( ) Page: 1/16 MINUTES OF THE MEETING HELD ON 4 OCTOBER 2013 CHAIRPERSON: MR TSOTETSI MAKONG (LESOTHO)

Transcription

1 RESTRICTED G/TRIMS/M/35 20 December 2013 ( ) Page: 1/16 Committee on Trade-Related Investment Measures MINUTES OF THE MEETING HELD ON 4 OCTOBER 2013 CHAIRPERSON: MR TSOTETSI MAKONG (LESOTHO) 1. The Committee on Trade-Related Investment Measures (the "Committee") met on 4 October The Committee adopted the following agenda contained in WTO/AIR/4190. The Chair reminded delegations that submissions for Committee meetings must be provided to the Secretariat, at the latest, 10 days before the date of the meeting. 1 NOTIFICATIONS UNDER ARTICLE 6.2 OF THE TRIMS AGREEMENT PROPOSALS ON SPECIAL AND DIFFERENTIAL (S&D) TREATMENT PROVISIONS RELATED TO THE TRIMS AGREEMENT BRAZIL- CERTAIN LOCAL CONTENT PROVISIONS IN THE TELECOMMUNICATIONS SECTOR BRAZIL TAX PREFERENCES LINKED TO LOCAL CONTENT CONDITIONS IN SEVERAL SECTORS INDIA CERTAIN PREFERENCES TO DOMESTICALLY MANUFACTURED ELECTRONIC GOODS INDONESIA CERTAIN MEASURES ADDRESSING LOCAL CONTENT IN INVESTMENT IN THE TELECOMMUNICATIONS SECTOR INDONESIA CERTAIN LOCAL CONTENT PROVISIONS IN THE ENERGY SECTOR (MINING, OIL AND GAS) NIGERIA CERTAIN MEASURES TAKEN IN THE "ACT TO PROVIDE FOR THE DEVELOPMENT OF NIGERIAN CONTENT IN THE NIGERIA OIL AND GAS INDUSTRY" OF APRIL AGENDA ITEM 9: RUSSIA LOCAL CONTENT CONDITIONS IN THE "AUTO INVESTMENT PROGRAM" RUSSIA LOCAL CONTENT REQUIREMENTS FOR AGRICULTURAL EQUIPMENT UKRAINE CERTAIN LOCAL CONTENT PROVISIONS IN THE LAW "ON AMENDMENTS TO THE LAW OF UKRAINE 'ON ELECTRIC POWER INDUSTRY' UNITED STATES - CERTAIN LOCAL CONTENT REQUIREMENTS IN THE RENEWABLE ENERGY SECTOR UNITED STATES - DOMESTIC CONTENT REQUIREMENTS IN PROCUREMENT BY WATER UTILITIES URUGUAY - DOMESTIC CONTENT REQUIREMENTS FOR WIND POWER EQUIPMENT OTHER BUSINESS ANNUAL REPORT (2013) DATE OF THE NEXT MEETING... 16

2 - 2-1 NOTIFICATIONS UNDER ARTICLE 6.2 OF THE TRIMS AGREEMENT 2. The Chairperson indicated that Article 6.2 of the Agreement on Trade-Related Investment Measures (the "Agreement") and the 1996 Committee Decision contained in document G/TRIMS/5 required each Member to notify the Secretariat of the names of publications in which TRIMs might be found, where such publications existed, including those applied by regional and local governments and authorities within their territories, and the addresses from which copies could be obtained, without prejudice to the legal consistency of any TRIM which might be found in the publications notified. As agreed by the Committee, the Secretariat circulated a six-month reminder in September Since the last meeting of the Committee, Guatemala, Lao People's Democratic Republic, Lesotho, and South Africa submitted notifications under Article 6.2. The latest compilation of notifications under this Article was circulated in document G/TRIMS/N/2/Rev.23. The Chairperson urged Members that had not provided their notifications to date to provide such notifications promptly and requested Members that had provided them some time ago to update them. 4. The Committee took note of the statements and agreed to revert to this at a future meeting. 2 PROPOSALS ON SPECIAL AND DIFFERENTIAL (S&D) TREATMENT PROVISIONS RELATED TO THE TRIMS AGREEMENT 5. The Chairperson recalled that pursuant to the Decision adopted by the General Council on 1 August 2004 (WT/L/579) and paragraph 37 of the Hong Kong Ministerial Declaration (WT/MIN(05)/DEC), the Committee continued its consideration of the Category II Special and Differential Treatment ("S&D") proposals referred to it by the Chairman of the General Council. The proposals were originally submitted by the African Group in document TN/CTD/W/3/Rev.2 and related to Articles 4 and 5.3 of the Agreement. In April 2007, Kenya on behalf of the African Group, submitted a revised version of the proposals (see Annex attached to G/TRIMS/M/31). 6. In June and October 2007, the Chairperson consulted interested delegations on the revised proposals. At the Committee's November 2007 meeting, Kenya indicated that the African Group was open to listen to any new ideas concerning these proposals, particularly with respect to the drafting, but that the Group had gone as far as it could on this issue. No further revisions to the draft proposals were received from the proponents since then. At the meetings in October 2008, 2009, 2010, 2011, and 2012 the Chairpersons expressed their readiness to continue informal consultations at Members' requests. However, no requests were forthcoming. 7. There were no statements. The Chair reiterated his willingness to continue consultations; requesting Members were invited to contact himself or the Secretariat. 8. The Committee took note of the statement and agreed to revert to this at a future meeting. 3 BRAZIL - CERTAIN LOCAL CONTENT PROVISIONS IN THE TELECOMMUNICATIONS SECTOR 9. The Chairperson informed Members that this item, requested by the European Union, Japan, and the United States, had been on the agenda since May Questions were posed to Brazil in G/TRIMS/W/93 and G/TRIMS/W/107, to which Brazil responded in documents G/TRIMS/W/99 and G/TRIMS/W/113, respectively. 10. The United States recalled its disappointment with stringent local content requirements in mobile service licenses issued by Brazil last year. The requirements were bad for Brazil's equipment and services sectors and Brazilian consumers, who would pay for less competitive and less innovative goods and services. They also raised serious questions about Brazil's compliance with its TRIMs obligations. Compounding this were plans for another auction for commercial mobile services in the 700 MHz band for a launch of services in time for the World Cup, in G/TRIMS/W/126.

