The Agreement on Subsidies and Countervailing Measures are popularly known as “SCM Agreement” which addresses two separate concepts but the importance of putting both the concepts in the same agreements is that they are closely related topics and one is the action of other principles. Subsidies are the multilateral disciplines regulated by SCM Agreement of WTO whereas countervailing measures are the kind of remedy for damage caused by subsidy
INTRODUCTION TO THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES The Agreement on Subsidies and Countervailing Measures are popularly known as “SCM Agreement” which addresses two separate concepts but the importance of putting both the concepts in the same agreements is that they are closely related topics and one is the action of other principles Subsidies are the multilateral disciplines regulated by SCM Agreement of WTO whereas countervailing measures are the kind of remedy for damage caused by subsidy SUBSIDIES A subsidy is defined as a “financial contribution” by a government which provides a benefit The forms that a subsidy can take include: a direct transfer of funds, a potential transfer of funds or liabilities, foregone government revenue, the purchase of goods, or the provision of goods or services Under the Agreement, actions can only be taken against subsidies that are “specific.” A specific subsidy is one that is only given to one company, or to a special group of companies Categories of subsidies Prohibited Subsidies Export subsidies and local content subsidies are prohibited by Article of the SCM Agreement 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 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 Non-Actionable Subsidies It is a kind of subsidy which is neither prohibited nor restricted by GATT/ WTO and does not permit any of the member nations to impose countervailing duties against them Countervailing Measures Countervailing Duties (CVDs) are tariffs levied on imported goods to offset subsidies which are either restricted or prohibited under the SCM Agreement Part V of the SCM Agreement has mentioned a substantive rule to check if the imported goods can be subjected in imposing CVDs, the rules contain three essentials to establish the objective of imposing CVDs on imported goods which are as follows The importer country has to determine whether there are any subsidies provided to the producers in their country by their government or any such public body When these subsidize goods are imported in the country they must create some threat to their domestic market There must be a direct causal link between subsidized goods and a threat to the domestic market Apart from this, it is very important to understand the concept of ‘Sunset’ and ‘Judicial Review’ ‘Sunset’ means CVDs will be collapse automatically after every years and can be continued only after the condition that if the importer country determines that the exporter country still not following the key regulations of the SCM Agreement ‘Judicial Review’ is the power given under Article 23 that GATT/ WTO member can create an independent tribunal to review the decisions of investigation authority or investigation panel of GATT/ WTO with respect to the domestic law of the country only if the country has its own national legislation or law relating to CVDs Subsidies and Countervailing HOMEW ORK 2112150128 - TRẦN THỊ KIM NGÂN 1.What are subsidies? s i d b u i e S s I Subsidies are financial assistance provided by a government or other organization to support a particular activity or industry They can come in various forms, including direct cash payments, tax breaks, or in-kind support such as infrastructure or research and development assistance Subsidies are often used to encourage the growth or development of industries that are deemed important for a country's economy or strategic interests They can also be used to support industries that are struggling, either due to competition from imports or other challenges Drawbacks of subsidies They can lead to inefficient allocation of resources and distort markets by artificially inflating the competitiveness of certain industries They can also be expensive for governments and lead to fiscal deficits II Countervailing Countervailing measures are trade policy tools that are used to counteract the effects of subsidies When a country provides subsidies to its industries, it can create unfair advantages in international trade by allowing those industries to sell their products at lower prices than competitors from other countries This can harm domestic industries in other countries and lead to trade disputes ==> Countervailing measures Countervailing measures can include tariffs or other restrictions on imports from the subsidized country, or they can involve the imposition of countervailing duties on the subsidized products These measures are intended to offset the effects of the subsidies and level the playing field for all producers in the affected industry III The WTO Agreement on Subsidies and Countervailing Measures (ASCM) The WTO Agreement on Subsidies and Countervailing Measures (ASCM) is a multilateral trade agreement that sets out the rules for the use