State Trading Enterprises: Compliance with the General Agreement on
Tariffs and Trade (Letter Report, 08/30/95, GAO/GGD-95-208).
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-95-208
TITLE: State Trading Enterprises: Compliance with the General
Agreement on Tariffs and Trade
DATE: 08/30/95
SUBJECT: Reporting requirements
Foreign trade agreements
Foreign trade policies
International trade regulation
Tariffs
International organizations
International trade restriction
Economic growth
Noncompliance
IDENTIFIER: Russia
China
Ukraine
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Cover
================================================================ COVER
Report to Congressional Requesters
August 1995
STATE TRADING ENTERPRISES -
COMPLIANCE WITH THE GENERAL
AGREEMENT ON TARIFFS AND TRADE
GAO/GGD-95-208
General Agreement on Tariffs and Trade
(280129)
Abbreviations
=============================================================== ABBREV
CCC - Commodity Credit Corporation
ECE - Economic Commission for Europe
EU - European Union
FAS - Foreign Agricultural Service
FSU - former Soviet Union
GATT - General Agreement on Tariffs and Trade
ITO - International Trade Organization
MFN - most favored nation
OECD - Organization for Economic Cooperation and Development
STE - state trading enterprise
TPSC - Trade Policy Staff Committee
USDA - U.S. Department of Agriculture
USTR - U.S. Trade Representative
WTO - World Trade Organization
Letter
=============================================================== LETTER
B-261281
August 30, 1995
Congressional Requesters
The Uruguay Round of multilateral trade negotiations, conducted from
1986 to 1994 under the auspices of the General Agreement on Tariffs
and Trade (GATT), resulted in a variety of "disciplines" designed to
liberalize trade in agricultural products.\1 Agricultural trade in
some GATT member countries is directed through entities called "state
trading enterprises" (STE).\2 Several trade experts have identified
STEs as one of the most important aspects of agricultural trade left
unresolved by the Uruguay Round. While STEs are generally subject to
GATT disciplines, some U.S. agricultural producers are concerned
that STEs may operate in ways that bypass these disciplines.
You asked us to review several issues related to the activities of
other countries' agricultural STEs. This report is one in a series
of products in which we plan to provide information to Congress
regarding the nature of state trading in other countries and the
treatment of STEs in GATT and by the new World Trade Organization
(WTO). As agreed with you, this report addresses (1) GATT members'
reporting of STE activities from 1980 to 1994, (2) Uruguay Round
results contained in GATT 1994\3 that relate to STEs, (3) Uruguay
Round results contained in the Agreement on Agriculture that relate
to STEs, (4) the potential for increase of STEs under GATT/WTO, and
(5) U.S. efforts to monitor the activities of other countries' STEs
with respect to GATT/WTO requirements.
--------------------
\1 Disciplines as used in this report refers to rules, commitments,
and procedures contained in GATT and related agreements.
\2 STEs are generally considered to be governmental or
nongovernmental enterprises that are authorized to engage in trade
and are owned, sanctioned, or otherwise supported by the government.
\3 "GATT 1994" refers to GATT as modified by the Uruguay Round, while
the original version of GATT is known as "GATT 1947." Unless
otherwise specified, the term "GATT" in this report refers to all
aspects of GATT prior to the implementation of the Uruguay Round
agreements. GATT 1994 is part of WTO. The Uruguay Round created WTO
as a formal organization encompassing all GATT disciplines to replace
the provisional GATT organizational structure. GATT was an interim
agreement to the International Trade Organization (ITO). Plans for
ITO were abandoned in 1948, leaving GATT as the only multilateral
trade organization. Because some GATT members have not yet joined
WTO, however, the GATT organization still exists.
BACKGROUND
------------------------------------------------------------ Letter :1
When GATT came into force in 1948, some member countries\4 had active
state trading programs and wanted to ensure their governments' right
to engage in market activities. However, governments with a dual
role as market regulator and market participant can act in ways that
protect domestic producers and disadvantage foreign producers. While
the drafters of GATT 1947\5 accepted STEs as legitimate participants
in trade, they recognized that STEs, especially those with a monopoly
of imports or exports, could be operated to create serious obstacles
to trade.
