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    Subsidies

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    mixerarmy 2001
    The document discusses different types of subsidies and countervailing measures under WTO rules. It defines what constitutes a subsidy and outlines prohibited subsidies like export and local content subsidies. It also discusses actionable subsidies that are subject to challenge if they cause adverse effects. Specificity is discussed as well as the different types of adverse effects actionable subsidies can cause.

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    Subsidies

    Uploaded by

    mixerarmy 2001
    2 views8 pages
    The document discusses different types of subsidies and countervailing measures under WTO rules. It defines what constitutes a subsidy and outlines prohibited subsidies like export and local content subsidies. It also discusses actionable subsidies that are subject to challenge if they cause adverse effects. Specificity is discussed as well as the different types of adverse effects actionable subsidies can cause.

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    The document discusses different types of subsidies and countervailing measures under WTO rules. It defines what constitutes a subsidy and outlines prohibited subsidies like export and local content subsidies. It also discusses actionable subsidies that are subject to challenge if they cause adverse effects. Specificity is discussed as well as the different types of adverse effects actionable subsidies can cause.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    2 views8 pages

    Subsidies

    Uploaded by

    mixerarmy 2001
    The document discusses different types of subsidies and countervailing measures under WTO rules. It defines what constitutes a subsidy and outlines prohibited subsidies like export and local content subsidies. It also discusses actionable subsidies that are subject to challenge if they cause adverse effects. Specificity is discussed as well as the different types of adverse effects actionable subsidies can cause.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    SUBSIDIES AND

    COUNTERVAILING
    MEASURES
    Dr Bommuluri Bhavana Rao
    What is a Subsidy?

    The WTO SCM Agreement contains a definition of the term “subsidy”.


    The definition contains three basic elements:
    (i) a financial contribution
    (ii) by a government or any public body within the territory of a
    Member
    (iii) which confers a benefit.

    All three of these elements must be satisfied in order for a subsidy to


    exist.
    The SCM Agreement creates two basic categories of
    subsidies:
    1. those that are prohibited,
    2. those that are actionable (i.e., subject to
    challenge in the WTO or to countervailing
    measures).
    Specificity

    Assuming that a measure is a subsidy within the meaning of the SCM Agreement, it nevertheless is not subject to
    the SCM Agreement unless it has been specifically provided to an enterprise or industry or group of enterprises or
    industries. The basic principle is that a subsidy that distorts the allocation of resources within an economy should
    be subject to discipline. Where a subsidy is widely available within an economy, such a distortion in the allocation
    of resources is presumed not to occur. Thus, only “specific” subsidies are subject to the SCM Agreement
    disciplines. There are four types of “specificity” within the meaning of the SCM Agreement:

    Enterprise-specificity. A government targets a particular company or companies for subsidization;

    Industry-specificity. A government targets a particular sector or sectors for subsidization.

    Regional specificity. A government targets producers in specified parts of its territory for subsidization.

    Prohibited subsidies. A government targets export goods or goods using domestic inputs for subsidization.
    Prohibited Subsidies

    Two categories of subsidies are prohibited by Article 3 of the SCM Agreement.

    1. The first category consists of subsidies contingent, in law or in fact, whether


    wholly or as one of several conditions, on export performance (“export subsidies”).
    (A detailed list of export subsidies is annexed to the SCM Agreement)

    2. The second category consists of subsidies contingent, whether solely or as one of


    several other conditions, upon the use of domestic over imported goods (“local
    content subsidies”).

    These two categories of subsidies are prohibited because they are designed to
    directly affect trade and thus are most likely to have adverse effects on the interests of
    other Members.
    Actionable subsidies

    Most subsidies, such as production subsidies, fall in the “actionable” category.


    Actionable subsidies are not prohibited.

    However, they are subject to challenge, either through multilateral dispute


    settlement or through countervailing action, in the event that they cause
    adverse effects to the interests of another Member.
    There are three types of adverse effects.
    First, there is injury to a domestic industry caused by subsidized imports in the
    territory of the complaining Member. This is the sole basis for countervailing
    action.
    Second, there is serious prejudice. Serious prejudice usually arises as a result of
    adverse effects (e.g., export displacement) in the market of the subsidizing
    Member or in a third country market. Thus, unlike injury, it can serve as the basis
    for a complaint related to harm to a Member's export interests.

    Finally, there is nullification or impairment of benefits accruing under the GATT


    1994. Nullification or impairment arises most typically where the improved
    market access presumed to flow from a bound tariff reduction is undercut by
    subsidization.
    If you remember….let me refresh your memory

    Bound tariffs are the maximum tariff rate for a given product that a
    country has committed not to exceed.

    WTO members have the flexibility to apply tariffs at any level up to


    their bound level.

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