of subsidies and the imposition of countervailing measures by WTO member countries The agreement was negotiated during the Uruguay Round of trade negotiations and came into force in 1995 as part of the creation of the WTO The ASCM is designed to ensure that subsidies are used in a way that does not distort international trade and that they not give an unfair advantage to producers in one country over producers in another The agreement defines what subsidies are, and it sets out the circumstances under which subsidies are considered to be countervailable and when they are prohibited The ASCM defines a subsidy as a financial contribution by a government or any public body within the territory of a WTO member that confers a benefit on a recipient, including a direct transfer of funds, a government revenue forgone, or the provision of goods or services at below market value Subsidies can be provided to any industry, including agriculture, fisheries, and manufacturing The agreement establishes three categories of subsidies: Prohibited subsidies: These are subsidies that are specifically prohibited under the agreement because they are deemed to cause the most harm to international trade Examples include export subsidies and subsidies that are contingent on the use of domestic over imported goods Actionable subsidies: These are subsidies that are not prohibited but can cause trade distortions and harm to other countries' industries They are subject to challenge under the WTO dispute settlement mechanism Non-actionable subsidies: These are subsidies that are not considered to cause significant trade distortions and are exempt from challenge under the WTO dispute settlement mechanism Rules for the imposition of countervailing The ASCM also sets out the rules for the imposition of countervailing measures, such as countervailing duties, to offset the effects of subsidies that are found to be countervailable To impose such measures, a WTO member must demonstrate that the subsidized imports are causing or threatening to cause material injury to its domestic industry Overall, the ASCM is an important part of the WTO's efforts to promote free and fair trade and to ensure that subsidies are used in a way that benefits all WTO members Thank you for listening! Categories of Subsidies Prohibited subsidies “Attack” against prohibited subsidies • Mutilateral track: challenge the subisdies before WTO’s Dispute Settlement Body (DSB) If the DSB finds in favour of the plaintiff → ask to remove the prohibited subsidy • Unilateral track: carry out national investigation → levy countervailing duties Categories of Subsidies Actionable subsidies • most subsidies fall into this type • not prohibited • subject to challenge (multilateral dispute settlement or through countervailing action) • they cause adverse effects to the interests of another Member Categories of Subsidies Actionable subsidies “adverse effects” • is injury to a domestic industry → countervailing action • serious prejudice complaint related to harm to a Member's export interests • nullification or impairment of benefits accruing under the GATT 1994 Countervailing Measures Substantive and Procedural Countervailing Measures Substantive rules it determines that • subsidized imports, • injury to a domestic industry • causal link between the subsidized imports and the injury Countervailing Measures Procedural rules • Standing • Preliminary investigation • Undertakings • Sunset • Judicial review Countervailing Measures Procedural rules Key objectives • investigations are conducted in a transparent manner • interested parties have a full opportunity to defend their interests • investigating authorities adequately explain the bases for their determinations Transition Rules and Special and Differential Treatment Transition Rules and Special and Differential Treatment Developed countries • years to phase out prohibited subsidies • Such subsidies must be notified within 90 days Transition Rules and Special and Differential Treatment Developing countries • Least-developed Members (LDCs) • exempted (prohibition on export subsidies); • years (import-substitution subsidies) • Other developing country • years(export subsidies); • years (import-substitution subsidies) • Members in transformation to a market economy • years (prohibition on export subsidies) • Must have been notified within years Notifications Notifications Subsidies • Members notify all specific subsidies to the SCM Committee • New and full notifications are due every three years • Notifications are the subject of extensive review and discussion Notifications Countervailing legislation and measures Require to notify • their countervailing duty laws and regulations to the SCM Committee • all countervailing actions taken on a semi-annual basis • preliminary and final countervailing actions at the time they are taken • which of their authorities are competent to initiate and conduct countervailing investigations Dispute Settlement Dispute Settlement • relies on the dispute settlement rules of the DSU • extensive special or additional dispute settlement rules and procedures → expedited procedures • special mechanisms for the gathering of information