GATT 1947 addressed STEs in article XVII (see app. I for the
complete text). However, article XVII did not define the term "state
trading enterprise," and as discussed later in this report, GATT
members have had problems understanding which entities were subject
to the provisions of article XVII. As a result of the Uruguay Round,
GATT 1994 defined STEs in the Understanding on the Interpretation of
Article XVII of the General Agreement on Tariffs and Trade 1994 (the
"Understanding"--see app. III for the complete text or page 11 of
this report for the definition). All entities covered by this
definition are subject to article XVII.
Article XVII establishes a number of guidelines and requirements with
respect to the activities of STEs and the obligations of member
countries. For example, it stipulates that
STEs shall act in a manner consistent with the principles of
nondiscriminatory treatment;\6
STEs shall make any purchases or sales in accordance with
commercial considerations and shall allow enterprises from other
member countries the opportunity to compete;
member countries shall provide certain information to the GATT/WTO
secretariat\7 about their STEs' activities; and
member countries are not required to provide confidential
information that (1) would impede law enforcement, (2) would be
contrary to the public interest, or (3) would prejudice the
legitimate commercial interests of their STEs.
Information is provided to the GATT/WTO secretariat about STEs and
their activities on the basis of a questionnaire adopted in 1960.\8
(The full text of the questionnaire is contained in app. II.)
GATT/WTO members are to provide responses, called "notifications," to
the questionnaire. Ideally, the notifications should provide enough
transparency (openness) about STE operations to determine whether or
not they are adhering to GATT disciplines. The questionnaire asks
members to list their STEs, the products for which STEs are
maintained, and the reasons for maintaining STEs. It also asks them
to provide certain information about how their STEs function and
statistics that indicate the extent of trade accounted for by STEs.
Other portions of GATT 1947 and GATT 1994 also contain references to
STEs. For example, countries that have negotiated with other
GATT/WTO members to provide a certain level of protection for
domestic producers cannot allow their STEs to operate in a way that
affords a level of protection greater than was negotiated.\9
Also, references made in certain GATT articles to import or export
restrictions include those made effective through STEs.\10
--------------------
\4 Participants in GATT were known as "contracting parties" until
1994 when WTO was established. In this report, however, we refer to
contracting parties, as well as particpants in WTO, as member
countries.
\5 See footnote 3.
\6 Under GATT and WTO, nondiscriminatory treatment generally
encompasses most-favored-nation (MFN) and national treatments. MFN
requires granting to all GATT/WTO member countries the most favorable
treatment granted to any single member. National treatment requires
treating domestic and foreign producers equally. In article XVII,
however, the meaning of nondiscriminatory treatment is less clear.
The United States maintains that STEs should provide both MFN and
national treatment, but other GATT/WTO members maintain national
treatment is not required.
\7 The term "GATT/WTO secretariat" is used throughout this report to
refer to the secretariat staff that currently support both GATT and
WTO.
\8 The first questionnaire under article XVII was implemented in
1957. A revised questionnaire was adopted in 1960 but not
implemented until 1962.
\9 See GATT article II:4.
\10 See the interpretive note to GATT articles XI, XII, XIII, XIV,
and XVIII.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
Some information on state trading in GATT member countries has been
obtained through the notification process, but compliance with the
reporting requirement has generally been poor. From 1980 to 1994,
the highest annual response rate to article XVII's reporting
requirement was about 21 percent of GATT members. GATT/WTO and
member country officials attributed the lack of compliance to
definitional problems, the lack of a systematic review of
notifications received, the low priority some member countries
assigned to article XVII reporting, and the overall burden of GATT
reporting. As a result, the GATT/WTO secretariat may not have
current information about the activities of STEs in most GATT/WTO
member countries, and members therefore are hindered in determining
whether all STEs in GATT/WTO member countries operate in accordance
with GATT disciplines.
