Agreement on Subsidies and Countervailing Measures (SCM

Agreement

Presented by

Saroj Paswan(10020242026)
Swati charbhe(10020242030)
Sushil Kamble(10020242035)
Define subsidises and counterfiling

Agreement of article on subsidies

Effect upon developing and developed

countries
Current overall situation
  Financial contribution by a government or any
public body where government

 Practice direct transfer of funds, potential transfer

Definition of subsidy

of funds

 Provides goods or services other than general

infrastructure

 There is any form of income or price support by

the government

 This Contribution confers a profit

Agreement on Subsidies and
Countervailing Measures

Aim:

 To balance potentially conflicting concerns.

Should not be obstacles for fair trade

Harmful effects of a subsidy
1)Material injury to domestic industry of
another member country

2)Serious prejudice to the interests of

another WTO member country

3)Nullification or impairment of benefits

accruing directly or indirectly to another
WTO Member, particularly with respect
to binding commitments in WTO on
custom duties.
Any reduction in import tariffs would likely increase imports

Increase in imports would cause industry to seek remedies

  Export incentives play an important role in encouraging exports
from a country

 Almost every country provides incentives to its exporters.

However, not all types of export incentives are actionable under
Why subsidy necessary

the SCM Agreement.

 To analyze what kind of export subsidy is actionable and what is

not, a good understanding of the main provisions of the
Agreement is an absolute must.
?
  financial contribution by a government or any public body
within the territory of a Member (referred to in this Agreement
as "government").
Article 1 Definition of subsidies

(i) a government practice involves a direct transfer of funds (e.g.

grants, loans, and equity infusion), potential direct transfers of
funds or liabilities (e.g. loan ,guarantees);

(ii) government revenue that is otherwise due is foregone or not

collected (e.g.
fiscal incentives such as tax credits)

(iii) a government provides goods or services other than general

infrastructure, or
purchases goods;
Article XVI of GATT 1994

 There is any form of income or price support

And

 a benefit is thereby conferred.

Amount of a Subsidy in
Terms
of the Benefit to the
Recipient
Government provision of equity capital - If the
investment decision was inconsistent with the
usual investment practice.
A loan by a government – Relevant difference in
the amount paid in case of commercial loan.
A loan guarantee by a government – Relevant
difference in the amount paid in case of
commercial loan without guarantee.
 specific subsidies
Harmful
 prohibited
Types

 Actionable
 non actionable.
 open to challenge
Only "specific subsidies" are subject to the
"disciplines" of the SCM Agreement. (cont.)

• 1)Specific subsidies are subsidies that target:

• a) A specific enterprise or industry.
• b) A group of enterprises or industries.
• c) Enterprises in a particular region.
1)Specific
subsidies
Categories of Specific Subsidies

• Prohibited subsidies ("red" subsidies) are subsidies

that either:

•
• Depend upon export performance, or
• Are contingent upon the use of domestic instead of
imported goods.
Categories of Specific Subsidies. (cont.)

2)Actionable subsidies ("yellow" subsidies)

are subsidies that are trade distorting
because, in the way they are used, they:
• Injure a domestic industry of another
member state.
yellow" subsidies

• Nullify or impair benefits due another

member state under GATT 1994.
• Cause or threaten to cause "serious
prejudice" to the interests of another
member state.
Categories of Specific Subsidies. (cont.)

3)No actionable subsidies ("green" subsidies) are

subsidies that either:
• Are not nonspecific.
• Are infrastructural subsidies that involve government
funding to:
• Assist (but not fully cover) the cost of business
research activities.
• Aid disadvantaged regions.
• Help existing facilities adapt to new environmental
requirements.
Non actionable
subsidies
• Assistance to disadvantaged regions within the
territory of a Member provided that:
• region must be a clearly designated contiguous
geographical area with a definable economic and
administrative identity
• the region is considered as disadvantaged on the basis of
criteria that must be clearly spelled out in law, regulation
• the criteria shall include a measurement of economic
development
Non actionable
subsidies
Assistance to promote adaptation of existing facilities
to new environmental requirements:
◦ one-time non-recurring measure
◦ limited to 20 per cent of the cost of adaptation
◦ does not cover the cost of replacing and operating the
assisted investment, which must be fully borne by firms
◦ directly linked to and proportionate to a firm's planned
reduction of nuisances and pollution, and does not cover
any manufacturing cost savings which may be achieved
◦ available to all firms which can adopt the new equipment
and/or production processes.
Actions an injured state may take

• Request consultations with the subsidizing state.