3 He referred to a published request in February 2013 by ANATEL, Brazil's telecom regulator, for comments on rules for the use of this new spectrum. Although detailed bid documents had yet to be proposed, he quoted Minister Paulo Bernardo as stating "We intend to put a requirement in the 700 MHz auction for the use of national technology." The US urged Brazil to reconsider making discriminatory content requirements part of this next bid. Brazilian consumers deserved the best technology without regard to its country of origin. He concluded by asking Brazil for an update on ANATEL's plans in this regard. 12. The European Union voiced concern that, following last year's 2.5 GHz band and 450 MHz band auctions to install 4G technology in Brazil, the Government announced its intention to continue the local content requirement in the 700 MHz auction. His delegation had posed questions to Brazil at the last two meetings of the Committee. In Brazil's replies to follow-up questions from the US, dated 5 October 2012, Brazil only provided the references to the applicable laws and the relevant Rule of the Ministry for Science, Technology and Innovation; it failed to explain Brazil's definition of "national technology". He reiterated his delegation's concern about the impact on foreign operators affected by local content requirements, and about the local content requirements that might be included in the recently announced measures on 19 strategic sectors including information communication technologies (ICT). 13. Japan remained concerned about the local content requirements imposed by Brazil on the winning bidders of an auction on the radio frequency spectrum in the 450 MHz and 2.5 GHz bands last year. Further, Japan expressed concern about the order by the Ministério das Comunicações do Brasil, announced in February 2013, for an eventual auction of the radio frequency spectrum in the 700 MHz band. According to the order, ANATEL, after verifying viability of attribution, destination and distribution of the band between 608 MHz and 806 MHz, should take into account principles, one of which was to reinforce the manufacturing sector of Brazil. As the bidding conditions for the use of 700 MHz band radio frequency would be announced in the second half of 2013, and the auction would be conducted early next year, Japan asked Brazil to promptly provide information about whether it would apply local content requirements of the same nature. 14. Brazil stated that its Government was committed to fostering innovation, streamlining investment and promoting the sustainable development of its economy. In this sense, Brazil had taken steps to simplify its fiscal system and improve the conditions for the development of its economy based on technology, innovation and a well-qualified workforce. The bidding process for the telecommunications sector was initiated after a long period of public consultations with all interested parties. It did not stipulate any restriction to the participation of foreign enterprises, including companies already operating in Brazil and newcomers. There was ample participation of foreign companies in the process. Furthermore, the Brazilian Government did not consider the bidding process a mere commercial transaction; the band spectrum was a natural resource belonging to the State. The auction, therefore, was an important instrument of economic and social development, contributing to the construction of a network vital to Brazil's security interests. Brazil remained ready to discuss these issues in more detail with interested delegations. 15. The United States asked Brazil if the 700 MHz auction would continue, and if so, to provide information on its timing. Brazil said that it would check with its capital and revert with a response. 16. The Committee took note of the statements made. 4 BRAZIL TAX PREFERENCES LINKED TO LOCAL CONTENT CONDITIONS IN SEVERAL SECTORS 17. The Chairperson informed Members that the European Union, Japan and the United States had proposed that this item be placed on the agenda for this meeting. Questions had been circulated in G/TRIMS/W/118, to which Brazil responded in G/TRIMS/W/ Japan said that the assistance program for the automotive sector in Brazil, called INOVAR- AUTO, was a framework under which companies meeting certain conditions could benefit from taxreduction incentives for industrial products. Since the measures under the program were envisaged to protect domestic industry and would provide advantages pertaining to internal taxes on products of specific countries, Japan was concerned that they could be implemented inconsistently with Articles 1 and 3 of the GATT 1994 and Article 2 of the TRIMs Agreement.