Although state trading was not a major issue during the Uruguay
Round, the Understanding addressed certain problems related to
article XVII. The Understanding provided a definition of STEs,
implemented procedural measures designed to improve compliance with
article XVII's reporting requirement, and created a working party to
review STE notifications. The questionnaire used for collecting
information about STEs remains unchanged since 1960, but WTO member
countries have agreed to examine the adequacy of the questionnaire.
Some member countries are interested in revising the questionnaire,
but members have different opinions about the nature and extent of
information that should be provided to GATT/WTO about STEs. Several
U.S. and GATT/WTO officials expect compliance with article XVII's
reporting requirement to increase. However, it is too early to tell
whether the amount of information available about STEs will increase
or its quality will improve.
STEs that engage in agricultural trade are also subject to the
disciplines contained in the Uruguay Round Agreement on Agriculture.
The agreement required member countries to reduce market access
restrictions, export subsidies, and internal support, including any
such measures provided through STEs. In order to demonstrate their
compliance with these commitments, STEs must provide certain
information about their operations to WTO. Because the first
implementation year of the agreement will not be completed until
1996, it is also too early to tell whether countries with
agricultural STEs will comply with Uruguay Round commitments
regarding agricultural trade.
The effectiveness of article XVII is especially important given the
potential for increase in STEs if countries like the People's
Republic of China (China), Russia, and Ukraine join GATT/WTO, as they
have applied to do. National and local governments in these
countries, and others like them, have a prominent role in economic
and trade affairs. While some of these countries are undertaking
privatization efforts to move towards more market-oriented economies,
the role of STEs in GATT/WTO will likely increase if these countries
become members.
Monitoring STE activities and their compliance with Uruguay Round
commitments is coordinated by the U.S. Trade Representative (USTR)
with participation from other U.S. agencies. U.S. officials
participate in the WTO Working Party on STEs and the WTO Committee on
Agriculture. These bodies are responsible for monitoring
implementation of Uruguay Round commitments regarding STEs and
agricultural trade, respectively. In addition, staff in the U.S.
Department of Agriculture's Foreign Agricultural Service
(USDA/FAS)and the Department of Commerce's Foreign Commercial Service
are responsible for monitoring STE activities in the countries where
they are located and reporting on their activities as needed.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3
We prepared this report for congressional requesters to provide
information about the nature of state trading in other countries and
the treatment of STEs in GATT/WTO. To determine the extent of STEs
in GATT member countries, the type of information available about
STEs, and the level of compliance with article XVII, we reviewed
article XVII notifications provided to the GATT/WTO secretariat from
1980 to 1994. (Details on our analysis of STE reporting are
contained in apps. IV and V.) We also reviewed reports of the Panel
on Notifications of State Trading Enterprises, member country
position papers on article XVII presented during the Uruguay Round,
and GATT/WTO secretariat notes on article XVII prepared for the
Uruguay Round. Finally, we discussed the effectiveness of article
XVII prior to the Uruguay Round with officials from the United
States, GATT/WTO, and other countries.
We discussed the results of the Uruguay Round as contained in GATT
1994 and the Agreement on Agriculture with officials from the United
States, GATT/WTO, and other countries, including the chairmen of the
WTO Working Party on State Trading Enterprises and the WTO Committee
on Agriculture. We also reviewed relevant documents, including the
Understanding and the Uruguay Round Agreement on Agriculture.
We discussed the potential for an increase of STEs in GATT/WTO with
relevant officials from the United States, GATT/WTO, the United
Nations, and other countries. We also reviewed studies of economies
in transition by the Organization for Economic Cooperation and
Development (OECD) and other expert organizations.
We discussed U.S. efforts to monitor the activities of STEs in other
countries with respect to GATT/WTO requirements with officials from
USTR, USDA/FAS, the Department of Commerce, and the International
Trade Commission.
We obtained oral comments on a draft of this report from the U.S.
Trade Representative and the Department of Agriculture. Their
comments are discussed on page 19.
