière d'investissements danslesrégions
demontagne (RS901.1).
6Thetitleintheoriginal isOrdonnance surl'aideenmatière d'investissements danslesrégions
demontagne (RS901.11).
*Delegations wishing toseethese Laws andOrdinances maycontact SueAspinall, Office 1028,
Extension 5109.
7Seefootnote 1,above.G/SCM/Q2/CHE/5
Page4
threatened. Theeconomy ofaregion isdefined tobe"threatened" ifitspercapita
income issignificantly below thenational average anditsaverage unemployment rate
(orchange ofit)overthelastthree years ismore than10%higher thanthenational
average.
(ii) Withrespect totheprogramme notified insection I.3ofournotification, theFederal
LawonGuarantees andLoan Service Contributions toMountain Regions8of25June
1976, theFederal LawonInvestment AidforMountain Regions9of28June1974, and
thecorresponding Federal Ordinance10of9June1975 clearly specify thefollowing
objective criteria foreligibility: guarantee orloanservice contributions aregranted
tosmall andmedium-size enterprises located inmountain regions. "Mountain regions"
aredefined asregions where atleast50%oftheareaandatleast20%ofthepopulation
constitute problem communities. Acommunity isdefined asa"problem community",
ifatleasttwoofthefollowing threeindices arebelow acertain threshold: (i)long-run
population development (which isdetermined byanagestructure andadevelopment
factor, asdefined intheLaw), (ii)economic strength (which isdetermined byanincome
factor, asdefined intheLaw), (iii)stock ofinfrastructure (which ismeasured bythe
attractiveness factor, asdefined intheLaw).11
2. Switzerland hasnotified thatithasanumber ofprogrammes toencourage andpromote applied
research.
2.1 Could Switzerland provide abreakdown, foreachofthenotified programmes, ofthe
percentages ofthecostsoftheresearch activities covered bysuchaids,inaccordance
withArticle 8.2(a) oftheSubsidies Agreement?
Reply
Switzerland hasnotified fivetypes ofprogrammes fortheencouragement ofapplied research:
CERS, PACER/RAVEL, MicroSuisse, CIMandEUREK. Weshould liketoemphasize thatwehave
chosen tonotify themfortransparency reasons, although thesubsidies associated withtheseprogrammes
arenotspecific inthesense ofArticle 2oftheSCM Agreement. Infact,participation inthese
programmes inopen toallinterested firms based inSwitzerland. Theoverall goalistoaccelerate
thediffusion ofnewtechnologies. Thetwotransmission mechanisms usedarefurther training courses
andsupport toapplied R&D. Thelatter serves, interalia,toprovide thenecessary knowledge for
participation inthese further training courses. There isnosectorial dimension tothese programmes.
Theregulation governing thefinancing oftheprogrammes, theFederal Ordinance Concerning
Federal AidsforthePromotion ofApplied Research andDevelopment12of17December 1982, states
initsArticle 11,paragraph 1,thatthefinancial contributions fromtheprivate sector mustcover 50%
8Seefootnote 2,above.
9Seefootnote 5,above.
10Seefootnote 6,above.
11These indices aredefined inArticles 5to8oftheFederal Ordinance onInvestment Aidfor
Mountain Regions (seefootnote 6,above).
12Thetitleintheoriginal isOrdonnance surl'octroi desubsides pour l'encouragement dela
technologie etl'innovation (RS823.312).G/SCM/Q2/CHE/5
Page5
ofthetotalcostoftheprogramme. Projects mustbejointly submitted byscientific non-profit institutions
andcommercial companies. Payments aremade tothescientific institutions, mainly tocover wages
ofpost-graduate students. Thesupport isconfined tothepre-competitive stageandthescientific results
oftheprojects aremade public. Copies ofthislawaswellasannual reports areavailable onrequest.