4 - 4 - Hence, Japan was interested in observing the developments from a systemic point of view, and would welcome Brazil's views on the background and objectives of these measures and on the consistency of such measures with the WTO Agreements. 19. Japan reiterated its deepening concern about Brazil's recent proliferation of the use of indirect taxes in various sectors to support domestic manufacturing and exports. Although it was still analyzing the potential impact on its industry, Japan was concerned that the use of indirect taxes extended beyond the automobile sector to sectors such as communication network equipment and chemical fertilizer, potentially causing negative implications to the business environment in Brazil. 20. The European Union said that Brazil had adopted a number of programs granting tax benefits to companies that met certain local content requirements. The EU had expressed its concerns at the last two Committee meetings where it also noted that these tax measures were not limited to the automotive sector. Law No of 17 September 2012, which introduced the automotive regime, foresaw a comparable regime for telecommunication network equipment, a tax regime on certain digital goods that appeared to discriminate against imported goods, and reinforced a tax scheme on semiconductors and related goods along the same lines. The automotive regime was supplemented by Decree 8.015/13 and implementing Ordinance 113/2013 which increased the number of production stages to be performed in Brazil to benefit from the 30% IPI tax reduction. The Government indicated that the program may be extended beyond In its responses to questions, Brazil said that Article 41 of Law gave tax credits to accredited companies producing or importing automobiles in Brazil in a manner consistent with WTO agreements. Beneficiaries could choose which expenditures listed under the Law they might incur to acquire the credit; the specific details on how the regime operated and how the requirements should be fulfilled were still under discussion. The EU asked what the results were of the internal discussion regarding details on how the regime of tax credits under Article 41 of Law operated and the requirements were fulfilled. The EU asked Brazil to provide more information on the Government plan (as evidenced by Minister Pimentel's remark of 17 September) to extend INOVAR AUTO beyond The EU was concerned that the law of September 2012 may be part of a policy for a broader use of indirect taxes to afford protection to domestic goods. Three days after its adoption, the Brazilian Government issued a further executive measure foreseeing exemptions from indirect taxes linked to local content requirements in the fertilizers sector. In addition, the Government announced the launch of 19 new sector-strategic agendas, which appeared to include indirect tax exemptions linked to local content conditions. Of particular concern were the plans to introduce a special tax regime for the chemicals sector known as "Repequim", which, according to official reports, would be modeled on the automotive regime in terms of local content conditions. The EU called on Brazil to refrain from adopting or implementing provisions that would create discrimination against imported goods with regard to indirect taxes. Brazil's replies to questions posed by the EU, US and Japan on the consistency of the measures with the TRIMs Agreement were general in nature. Thus, the EU remained unconvinced about the compatibility of these measures with the TRIMs Agreement. 23. The United States shared the EU and Japan's concerns about the apparent proliferation of a tax preference program under which the tax on investments was partially forgiven contingent on the use of local content. While Brazil asserted that WTO Members had the right to regulate production, they must do so in a manner consistent with their WTO obligations, including in the TRIMS Agreement. The US asked Brazil to confirm whether it had correctly understood that these tax provisions provided a benefit contingent on the use of domestic goods. The US was also concerned with the general nature of Brazil's responses to questions posed. His delegation drew particular attention to Law pertaining to the telecommunications equipment sector where Brazil may be restricting imports of a large number of products. This sector was an important area for foreign investment as well as for development in Brazil. Broadly, the US was concerned about the growing list of tax exemptions based on local content, and would appreciate an explanation of the policies and objectives of the Brazilian Government. 24. Australia also noted its systemic and commercial concerns. Since the policy was announced some 2 years ago, the specific details were still unclear and, judging from the replies received from Brazil in April 2013, the features of the tax regime "varied from situation to situation" and were applied on a case-by-case basis. This contributed to the lack of predictability and clarity

5 - 5 - surrounding the investment and import regime in various sectors. Australia also drew attention to a distinction between a requirement to use or purchase domestic products, and encouragement of value-added in the production chain. WTO rules prohibited the former but did not prevent Members' developing or assisting their industries in ways consistent with the rules and with minimum impact on the trade and commercial interests of Members. Australia remained concerned that Brazil chose a combination of elements related to tax preferences which related, not to valueadded, but to local content requirements. Could Brazil confirm that motor vehicle producers in Brazil could earn tax credits from imported inputs as part of an eligible manufacturing activity? This question related to Brazil's response to question 5 in document G/TRIMS/W/124. Finally, Australia asked Brazil to consider refining its measures to ensure that its market remained open to fair competition for imported goods consistent with its international obligations. 25. Brazil responded that each of the Brazilian measures discussed had unique features to facilitate investments in different sectors of the economy. Each sector had its own structural problems and particular necessities. The measures envisaged providing adequate conditions for those producers committed to energy efficiency and sustainable development to thrive, or the measures aimed at reducing and rationalizing costs along the production chain, especially in those sectors with high upfront expenses. 26. Brazil recalled that the different incentive regimes were conceived to improve the national tax system that often unintentionally surtaxed investments, with producers overpaying certain taxes along the chain of production and receiving tax credits to be used at the end of this chain. The new measures constituted an effort to align the Brazilian tax system with the practice of most countries, in a transparent and non-discriminatory manner. These measures were fiscally neutral, as they simply displaced a credit along the value chain, with a view to promoting innovation, development, full employment and the optimal use of resources, according to the WTO rules and objectives. With respect to the automotive sector, he noted that several foreign companies from different countries, including from some Members that spoke at this meeting, had qualified for and were taking advantage of the Program. 