We conducted our review in Washington, D.C., and Geneva, Switzerland,
from April 1995 to July 1995 in accordance with generally accepted
government auditing standards.
COMPLIANCE WITH ARTICLE XVII
REPORTING REQUIREMENTS HAS BEEN
POOR
------------------------------------------------------------ Letter :4
A central objective of article XVII is the collection of information
about STEs in member countries in order to provide transparency about
their activities and ensure they operate in accordance with GATT
disciplines. However, according to GATT/WTO and member country
officials, article XVII has generally been ineffective in meeting
this objective. The notifications we reviewed provided much of the
information requested in the questionnaire, including sectors in
which STEs operate, their purposes and activities, and some
statistics about their operations. However, compliance with the
notification requirement was limited during 1980 to 1994, as 79
percent of GATT members did not submit STE notifications during 1981,
the best year of reporting. The evidence we obtained suggested the
lack of compliance could be attributed to (1) confusion over the
definition of STEs, (2) the lack of systematic review of
notifications received, (3) the apparent low priority some GATT
members assigned to article XVII's reporting requirement, and (4) the
overall burden associated with GATT reporting requirements. Under
these circumstances, it is impossible to determine whether article
XVII has yielded information on the full nature and extent of STE
activity in GATT/WTO member countries. Moreover, the lack of
notifications from most member countries has hindered GATT/WTO
members in identifying all STEs in GATT/WTO member countries and
determining whether they operate in accordance with GATT disciplines.
SOME STE INFORMATION
AVAILABLE
---------------------------------------------------------- Letter :4.1
Twenty-nine member countries\11 submitted STE notifications to the
GATT/WTO secretariat at least once during the period 1980 to 1994,
with 21 of the countries reporting some form of state trading.\12
These notifications provided some insight into the activities of STEs
in member countries. For example, the majority of STEs described in
these notifications operated in the agriculture sector, covering such
products as grains and cereals, dairy products, beef and veal, and
sugar (see fig. 1). Member countries also reported that they
maintained state trading in alcoholic beverages and petroleum
products. In addition to the products listed in figure 1, a few
countries also provided notifications about state trading in salt,
coal, inflammables, aircraft, and nuclear fuel.
Figure 1: State Trading
Notifications by Product
Sector, 1980-1994
(See figure in printed
edition.)
Note: Data are for 20 countries reporting STEs. No sector-specific
data for Romania were provided.
Source: GAO analysis of STE notifications.
The notifications also provided information related to the purpose of
STEs and how they operate. With respect to purpose, some member
countries have reported using STEs to help agricultural producers
"achieve their full potential in overseas markets," to ensure
"protection of the domestic agricultural production against
low-priced imports," and to ensure a "stable and adequate supply" of
certain agricultural commodities as part of "national defense
preparedness." Regarding operations, member countries have reported
that STEs acted as sole agents for production, imports, and/or
exports in the sectors covered. Additionally, the STEs assessed
levies on production and/or imports, issued export licenses, and
received government guarantees on borrowed funds. Other state
trading practices reported included government-guaranteed minimum
prices and subsidized exports. The variety of state trading
practices reported to GATT makes comparisons between countries
difficult since the level of state involvement, and therefore impact
on trade, may differ in each case.
In general, most notifications have contained statistical information
on STE operations, but the information has occasionally been less
than requested in the questionnaire. For example, although the
questionnaire asked that statistics be furnished on the value and
quantity of imports, exports, and national production for the
products notified where possible, several countries did not provide
information covering national production. In addition, some
countries provided information on the quantity, but not the value, of
trade and production.
--------------------
\11 The number of GATT members rose from 85 in 1980 to 114 in 1994.
\12 Although we reviewed STE notifications during a 15-year period,
only 14 years were included in the sample. Notifications were not
solicited from GATT members in 1992 due to a GATT/WTO secretariat
oversight.
