Slide 14 Các biện pháp khắc phục thương mại

Trade creation and
protectionism
Mr. Nguyen Trung Vu
Faculty of International Law
Diplomatic Academy of Vietnam
LESSON OBJECTIVES
1. Overview of subsidies and import duties
2. Analyse international legal regulations on
subsidies and import duties.
3. When do countries use protectionist
measures
4. Brief look at the international legal
regimes on anti-dumping and protectionist
measures
SUBSIDIES
• What is meant by government support?
• Which economic factors drive countries to use subsidy
measures?
ECONOMIC ANALYSIS ON SUBSIDIES
SUBSIDIES
In WTO, there are two systems of regulations with regards to government support
that may be eligible to two products:
- For industrial goods: Types of subsidies, rules and conditions for each type,
along with measures for breach of subsidy or subsidy that causes loss
(Agreement on Subsidies and Countervailing Measures – SCM
Agreement);
- For agricultural goods: Compliance with the WTO Agreement on Agriculture.
SUBSIDIES
Subsidy (Or government grant) means any financial support provided by a

government or a public entity (central or local) that benefits an enterprise/industry
under one of the following means:
- Direct financial support through immediate transfer (e.g., capital grants, loans, equity
infusion) or promised transfer (e.g., loan guarantees).
- Exemption of payments that would normally be due (e.g., tax breaks, credits);
- Purchasing goods, providing services, or commodities (excluding general infrastructure);
- Grant financial support to a private sector company in the country to do the exact project as it
would have conducted by the public sector (Shadowing)
SUBSIDIES
• Art. 2 Agreement on Subsidies and Countervailing Measures:
2.1. (a) Where the granting authority, or the legislation pursuant to which
the granting authority operates, explicitly limits access to a subsidy to
certain enterprises, such subsidy shall be specific.
2.2. A subsidy which is limited to certain enterprises located within a
designated geographical region within the jurisdiction of the granting
authority shall be specific. […]
2.3. Any subsidy falling under the provisions of Article 3 shall be deemed to
be specific.
SUBSIDIES
• 03 types of subsidies that are prohibited under Art.3 SCM

• Subsidies that are de jure or de facto, as mentioned in Annex 1
(red light, substantive)
• Contingency subsidies (yellow light, substantive)
• Non-contingency subsidies (green light)
SUBSIDIES
Prohibited subsidies (Red light) Art.3 of SCM
- Export subsidies (subsidies based on added-on value to exports, i.e.
export bonuses, subsidies for input material for export, excise duty that
may be dispropotionate against identical tax applied for domestic goods,
promotion for insurance for exports and imports…); or
- Subsidies that prioritise the use of domestic goods over imported goods.
-
=> It is the matter of the court to determine whether the use of such
subsidies are prohibited under the regime of SCM (Substantive)
SUBSIDIES
Contingency Subsidies (Yellow light, Substantive) Part III SCM
"Including all types of subsidies with individual nature (except green
light subsidies). Member of SCM may apply the respected subsidies,
but if harm is done for the other countries or parties that produce
identical products, the provision makes way for a counter claim at
the WTO Dispute Settlement Board.
=> Substantive type of subsidy
SUBSIDIES
Art.5 of SCM: Adverse effects