27. The Committee took note of the statements made. 5 INDIA CERTAIN PREFERENCES TO DOMESTICALLY MANUFACTURED ELECTRONIC GOODS 28. The Chairperson recalled that this item was first considered at the Committee's meeting in May 2012, and was requested by the European Union, Japan and the United States. Questions were circulated in G/TRIMS/W/94 and G/TRIMS/W/105, and India's replies were circulated in documents G/TRIMS/W/97 and G/TRIMS/W/111, respectively. 29. The United States recalled its concerns about a notice of policy issued by India's Department of Electronics and Information Technology (DeitY) that could have been interpreted to require use of locally produced "electronic products" under certain circumstances. His delegation was pleased by recent indications it had received from the Indian Government that this policy was being reformulated, inter alia, to remove the domestic manufacturing requirement for purchases by private firms. While India had previously expressed the view that the measure was driven primarily by security concerns, his delegation was gratified to see that India shared the view that national security could and should be protected in a manner consistent with WTO obligations. In particular, India could achieve its security objectives without imposing domestic manufacturing requirements. He asked if India had any information about the timeframe for this issue and requested India to inform the Committee about developments. His delegation was ready to work with India on alternative approaches to better meet its security needs. 30. Japan had previously noted its concern about two announcements issued by Indian authorities. Firstly, on 5 October 2012, India's Department of Telecommunications issued a notification on the requirements for preferences to domestically manufactured telecom products in government procurement. According to this notification, all Government Ministries or Departments (except the Ministry of Defence) and the agencies under their administrative control, and all Government-funded telecom projects, had to comply with requirements on preferential market access and value addition, under which the percentage of procurement to be made from domestically manufactured telecom products was set between 50 to 100%.

6 Secondly, in January 2013, the Department of Telecommunications made public a draft of "notification regarding the policy for preference to domestically manufactured telecom products in procurement due to security consideration", seeking public opinion by January 24. If this draft entered into force, all procurements by Government licensees and their Managed Service Providers, i.e. the private sector, should give preference to domestically manufactured telecom products if they were deemed to have security implications. More recently, according to the Press Information issued by the Indian Prime Minister's Office on 8 July 2013, "a decision was taken to review the Policy for Providing Preference to Domestically Manufactured Electronic Goods, particularly PMA in the private sector" and to postpone its implementation. Under this decision, relevant Indian authorities would review the entire policy and particular attention would be paid to private sector procurements of electronic products having security implications so that such procurements would not be subject to the local content requirement. Japan welcomed this decision and asked to be kept informed of the recent developments of the review and future prospects. 32. The European Union noted that since the previous Committee meeting, India issued guidelines for government procurement of electronic products which provide for a more flexible interpretation of the value added thresholds. His delegation also welcomed the announcement of 8 July by the Prime Minister's Office calling for the suspension and review of the policy. He asked for an update regarding the status of the PMA (Preferential Market Access) policy following the 8 July announcement. In particular, he sought confirmation that PMA rules would not apply to any private procurement including that of licensee operators, and that local value added rules would not be applied on security grounds, including those for public procurement. 33. His delegation also asked India to provide information on how the review would be conducted and the timeline for the review. This was important for transparency and the involvement of all stakeholders. Finally, he sought confirmation that for domestically manufactured electronic goods the definition of value addition used in the Guidelines of 12 June 2013, i.e. "should be so calibrated that it reflects the average/slightly above average of the manufacturing capability of the domestic industry for that electronic product at a given time " would be applied, instead of the fixed percentage approach notified on 10 February Chinese Taipei shared the concerns raised and had systemic concerns regarding the WTO consistency of these measures. Information technology was an important sector for her country's trade; she hoped that India's measures would have not negative trade impacts and would be applied in a transparent and WTO-consistent manner. She asked India to provide up-to-date and complete information of the nature, scope and implementation of the measures and, in particular, to confirm that the measures applied to government procurement and not the private sector. 35. India recalled that, in its replies to questions, it had explained how its measures were not inconsistent with its obligations under the various WTO Agreements, and that the framework laid down under the Government of India Notification no. 8(78)/2010-IPHW, dated 2 October 2013, was only an enabling framework that did not, by itself, mandate any specific electronic product. India had also explained that the rationale of the policy was described in the policy document. 36. Regarding Japan's first concern, the Notification by the Department of Telecom, in paragraph 2, clearly specified that it was for government procurement and not for eventual commercial resale or with a view to use in the production of goods for commercial sale - which was clearly exempted under Article III: 8. His delegation was not clear as to why Japan had raised the issue of inconsistency of this notification with the TRIMs Agreement. The security related guidelines were in a draft stage so he could not comment on them. This answered the EU's question about the status of the guidelines. He would relay the US comments to his Capital. India and the US had had bilateral meetings and his delegation remained open to additional bilateral consultations. He requested any additional questions in writing to which his delegation would endeavor to respond. 37. The Committee took note of the statements made.