MOST GATT MEMBERS DID NOT
SUBMIT STE NOTIFICATIONS
---------------------------------------------------------- Letter :4.2
In accordance with article XVII, each GATT/WTO member country should
provide new and full responses to the questionnaire on state trading
activities every 3 years, called "full notifications," even if the
country does not have any STEs.\13
Additionally, GATT/WTO members should provide notifications of any
changes to their state trading regimes in intervening years, called
"updating notifications." Nonetheless, compliance with article XVII
was poor during the period we reviewed. Regular, full notifications
of STEs by GATT members were the exception and not the rule. Even
during 1981, the full notification year with the best response rate,
approximately 79 percent of GATT member countries failed to submit a
notification. (Article XVII notifications by year and by country
from 1980 to 1994 are contained in apps. IV and V, respectively.)
As shown in appendix IV, compliance with the full notification
requirement every 3 years was poor. The number of countries
responding during full notification years varied from a high of 18
notifications in 1981 (about 21 percent of GATT members) to a low of
7 notifications in 1990 (about 7 percent of GATT members). Only
Finland, Norway, and Sweden provided full notifications for all five
of the full notification years occurring during the period we
reviewed.
Between 1980 and 1994, a total of 29 countries responded at least
once to article XVII, providing either full or updating
notifications. In several cases, the updating notifications provided
the same amount of information contained in some member countries'
full notifications. As shown in appendix V, Austria, Norway, South
Africa, and Yugoslavia were the most regular reporters, providing
notifications in at least 11 of the 14 years under review. However,
of the 29 countries submitting any notification, about 62 percent of
the countries reported 3 or fewer times during the 1980 to 1994
period. Eight countries, including the United States, reported once
during the 14 years.
Due to poor compliance by most countries over the period reviewed,
the GATT/WTO secretariat may lack current information about STEs in
GATT/WTO member countries. For example, in our review of
notifications we found that 6 of the 29 countries that provided
notifications during this period had not updated their notification
since 1981, and another 5 countries had not updated their
notifications since 1984. Whether or not the level of state trading
in these countries has increased or decreased over the past 15 years
remains unclear. In addition, the lack of information hinders
GATT/WTO members in determining whether other member countries' STEs
are adhering to GATT disciplines.
--------------------
\13 Full notification years between 1980 and 1994 were 1981, 1984,
1987, 1990, and 1993.
VARIOUS PROBLEMS MAY EXPLAIN
THE LACK OF STE REPORTING
---------------------------------------------------------- Letter :4.3
We reviewed documents that indicated that some GATT members were
uncertain about the definition of STEs and the coverage of article
XVII and that this uncertainty may have caused some countries to not
report STEs. The GATT Panel on Notifications of State Trading
Enterprises emphasized in a 1960 report that STEs encompass a variety
of activities or entities. However, our review of STE notifications
confirmed what GATT/WTO and member country officials told us--that
some member countries continued to struggle with the definition of
STEs. In one case, for example, a country decided not to report at
all since "the meaning and coverage of the term `state enterprise' in
Article XVII:1(a) of the General Agreement are not clear."
Inconsistent responses to the questionnaire further illustrate this
possible lack of understanding of the definition of STEs. For
example, two Central European countries submitted notifications in
1984 claiming that they had no state trading in the meaning of
article XVII. However, two other Central European countries with
similarly structured economies both reported extensive STE activity
during this same period. Considering that all four countries
operated command economies in which most aspects of trade involved
the government, the inconsistent answers demonstrated a possible lack
of agreement regarding the article XVII questionnaire.
The lack of article XVII reporting by some member countries may also
be attributed to the absence of a regular process within GATT for
reviewing the notifications submitted. For example, one member
country, in explaining its decision not to submit a notification,
noted "the absence of any regular procedure for examining
notifications so as to afford greater transparency." The member
country went on to state that "one may also note that because of the
absence of such a procedure, many countries do not see themselves in
some way as `motivated' to notify." A U.S. official told us
countries did not report STEs because there was no review of the
notifications and thus no scrutiny over the notification process.