3. Switzerland hasnotified thatitcontributes totheSwiss Office forDevelopment ofTrade (OSEC).
Could Switzerland clarify whatismeant whenitsaystheOSEC "...canperform other tasksandprovide
other services toassist theSwiss export economy"?
Reply
Inaddition totheservices listed under section III.1(ii) ofournotification, OSEC offers the
following services:
- Assisting exporters fromdeveloping countries inselling theirproducts inSwitzerland;
- AssistingproducersinCentralandEasternEuropeanCountriestofindbuyersorpartners
inSwitzerland;
- Contributing topublications, seminars andfairs with theaimofimproving the
knowledge ofSwiss products abroad;
- Price andother pre-shipment controls;
- EuroInfoCentre (Saleofofficial publications anddatabases fromtheEU,cooperation
withother EUorganizations).
4. WithrespecttoQuestion1.4(FederalLawEncouragingCreditGuaranteesinMountainRegions),
theinterest rates reduced by25percentconstitute asubsidy inaccordance withArticles 1and2.
Howlongwillthislastandwhatproducts areaffected? There arenodatatocalculate thetrade effects,
northeamount ofthesubsidy.
Reply
Theduration oftheprogramme encouraging credit guarantees inmountain regions isindefinite.
Wewould liketoemphasize thatthesubsidies areneither product specific norsector specific. Moreover,
theamounts ofthesubsidy areextremely small (i.e.CHF 5.3,6.3and2.7million fortheyears 1992
to1994, respectively, asfollows fromsection I.3ofournotification). Forthesereasons, itisimpossible
tocalculate anytrade effects ofthese subsidies.
JAPAN
1. III. Contribution totheSwiss Office forDevelopment ofTrade (OSEC)
CouldSwitzerlandexplaintheunitoftheamountofsubsidyinparagraph1(iii)ofthenotification?
Reply
Theunitismillion ofSwiss Francs. Thisiscorrectly stated intheFrench version ofour
notification. Unfortunately, theEnglish translation contains anerror.G/SCM/Q2/CHE/5
Page6
2. IV. Agricultural subsidies
There isadescription inthenotification thattheinformation relating toagricultural subsidies
bySwitzerland willbenotified totheCommittee onAgriculture. However, theagricultural subsidies
arealsosubject toreview attheCommittee onSubsidies andCountervailing Measures. Inthis
connection, willSwitzerland notify theagricultural subsidies totheSCM Committee?
Reply
Asreferred toinournotification pursuant toArticle 25oftheSCM Agreement (document
G/SCM/N/3/CHE), andasstated inournotice of9September tothisCommittee (document
G/SCM/N/3/CHE/Suppl.1), Members areinvited toconsult documents G/AG/N/CHE/5 of8July1996
andG/AG/N/CHE/6 of1August 1996 forinformation onSwiss agricultural subsidies. Weare,
moreover, intheposition tostatethatSwitzerland iscurrently preparing itsupdate notification which,
inthelightofthequestions addressed tous,willbeafullnotification ofbothindustrial andagricultural
subsidies.
3. Others
Could Switzerland explain thecontents andthereason whytheywerenotnotified?
(1) Technological Cooperation inEurope (EUREKA)
Reply
Thisprogramme appears onournotification under section II.1(i)3, onpage5.Seealsoour
reply toArgentina 'squestion 2.
(2) Federal grant totheSwiss Electronics andMicro-Engineering Centre
Reply
Thisprogramme appears onournotification under section II.(i)5, onpage5.Seealsoour
reply toArgentina 'squestion 2.
(3) CIMandmicro-electronic training andresearch centres
Reply
Thisprogramme appears onournotification under section II.1(i)4, onpage5.Seealsoour
reply toArgentina 'squestion 2.