7 - 7-6 INDONESIA CERTAIN MEASURES ADDRESSING LOCAL CONTENT IN INVESTMENT IN THE TELECOMMUNICATIONS SECTOR 38. The Chairperson recalled that this issue was considered at Committee meetings held on 20 May and 16 October 2009, 1 October 2010, 3 October 2011, 4 May and 1 October 2012, and April It was placed on the agenda at the request of the European Union, Japan and the United States. Questions had been posed in documents G/TRIMS/W/61, 71, 78, 86, and 104. Responses were circulated in documents G/TRIMS/W/63, 75, 80, 96, and Japan continued to be concerned about the local content requirement in Indonesia's telecommunications sector. It constituted a significant barrier for foreign investors to contribute to the telecommunication infrastructure in Indonesia. The sole fact that the projects were funded by the Government and the Government selected operator(s) through a bidding process was not sufficient to regard such entities as governmental agencies exempt from the national treatment obligation under Article III: 8(a) of GATT Japan recognized that if "service obligation operator(s)" carrying out procurement were the Government itself or entities under its control, such procurement would be considered "government procurement". However, if the procurement decision was made independently from the Government, such procurement should not be regarded as "government procurement" by governmental agencies under Article III: 8(a) of GATT. 40. Under Article III: 8(a) of GATT, procurement by government agencies of products purchased "for governmental purposes" was regarded as "government procurement". Japan recognized that "for governmental purposes" did not simply mean for the aim of the government, but meant for government use, consumption or benefit. In this case, procurement by a government should not be regarded as "government procurement" envisaged in Article III: 8(a) of GATT. Indonesia's replies did not address Japan's concerns. Japan wished to follow up in this Committee. 41. The United States remained concerned by local content requirements in telecommunications decrees adopted over the last few years and the penalization of non-complying foreign investors. It questioned why Indonesia adopted such measures when it was seeking to develop its telecommunication sector, which presented opportunities for both Indonesian and foreign companies, particularly since many resources needed were not found domestically but would have to come from abroad. He asked when Indonesia would respond to Japan's questions on this issue. 42. The European Union reiterated its preoccupation with the "mushrooming" of investment and local content issues in Indonesian legislation. In this case, the local content provisions were a longstanding issue that the EU had raised on several occasions, including at the Ministerial level. The EU urged Indonesia to address the relevant regulatory issues which would establish better conditions to attract telecom investments in Indonesia for its own eventual benefit. He asked if Indonesia envisaged taking other measures that would support the same public policy objectives without the unnecessary trade and investment distortions to attract more foreign direct investment in this (and other) sectors. Was there truth to the rumour that Indonesia was going to further increase the mandatory local content requirements from 40 to 50%? If so, why? He recalled that no written answers had yet been provided to his delegation's questions. 43. Canada shared the concerns expressed regarding Indonesia's local content requirements in the telecommunication sector and urged Indonesia to consider the impact these measures could have on investment and innovation. Canada emphasized its interest in ensuring non-discrimination in the Indonesian telecommunication sector and would review the replies to Japan's questions. 44. Indonesia requested the questions in writing to forward to his capital for due response. 45. The European Union asked when Indonesia would respond to the written questions it had already submitted. Indonesia said that it would respond at a later time. 46. The Committee took note of the statements made.

8 - 8-7 INDONESIA CERTAIN LOCAL CONTENT PROVISIONS IN THE ENERGY SECTOR (MINING, OIL AND GAS) 47. The Chairperson recalled that this item had been considered at Committee meetings held on 16 October 2009, 1 October 2010, 3 October 2011, 4 May and 1 October 2012, and 30 April It was on the agenda at the request of the European Union, Japan and the United States. Questions had been circulated in documents G/TRIMS/W/70, 88, 108, 128 to which Indonesia replied in documents G/TRIMS/W/74, 79, , and The United States submitted additional questions that reflected its continued concerns about certain Indonesian measures affecting the energy sector (mining, oil and gas). In response to a US question about the meaning of the requirement to "prioritize" use of local content in the 2009 Mining Law and Government Regulation No. 23 Year 2010, Indonesia explained that the term "encourages companies to give preference to domestic goods and services provided that they are available in the Indonesia market and meet the quality and post-sales service standards, as well as having their sustainability of supply and timely distribution warranted" and that "[i]nvestors are considered to have prioritized the use of those goods and services when they have given preference to domestic goods, equipment, services, raw materials and/or components as well as imported products sold in Indonesia." 49. From the replies received and the discussions in the Committee, the US observed that it could be understood that investors were required to purchase domestic goods and services unless they could persuade some Indonesian government entity that an exception should apply. The US continued to have questions regarding the basis upon which Ministries in Indonesia determined which goods and services were included on the master list. It also continued to seek information on how the Indonesian Government judged that companies had "prioritized" use of those goods and services, as well as the consequences if a company was found not to have "prioritized". 