Similar perceptions that article XVII reporting was not a priority
may exist among other member countries. For example, an official of
one country's permanent mission told us that some countries have been
lax in meeting their reporting responsibilities because they felt the
disciplines on article XVII were not as rigid as other GATT
disciplines.
Finally, a USTR official suggested that the low response rate among
developing countries might also have been linked to the burden of
reporting under GATT. The official said many of the developing and
smaller GATT member countries may not have the administrative
capacity in their governments to comply fully with the multiple
reporting requirements under the various GATT articles. Discussions
with an official from one country's permanent mission confirmed this
observation. However, this explanation does not address why some of
the larger GATT members either did not report during the period we
reviewed or had low response rates.
URUGUAY ROUND IMPROVED SOME
ASPECTS OF ARTICLE XVII, BUT
WEAKNESSES REMAIN
------------------------------------------------------------ Letter :5
Although state trading was not a major negotiating issue during the
Uruguay Round, GATT member countries agreed to clarify article XVII
to address some of the problems previously described. The
clarifications are contained in the Understanding, which is part of
GATT 1994. The Understanding provided a definition of STEs and
contained several measures to address procedural weaknesses of
article XVII. The Understanding did not change the questionnaire
used to collect information about STEs, but WTO members have agreed
to review the questionnaire and the adequacy of information provided
about STEs. Because these measures have not been fully implemented,
it is too early to assess whether Uruguay Round changes will improve
compliance with article XVII and, thereby, increase the amount of
information available about STE activities and improve the quality of
such information.
UNITED STATES AND OTHERS
PROPOSED CLARIFICATIONS TO
ARTICLE XVII
---------------------------------------------------------- Letter :5.1
Officials from the United States, GATT/WTO, and other countries we
contacted recalled that state trading and the revision of article
XVII were not major issues during the Uruguay Round. Nevertheless,
the United States and other countries identified problems with
article XVII and proposed modifications during the late 1980s to
correct these problems. The United States proposed clarifying the
application of all GATT disciplines to STEs, particularly marketing
boards,\14 and increasing the transparency about state trading
practices. The United States suggested transparency could be
improved by creating a working party to clarify the definition of
STEs, review and revise the questionnaire, and conduct periodic
comprehensive reviews of STE notifications. Other countries noted
the need to clarify the definition of STEs, improve the notification
process, and better understand the role of STEs in trade.
According to U.S. officials, the text of the Understanding was made
final in 1990 with the expectation that the Uruguay Round would end
shortly thereafter. Although negotiations did not end until December
1993, they said article XVII was not revisited after 1990. One U.S.
official told us if the United States had known in 1990 that
negotiations were to continue for 3 years, it might have sought
additional improvements to article XVII.
--------------------
\14 Marketing boards are quasi-governmental agencies that have the
capacity to exercise control over individual transactions in the
domestic sale or export of a certain commodity. In some cases
marketing board activity may be limited to the promotion or marketing
of that commodity. They may operate as monopsonists (sole buyers) in
their domestic market and oligopolists (one of few sellers) in
external markets.
URUGUAY ROUND DEFINED STES
AND ADDRESSED PROCEDURAL
WEAKNESSES OF ARTICLE XVII
---------------------------------------------------------- Letter :5.2
The Understanding defined STEs as
"governmental and nongovernmental enterprises, including
marketing boards, which have been granted exclusive or special
rights or privileges, including statutory or constitutional
powers, in the exercise of which they influence through their
purchases or sales the level or direction of imports or
exports."
