World Trade Organization Agreement On Subsidies And Countervailing Measures

The SCM agreement creates two basic categories of subsidies: those that are prohibited, those that can be implemented (i.e. challenged in the WTO or that take countervailing measures). All specific grants fall into one of these categories. The agreement contains a definition of the subsidy. In addition, the concept of a specific subsidy is introduced, i.e. a subsidy that is only available to a company, industry, group of companies or a group of industries in the country (or state, etc.) that grants the subsidy. The disciplines defined in the agreement apply only to specific grants. These may be domestic or export subsidies. The Doha negotiating section on subsidies and countervailing measures contained in the Doha Industries or Business Ministerial Declaration may require its government to retain safeguards. The WTO agreement sets out the requirements for protection investigations conducted by national authorities. The emphasis is on transparency and compliance with established rules and practices to avoid arbitrary methods. The investigating authorities must publicly announce the hearing date and make other appropriate evidence available to interested parties. The evidence must contain arguments as to whether a measure is in the public interest.

Members in transition to a market economy have seven years to end the prohibited subsidies. However, these subsidies must have been notified within two years of the WTO agreement (i.e. until 31 December 1996) to receive special treatment. Changing members also receive preferential treatment for applicable subsidies. Under the agreement, only “specific subsidies” can be taken. A specific grant is a grant that is only awarded to a particular company or group. Substantive Rules A member cannot impose a countervailing measure unless he finds that there are subsidized imports, harm to a domestic industry and a causal link between subsidized imports and the injury suffered. As noted above, the existence of a specific subsidy must be determined on the basis of the criteria of the first part of the agreement. However, the criteria for injuries and causes are in Part V.