50. Further, in response to concerns that certain measures appeared to constitute export restrictions on certain mined products, Indonesia explained that the Minister of Energy and Mineral Resources Decree No. 34/2009 "require a minimum percentage of mining and coal production be prioritized for domestic needs at a benchmark price in accordance with the generally effective price in the international market." This could be understood to mean that investors were required to sell the minimum percentage of the covered product so long as there was any demand in Indonesia at the price set by the Government. While Indonesia's latest response provided some information on how these percentages were reached, the US was concerned that Indonesia had indicated that "currently there are no available mechanisms for investors to provide their comments on the draft decision" by the Ministry of Energy and Mineral Resources. The US also asked where the annual decisions were published, and what occurred if the estimates about production and domestic needs were incorrect? It also sought information regarding the "certain conditions," alluded to in Indonesia's responses, which would allow investors to allocate less than the minimum percentage. 51. The current chaos in the Indonesian tin market, where shipments had dropped 75%, and the largest producer had declared force majeure, were illustrative of the unintended consequences of such export restrictions. In response to a question from the US regarding Presidential Regulation No. 35/2004, which regulated contractor activities in the upstream oil and gas sector, regarding requirements to "prioritize" the use of local goods and services, Indonesia explained that the regulation "does not differentiate between the implementation of preference to domestic goods/services in the mineral and coal mining sector and that in the oil and gas sector." The US continued to have questions about the impact of Indonesia's Supreme Court decision in November Did Indonesia's Supreme Court issue a ruling to disband BP Migas, saying the upstream regulator allowed foreign companies too much control over the nation's natural resources? 52. Since the Supreme Court ruling, Indonesia created (under Presidential Regulation No. 9 of 2013) a Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas) in the Ministry of Energy and Mineral Resources to take over the duties and functions of BP Migas. Given that SKK Migas was created in the aftermath of an apparent Supreme Court finding that BP Migas was insufficiently restrictive on the activities of foreign investors, did SKK Migas have any plans to repeal the existing local content requirements and/or to enact new restrictions? The Supreme Court ruling also struck down the unprocessed ore export ban provisions of the Ministry of Energy and Mineral Resources regulation, though the Ministry had promised to move forward with the

9 - 9 - ban. Recent press reports indicated that GOI may be softening the stance on the smelting requirement given that it was unlikely Indonesia would have sufficient smelting capacity by 2014 to fully enforce the requirement. He asked for further clarity on this. 53. The European Union said that Indonesia's replies only reinforced his delegation's concerns. Given the expression by several Members of the doubts regarding the compatibility of the measures with the WTO Agreements, including TRIMs, did Indonesia contemplate a review of the provisions at issue? His delegation invited Indonesia to consider the long-term impact of the measures taken over the past few years and months in the Indonesian energy and mineral resources, bearing in mind G20 commitments to resist and roll-back protectionist measures. The measures included not only local requirements, but also export restrictions and limits imposed on foreign participation, which acted as deterrents to foreign investment. 54. Japan considered that the measures stipulated in the Mining Law of January 2009 and its relevant decrees would consist of de facto export restrictions of surplus mining products, because under these measures investors were obliged to conduct processing and refining mineral ore and coal to enhance the added value of the produced minerals. Japan invited Indonesia to explain the consistency of these measures with the obligations under Article XI of GATT 1994 and Article 2 of the TRIMS Agreement. Provisions in the Mining Law, such as production and export controls by the Government, or local content requirements for foreign investors, were also measures that appeared inconsistent with GATT Articles III:4 and XI:1 as well as Article 2 of the TRIMS Agreement. Japan continued to be concerned about the divestment obligation to foreign shareholders set out under the decree which regulated implementation of mineral and coal mining operations under the Mining Law. 55. Canada shared the concerns about the Indonesian mining sector and was closely following the developments of the new mining program. It continued to be concerned about the potentially negative impact on current and future foreign mining investments in Indonesia, and was particularly worried about the export ban on mineral ore, and the 2012 divestment law. Certain provisions of the mining regime appeared to discriminate against foreign suppliers. Canada looked forward to additional information from Indonesia on the nature and impact of the measures, and to the replies to the additional US questions. 56. Australia had on-going concerns regarding Indonesia's ownership divestment requirements, requirements to prioritize local service providers, domestic processing, restrictions on the export of raw materials, pressure to renegotiate contracts at work, and restrictions on obtaining approvals for expatriate positions. These regulations created uncertainty for foreign and Indonesian mining ventures operating in Indonesia, and had the potential to affect investor confidence more broadly. Australia looked forward to more clarity on the implementation of these regulations. 57. Indonesia said inter-ministerial coordination was necessary to provide answers to the US questions which it would do in writing. Upon the dissolution of BP Migas, Indonesia had issued Presidential decree No that ensured the sanctity and continuity of all contracts until they expired. It was the Constitutional Court, not the Supreme Court, which annulled the existence of BP Migas. The ruling related to the annulment of some items in the oil and gas laws issued in 2001 that related to the existence of BP Migas. The Indonesia Parliament was working on the revision of the oil and gas law. All regulations issued by BP Migas were still in effect, and all its responsibilities were handed over to SKK-Migas until the finalization of the new oil and gas law. 58. The United States welcomed news that the Indonesian Parliament was working on a new oil and gas law. He asked that the Indonesian delegation keep the Committee apprised of developments, in particular if other WTO Members would be able to comment on the draft law. 59. The Committee took note of the statements made. 8 NIGERIA CERTAIN MEASURES TAKEN IN THE "ACT TO PROVIDE FOR THE DEVELOPMENT OF NIGERIAN CONTENT IN THE NIGERIA OIL AND GAS INDUSTRY" OF APRIL The Chairperson noted that this item was previously considered at Committee meetings on 3 October 2011 and 4 May, 1 October 2012 and 30 April It was on the agenda of the