The Understanding addressed procedural weaknesses of article XVII by
improving the process for obtaining and reviewing information. For
example, the Understanding required member countries to review their
policies on submitting notifications about STEs and consider the need
to ensure transparency in order to permit a clear appreciation of
STEs' operations and their effect on international trade. It also
gave member countries the opportunity to question information
provided by another member country. If a member country believes
another member country has not adequately met its notification
obligation, it can raise the matter for discussion among WTO members
and can submit a counternotification to the WTO Council for Trade in
Goods if its concerns are not resolved.\15
The Understanding further addressed procedural weaknesses by
establishing the WTO Working Party on State Trading Enterprises (the
Working Party). The Working Party's responsibilities include (1)
reviewing notifications and counternotifications; (2) in light of
notifications received, reviewing the adequacy of the questionnaire
and the coverage of STEs notified; and (3) developing an illustrative
list of the kinds of relationships between governments and STEs and
the kinds of activities engaged in by STEs. One U.S. official said
the creation of a regular process in the Working Party to review STE
notifications was an important step towards improving compliance with
article XVII. The Working Party met for the first time on April 6,
1995, to discuss the timetable for its work program during the next
year. Some Working Party members told us they expect to meet
informally through the summer to prepare for their next official
meeting in the fall of 1995, when they will begin formal work on
meeting their responsibilities.
Finally, in order to improve member countries' knowledge about STEs,
the Understanding authorized the GATT/WTO secretariat to produce a
background paper on the operations of STEs as they relate to
international trade. GATT/WTO members told us they expect the paper
to describe the countries that engage in state trading, the products
traded, and the attributes of their STEs. The paper, which is due at
the next official Working Party meeting, is to consider information
provided so far to GATT/WTO about STEs as well as the next set of
full STE notifications that were due on June 30, 1995.
The Understanding did not change the form or content of the
questionnaire used to collect information about STEs. Officials from
the United States, GATT/WTO, and other countries told us the
questions in the questionnaire can be answered with very specific or
very general information and, as a result, the information provided
so far about STEs does not provide sufficient transparency about STE
activities to ensure they are adhering to GATT disciplines. However,
GATT/WTO members differed on the exact information necessary to
achieve such transparency. For example, officials from the United
States and some other countries told us they are interested in
obtaining more detailed information about transaction prices. Other
GATT/WTO members maintained that such information is confidential and
related to an STE's commercial interest and that countries are not
required by article XVII to disclose this type of information.
The Understanding obligated the Working Party to study the adequacy
of the questionnaire. Some Working Party members, including U.S.
officials, told us they hope their discussions will produce a revised
questionnaire that could be implemented at the ministerial conference
scheduled for late 1996.
--------------------
\15 The changes contained in the Understanding apply only to WTO
members.
IT IS PREMATURE TO ASSESS
WHETHER COMPLIANCE WITH
ARTICLE XVII WILL IMPROVE
---------------------------------------------------------- Letter :5.3
Several U.S. and GATT/WTO officials said they expect that compliance
with article XVII's notification requirement will increase. Although
the next set of article XVII notifications was due June 30, 1995, the
majority of WTO member countries, including the United States, did
not meet the deadline. More notifications were expected to be
submitted during the summer of 1995. Until all or most notifications
have been received and the Working Party can begin to review them, it
would be premature to assess whether the addition of a definition and
procedural measures would increase compliance with article XVII's
reporting requirements and improve the information available about
STEs.
A GATT/WTO official suggested that the general willingness to comply
with article XVII's notification requirement would be affected by the
notification decisions of major trading countries, such as Canada,
European Union (EU) member countries, or the United States.\16 For
example, a representative from one country, which views its own level
of state intervention in trade as comparable to the EU's, told us his
country would probably postpone its own notification of STEs until it
saw how the EU interpreted the notification requirement. In
addition, representatives from several countries' permanent missions
to GATT/WTO told us they think the United States should provide an
STE notification for USDA's Commodity Credit Corporation (CCC).\17
Representatives from other countries' missions told us they were not
sure whether CCC would come under the Understanding's definition of
an STE. The United States reported CCC as an STE in 1979 but
subsequently reported no state trading in 1984.\18
No decisions have yet been made about enforcing compliance with
article XVII and related procedural issues. For example, it is not
clear how the Working Party will handle situations in which countries
(1) do not comply with the notification requirement, (2) do not
respond to all questions in the questionnaire, or (3) submit a
counternotification about another country's STEs. Officials from
GATT/WTO and other countries said that in general, enforcing
compliance with article XVII is up to the Working Party and therefore
is dependent on the will of member countries.