(4) Federal lawonguarantees covering export risk
Reply
Based ontheFederal LawonGuarantees Governing Export Risk13of26September 1958, the
Swiss authorities offerguarantees covering partofbothcommercial andpolitical risksassociated with
13Thetitleintheoriginal isLoifédérale surlagarantie contre lesrisques àl'exportation
(RS946.11).G/SCM/Q2/CHE/5
Page7
exports fromSwitzerland. Thisservice isgenerally available toallfirms based inSwitzerland exporting
goods orservices from Switzerland tocertain countries. Guarantee isoffered against thepayment
offeesorpremiums which aredesigned tocover allexpected costs. Thepremiums aredifferentiated
according tothedestination ofexports, reflecting thedifferent lossprobabilities. Forsome destinations
ofexports, therisksareconsidered toohighand,consequently, noguarantee isoffered forexports
towards suchdestinations. TheGuarantee scheme isfinanced frompremium revenues andrecovered
losses which flowintoaspecial, extra-budgetary, legally independent, self-financed fund.
Switzerland considers thatsuchGovernment activity doesnotconstitute asubsidy within the
meaning ofArticles 1.1and2oftheSCM Agreement, astheservices areoffered against thepayment
offeeswhich aredesigned tocover thelong-term operating costsofthescheme. Thislatterrequirement
isspecified inArticle 7oftheFederal LawonGuarantees Covering Export Risks14which isavailable
onrequest.
KOREA
Financial assistance toareas whose economy isthreatened
Switzerland 'snotification states thatthisfederal assistance isintended forthebenefit ofareas
whose economy iscentred onasingle industry andwhich arethreatened withimminent unemployment.
CouldSwitzerlandprovideamoredetailedexplanationofthespecificcriteriausedfordetermining
severe orimminent unemployment andtheindustrial sectors which arethegreatest beneficiaries?
Reply
Seeourreplies toArgentina 'squestion 1.5.
UNITED STATES
Section I-Non-Notified Programmes
Please provide information concerning thefollowing programmes which didnotappear tobe
included within Switzerland ’snotification, yetmaymeetthenotification requirements ofGATT 1994
and/or theSCM Agreement. Ifthese programmes aresomewhere encompassed inSwitzerland ’s
notification, please explain. Ifnot,please include information relevant totheelements requested in
thenotification format, orexplain thebasis onwhich Switzerland determined thateachprogramme
didnotmeetthenotification requirements referenced above:
1. Encouragement ofapplied research bytheCommission fortheEncouragement ofScientific
Research (CERS)
Reply
Thisprogramme appears onournotification under section II.1(i)2, onpage5.Seealsoour
reply toArgentina 'squestion 2.
14Seefootnote 13,above.G/SCM/Q2/CHE/5
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2. Federal grant totheSwiss Electronics andMicro-Engineering Centre
Reply
Thisprogramme appears onournotification under section II.1(i)5, onpage5.Seealsoour
reply toArgentina 'squestion 2.
3. CIMandMicroelectronics Training andResearch Centres
Reply
Thisprogramme appears onournotification under section II.1(i)4, onpage5.Seealsoour
reply toArgentina 'squestion 2.
4. Federal lawonguarantees covering export risks
Reply
Seeourreply toJapan'squestion 4(4).
Section II.-Notified Programmes
1. Thenotification states that“theSwiss Government notifies below thesubsidies granted inthe
industrial sector; ”however, thenotification requirement alsoincludes theagricultural and
mining sectors. While noting thattheSwiss notification states atsection IVthatinformation
onagricultural subsidies isbeing provided totheWTO Committee onAgriculture, theUnited
StatesrequestsSwitzerlandtopleaseprovideinformationonsubsidiesprovidedtotheagricultural
andmining sectors inconformity withthenotification requirements setforthinGATT Article
XVI:1 andSCM Agreement Article 25.2, andelaborated inG/SCM/6.
Reply
Seeourreply toJapan'squestion 2.
2. Theprogramme “Promotion Programmes andEncouragement ofApplied Research ”appears
toencompass anumber ofspecific subsidy programmes. Could Switzerland please provide
more detail onthevarious activities supported under thisprogramme?
Reply
Seeourreply toArgentina 'squestion 2.1.