10 meeting at the request of the European Union and the United States. Questions were circulated in document G/TRIMS/W/89 to which Nigeria had not yet responded. 61. The United States recalled that Nigeria's local content requirements in its oil and gas industry had been on the Committee's agenda for two years. His delegation had posed written questions to in September 2011 and not received a formal response or any substantive engagement. His delegation raised its systemic concerns regarding the lack of response and engagement in the Council for Trade in Goods in July While his delegation understood that consultation could be necessary for such technical issues, he noted that the WTO Committee system provided a forum to gain a basic understanding of the trade polies of other Members, and to raise concerns outside of the context of dispute settlement. He urged Nigeria to make use of the Committee to clear up misunderstandings and to explain the relationship of the measures to the TRIMS Agreement. 62. The European Union echoed the US statement indicating that it was also waiting for responses to the questions submitted. He recalled the questions his delegation had raised in the May 2012 meeting and reiterated in October 2012 concerning the review of Schedule A. This review, originally foreseen for spring 2012, was meant to comprise the list of detailed local content requirements per good or service. His delegation was not aware of any review having taken place. He asked Nigeria to specify the date of this review and how it would be carried out? 63. His delegation understood that an Amendment Bill was pending before the National Assembly which could provide an opportunity to review certain provisions of the Act, including Schedule A, and address questions beyond the issue of WTO compatibility. The review could look also at whether the legislative scheme, and especially its local content requirements, provided the appropriate tool to achieve the stated goal of enhancing domestic capacity in the oil and gas industry. His delegation invited Nigeria to use this occasion to look more closely at whether the legislative scheme, and especially its local content requirements, provided the appropriate tool to achieve the stated goal of enhancing domestic capacity in the oil and gas industry. Issues related to the productive capacity and supply possibilities of the relevant Nigerian sectors ought to be addressed in this framework, as well as some apparent distortions introduced by the law, notably that the requirements in Schedule A favoured pure agency/intermediation over genuine local investments. His delegation looked forward to this planned review. 64. Japan shared the systemic points expressed by the previous speakers and encouraged Nigeria to expeditiously provide written answers to meet the established practice in the WTO. 65. Nigeria assured the Committee that his Government was committed to its WTO obligations as evidenced by the notifications it had submitted to enhance transparency. As indicated in previous meetings, the Act in question provided a framework for the utilization of services in the Nigerian oil and gas industry. It encompassed activities connected with the exploration, development, exploitation, and sale of Nigerian oil and gas resources, including upstream oil and gas operations. The scope of the TRIMS Agreement related to goods. Therefore, the Act could not be viewed as inconsistent with Nigeria's obligations. On the US and EU issues, his delegation was still waiting for substantive responses from its Capital. Nonetheless, he informed Members that the two delegations were consulting with his capital. His delegation was still consulting with the relevant Ministries and Governmental agencies to formulate its responses. 66. The Committee took note of the statements made. 9 AGENDA ITEM 9: RUSSIA LOCAL CONTENT CONDITIONS IN THE "AUTO INVESTMENT PROGRAM" 67. The Chairperson recalled that this item was discussed at the Committee meeting of 30 April It has been requested by the European Union, Japan and the United States, who had also circulated questions in document G/TRIMS/W/120. Russia responded to these questions in document G/TRIMS/W/ The United States said that his delegation was still analysing Russia's responses to its questions. It remained interested in how Russia would bring the WTO-inconsistent elements of its automotive investment regimes into compliance with its WTO commitments. It looked forward to

11 consulting with Russia on any WTO-consistent measures that would replace the existing measures not later than July The European Union welcomed Russia's confirmation in its responses to questions that it would abide by its commitment to eliminate all the WTO-inconsistent elements of this investment regime by 1 July He asked what Russia meant in its response to Question 1, that "the form of the agreements should not necessarily be changed". Did Russia mean that it could comply with its commitment without changing the terms of these agreements? The EU requested that this Committee be regularly informed of Russia's steps to consult interested WTO Members and eliminate the relevant programs pursuant to paragraph 1090 of its Accession Protocol. 70. Japan considered the answers provided by Russia to the questions it co-sponsored disappointing. Under the "Auto Investment Program", agreements existed between the Ministry of Economic Development and companies engaged in automobile production and assembly which accepted the local-content requirement to obtain preferential tariffs. Paragraph 1090 of Russia's Accession Protocol stated that "[t]he representative of the Russian Federation confirmed that all WTO-inconsistent measures, including preferential tariffs or tariff exemptions, applied pursuant to Auto Investment Program No. 1 and Auto Investment Program No. 2 and agreements concluded under these programmes would be eliminated by 1 July 2018." However, in response to a question about phasing out or eliminating the program, Russia stated that "[t]he ultimate date of expiration of the agreements between investors and the Ministry of Economic Development of the Russian Federation is 31 December 2020." 71. At the last Committee meeting, Japan urged Russia Federation to correct this discrepancy in written form. Instead, Russia provided a series of puzzling answers. Japan failed to understand what the Russian Federation meant by, "[t]here could be different means of ensuring compliance of the regime with the WTO rules" and "[a]t this stage we cannot forecast what these measures will be." Japan urged Russia to clarify when and how it intended to bring the current investment regime into consistency with WTO Agreements. Also, with regard to the reply to Question 2, Japan requested further clarification on the discussion with participants of the regime on means of ensuring compliance of the regime with the WTO rules. 