- Cause injury to an industry of another Member;
- Refers to cause of action referred under Article II of GATT 1994
- Cause serious prejudice to the interests of another Member of
SCM
SUBSIDIES
Serious Prejudice (Art. 6.3 SCM)
- The total of ad valorem subsidization of a product exceeding 5%;
- Subsidies to cover operating losses sustained by an industry;
- Subsidies to cover operating losses sustained by an enterprise; other than one-time
measures which are non-recurrent and cannot be repeated for that enterprise and
which are given merely to provide time for the development of long-term solutions
and to avoid acute social problems.
- Direct forgiveness of debt, i.e: forgiveness of government-held debt, and grants to
cover debt repayment
SUBSIDIES
• To determine “damages” in an investigation on anti-dumping measures subject to
SCM Art. 6.3 on the grounds that a detrimental impact has been for imported
countries, has there been evidence then it could determine the clause.
• In context, the damages may be available in two ways: actual damages, or
foreseeable damages (with close proximity of it being happened);
- In propotionality, the damage must be seen as a reasonable output;
- In quantifying damages, damages are considered based on an analysis of all
circumstances that may link to the rate and level of import increases, the market
share of the product in litigation (i.e: export and import volumes, market share of
the imported products, changes in sales, volume, productivity, labour…).
TAXES AGAINST SUBSIDIES
• Article 3 Part VI GATT 1994

- The term Anti-subsidy taxes is understood as a tax applied for the
purpose of narrowing down all the discounts or subsidies (direct
or indirect) for domestic goods in all stages of its production.
- The amount by which these duties are imposed may not exceed
the actual price of the product/service.
=> "This is an anti-dumping duty (also known as countervailing measure)
which targets foreign exporters receiving subsidies."
Art.14 SCM Calculation of total volume of subsidy
- If the government provides a business with a loan at an interest rate lower
than the normal commercial interest rate for a similar loan, the subsidy
amount is calculated as the difference between these two interest rates.
- If the government provide a loan with a guaranteed fee lower than the
cost that the business would have to pay for a similar commercial loan
without government guarantees, the subsidy amount will be calculated as
the difference between these two amounts.
When may a country take no harms in applying taxes?
Case: US-Superfund case (United States – Taxes on Petroleum and Certain
Imported Substances L/6175 – 34S/136).
Facts: The U.S applies a tax regime on domestic products and imported
products on gasoline and genetic modified products for agricultural use. The
Claimant’s finding shows that the differences among prices of agricultural
product after the new tax regulation were insignificant (0.002 USD) for like
product.
When may a country take no harms in applying taxes?
Legal issue: Would an imposition on imported taxes against regulations on
WTO?
Held: The taxes in which it applies were not against the fundamental
meanings of “national treatment” as it was stated in Art.3 of the SCM and
Art.3 of General Agreement on Tariffs and Trade (GATT).
ADDITIONAL READINGS
Book:
1) Asso.Prof. Nguyen Hong Thao, Dr. Trinh Hai Yen, International Economic Law
Syllabus, Chapter 5: Protectionism and Anti-Competitive practice.
ADDITIONAL READINGS
For further references:
1/ UNITED STATES - MEASURES AFFECTING ALCOHOLIC AND MALT BEVERAGES <
https://www.wto.org/english/tratop_e/dispu_e/gatt_e/91alcohm.pdf>
2/ UNITED STATES - TAXES ON PETROLEUM AND CERTAIN IMPORTED SUBSTANCES <

https://www.wto.org/english/tratop_e/dispu_e/gatt_e/87superf.pdf>
3/ Clarification of Article III of GATT:

https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art3_e.pdf
4/ Agreement on Subsidies and Countervailing measures (SCM Agreement):

<https://www.worldtradelaw.net/document.php?id=uragreements/scmagreement.pdf&mode=download>
5/Anti-Dumping Agreement (Implementation of Article VI of GATT): <

https://www.wto.org/english/res_e/publications_e/ai17_e/anti_dumping_e.htm>

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Trade creation and

Subsidy (Or government grant) means any financial support provided by a

• 03 types of subsidies that are prohibited under Art.3 SCM

Art.5 of SCM: Adverse effects

• Article 3 Part VI GATT 1994

2/ UNITED STATES - TAXES ON PETROLEUM AND CERTAIN IMPORTED SUBSTANCES <

3/ Clarification of Article III of GATT:

4/ Agreement on Subsidies and Countervailing measures (SCM Agreement):

5/Anti-Dumping Agreement (Implementation of Article VI of GATT): <

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