SUBSIDIES &
COUNTERVAILING DUTIES
DISCIPLINES ON SUBSIDIES
The SCM Agreement allows Members to seek the
withdrawal of the subsidy or the removal of its adverse effects under certain conditions.
Subsidies under the SCM Agreement containsthree elements which must be satisfied in order for a subsidy to exist:
a financial contribution;
by a government or any public body within the territory of a Member;
which confers a benefit.
The disciplines in the SCM Agreement only apply
to "specific" subsidies
i.e. subsidies available
only to an
enterprise
,
industry
,
group of
enterprises
, or
group of industries
in the country.
Only a measure which is a specific subsidy is
subject to multilateral disciplines and can be
subject to countervailing measures.
Prohobited Subsidies
Two categories of subsidies are prohibited.
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 ).
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 ) or, in other words, those subsidies that require recipients to use domestic goods instead of imported goods.
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.
The SCM Agreement states that a country can:
use the WTO dispute settlement mechanism to
seek the withdrawal of the subsidy or the
removal of its adverse effects; or
launch a domestic investigation and ultimately
apply countervailing measures
("countervailing
duties") on subsidized imports that are found to
be causing injury to domestic producers.
COUNTERVAILING MEASURES
An affected WTO Member can launch its own investigation and ultimately charge extra duty
A Member may not impose a countervailing measure unless it determines in an investigation according to the provisions set forth in the SCM Agreement that: (i) imports are being subsidized;
(ii) there is material injuryor thereof to the domestic industryoflike products; and,
(iii) there is acausal link between the subsidized imports and the injury.
Note
Article VI:3 of the GATT 1994 defines
"countervailing duties":
"The term countervailing duty shall be understood
to mean a special duty levied for the purpose of
offsetting any bounty or subsidy bestowed,
Investigation
A countervailing duty (the parallel of anti-dumping duty) can only be charged after the importing country has conducted a detailed investigation similar to that required for an anti-dumping measure. There are detailed rules for deciding whether a
product is being subsidized, criteria for determining whether imports of subsidized products are causing material injury to the domestic industry, procedures for initiating and conducting investigations, and rules on the implementation and duration of countervailing measures (normally five years).
Countervailing Measures
Countervailing duties may only be imposed pursuant to investigations initiated and conducted in
accordance with the provisions of this Agreement and the Agreement on Agriculture
Countervailing measures do not need to be
The level of the countervailing duty should be
only
as high as necessary to offset the
subsidization
.
Countervailing duties are to be terminated
immediately where
the amount of a subsidy is
de minimis
(
less than 1% a
d valorem
) or where
the volume of (actual or potential) subsidized
imports or the injury is negligible.
Investigations are to be
concluded
within one year
after they are imposed,
and should not last more than 18
months, except in exceptional
circumstances.
A Member may also want to complain
about the subsidized product in an export
market or in a
third-market where two or
more Members' exports compete
. In these
cases, the only way to redress and