72. The Russian Federation recalled that it had committed to change the existing investment regime by 1 July However, the commitment did not provide for termination of the investment regime itself after 1 July 2018 and the investment agreements. On requests for clarity, he referred to the relevant section of the Accession Protocol which contained a detailed description of the investment regime and how it worked. The requirements to the investors were established not by the investment agreements but by the provisions of the Governmental Order on the investment regime of industrial assembly. The form of the investment agreements should not be necessarily changed. There could be different means of ensuring compliance of the regime with the WTO rules and he could not foresee what these measures would be. Russia had launched a discussion with participants of the investment regime on how to balance compliance of the regime with the WTO rules while maintaining their investment projects. At this stage it was too early to judge how full compliance with the WTO rules would be achieved by 1 July The Committee took note of the statements made. 10 RUSSIA LOCAL CONTENT REQUIREMENTS FOR AGRICULTURAL EQUIPMENT 74. The Chairperson recalled that this item was discussed at the Committee meeting of 30 April It had been requested by the European Union and the United States who had also circulated questions in document G/TRIMS/W/116 to which Russia submitted responses in document G/TRIMS/W/ The United States remained concerned about reports that RosAgroLeasing (RAL), a stateowned leasing company created to supply agricultural equipment to farmers in Russia, was imposing a local content requirement for that agricultural equipment. At the last meeting, Russia provided the Committee with the relevant laws and written answers to its questions. However, relatively little information was provided about this program; he asked Russia when it would provide written responses to its questions. He asked Russia to provide further information about RAL's relationship to the Russian Government, and its operation with the purchase of agricultural

12 equipment. In particular, did RAL require that the agricultural equipment it purchased be "manufactured in the Russian Federation?" 76. The European Union reiterated its interest in receiving responses from Russia to its joint questions to better understand how this system was functioning. 77. Japan expressed its systemic interest in the local content requirement by "RosAgroLeasing" in agricultural equipment and would examine Russia's responses to the questions posed. 78. Russia explained that "RosAgroLeasing" was a joint-stock company with a state share in its authorized capital. It was a commercial organization that conducted its activities in accordance with national legislation. In accordance with the Civil Code of the Russian Federation, under the financial lease the property acquired under the leasing agreement was specified by the lessee. The leasing agreement specified exact features of the equipment subject to the leasing contract and other details that were common for such contracts. He added that Government Resolution No 90 of 4 February 2009, which was repealed in January 2013, enabled the Ministry of Agriculture to provide loans to farmers at an interest rate below the market rates for the purchase of farm machinery manufactured in the Russian Federation. The system no longer worked in this way. Government Resolution No of 27 December 2012 "On Establishing the Rules for Granting Subsidies to Agricultural Machinery Manufacturers" was adopted to bring into force the State Program of Agricultural Development and Regulation of the Market of Agricultural Production, Commodities and Supplies for The Committee took note of the statements made. 11 UKRAINE CERTAIN LOCAL CONTENT PROVISIONS IN THE LAW "ON AMENDMENTS TO THE LAW OF UKRAINE 'ON ELECTRIC POWER INDUSTRY' 80. The Chairperson informed Members that this item was discussed at the Committee's meeting in October 2012 and 30 April Questions from the EU were circulated in G/TRIMS/W/109, and Ukraine's responses were circulated in document G/TRIMS/W/115. Additional question were subsequently circulated in document G/TRIMS/W/119. This item was requested by the EU, Japan and the US. 81. The European Union recalled that the specific local content requirements imposed on the development of new investments in energy power plants in Ukraine were in force since the adoption of the amendments to the Law on Electricity Production in November The requirements specified that, beginning in 2014, after a short transition period, the share of construction costs, i.e. raw materials, supplies, fixed assets, works and services to be used in the development of energy power plants, must be at least 50% locally sourced. This was a significantly higher share of local components than that used presently by the industry in similar projects for the development of energy plants. This also meant that to comply, economic operators would need to substantially modify their investment projects. This created uncertainty for investors, in particular those who had already started the implementation of their projects. 82. In past meetings, the EU and other Members had raised concerns regarding both the process and the legal aspects of the measure. As regards the process, the EU expressed dissatisfaction that, despite multiple requests including at the bilateral level, Ukraine had not engaged in meaningful consultations prior to the adoption of the amendments to the Law. While Ukraine announced at the April 2013 Committee meeting an internal expert consultation, and committed to providing swift answers to the request for clarification on how the measure would be applied, no such clarification had been provided to date. Legally, the EU believed that the amendments to the Law on Electricity production were in breach of Article III: 4 of GATT 1994 (less favourable treatment to imported equipment than to like products originating in the Ukraine), and of Article 2.1 of the TRIMs Agreement. The EU view was largely corroborated by the May 2013 report from the WTO Appellate Body on the measures affecting the renewable energy generation sector and measures related to the Canada's Feed-In Tariff program. 83. The EU had also raised concerns regarding another element, namely the "green" Feed-In- Tariff (FIT) for the production of electricity from renewable sources, the granting of which was conditional on the local content requirements mentioned above. The EU had advanced specific