• Ask the WTO to authorize it to impose

countervailing duties.
• Independently impose countervailing duties.
• Must follow the same procedures used for
imposing antidumping duties
structure of subsidies available in wto
agreement

Prospects
Structure

• Part I – Apply only to subsidies that are

given to a specific enterprise or industry or
group of enterprises or industries. Terms,
“subsidy” and “specificity” are defined.
• Parts II, III, IV – Place all the subsidies in
the traffic light category.
• Part V – requirements both of substance
and procedure
Structure
• Parts VI & VII concern the machinery of the
agreement, establishing its institutions and
its arrangements for notification and
surveillance.

• Parts VIII & IX set out special provisions for

various categories of developing countries
and for countries that are moving from
central planning to a market economy.

• The final sections, Parts X and XI deal with

dispute settlement and final provisions.
Definition countervailing
• Countervailing duties (CVDs) are duties imposed
under WTO Rules to neutralize the negative effects of
subsidies.

• They are imposed after an investigation finds that a

foreign country subsidizes its exports, injuring
domestic producers in the importing country.

• Since countries can rule domestically whether

domestic industries are in danger and whether
foreign countries subsidize the products, the
institutional process surrounding the investigation
and determinations has significant impacts beyond
the countervailing duties
Duration & Review of
countervailing duties
• To the extent necessary to counteract subsidization
which is causing injury.
• Interested parties can request the authorities to review
whether the continued imposition of the duty is
necessary to offset subsidization.
• Notwithstanding the above provisions, duty cannot be
terminated on a date later than five years from its
imposition.
Committee on Subsidies
and Countervailing
Measures
Representatives from each of the Members
Election of chairman
The WTO Secretariat acts as the secretariat to the
Committee
The Committee may set up subsidiary bodies as
appropriate
Permanent Group of Experts – 5 persons highly
qualified in the fields of subsidies and trade relations
PGE consultations
Determination of
Injury
Volume of subsidized imports
Price undercutting of like products
Prevent price increases
Evaluation of all relevant economic factors and indices
More than one country simultaneously subject to countervailing
duty, cumulative assessment done if:
Amount of subsidization > de minimums (for both)
Similar conditions of competition between the imported products &
like products
Impact of subsidized imports on the domestic producers
Public Notice
• Initiation of investigation to member/members of the
product & other interested parties.
• Preliminary or final determination, whether affirmative
or negative.
• Imposition of provisional measures
• Conclusion or suspension of an investigation in the case
of an affirmative determination.
• Termination or suspension of an investigation.
Committee on Subsidies
and Countervailing
Measures
Representatives from each of the Members
Election of chairman
The WTO Secretariat acts as the secretariat to the
Committee
The Committee may set up subsidiary bodies as
appropriate
Permanent Group of Experts – 5 persons highly
qualified in the fields of subsidies and trade relations
PGE consultations
Existing Programmed
• Subsidy programmed established before the signing
the WTO Agreement & which are inconsistent with the
agreement should be:
• notified to the Committee not later than 90 days after the
date of entry
• brought into conformity with the provisions of this
Agreement within three years of the date of entry
• Extension and renewal of such programmed is not
possible
Current trend regarding
subsidies
 Source: WTO data
Value of world trade 1948–2003
US$ trillion, current prices
8

MORE trade? Of course, but …

6
… look at the STABILITY >
5

3
If 67%
had been
2
wiped out

GATT ’48 WTO ’95

1

1997
0
1948 1957 1966 1975 1984 1993 2002

Preliminaries
 In 1997 there was another financial crises. Currencies in east
and southeast Asia were devalued.

These lowered the price of those countries’ exports. Fearing a

surge in cheap imports, lobbies campaigned to raise trade
barriers in the major markets of North America and Europe.
Effect upon developing and

The governments resisted. They were bound by their

developed countries

obligations in the WTO, and because they knew others were

similarly bound, they had confidence that the system would
remain stable.

.It would probably have been worst on developing countries.

.
Source: WTO
• NAMA and Agriculture Chairs Circulated
their blueprints for an Agreement (Feb
8 2008)
• Agriculture
• Domestic Support
• Market Access Sensitive Products –Special
Products
• Export Competition
• Next Room E meeting 31 March (Cancelled)
 Result
CURRENT NEGOTIATIONS

EASY OPTION:

Defensive no deal is better than a bad deal’

)’

MOST DIFFICULT:
to move forward …
What can as well as take

Better trade
The World Trade
Organization
THANK YOU

The World Trade Organization

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rue de Lausanne 154
CH–1211 Geneva 21
Switzerland

website: www.wto.org