If no amicable solution is found during the initial consultations, the matter may be referred to the WTO Dispute Settlement Body (DPO), composed of representatives of all WTO Members. The Dispute Settlement Body establishes a panel to report its findings to the parties to the dispute within 90 days for prohibited subsidies or 180 days for convertible subsidies. If the Panel concludes that the measure in question is a prohibited subsidy, the subsidizing Government must withdraw it immediately. In the case of actionable subsidies, the subsidizing government must either withdraw the subsidy or eliminate its negative effects. If a prohibited subsidy has not been withdrawn within a certain period of time (as determined by the panel) or if the subsidizing country has not taken appropriate measures to withdraw a countervailable subsidy or eliminate its adverse effects within six months, the DPO may authorize the complaining country to take countermeasures. Agricultural subsidies Article 13 of the Agreement on Agriculture lays down specific rules for subsidies to agricultural products during the implementation period provided for in that Agreement (until 1 January 2003). Export subsidies that are in full compliance with the Agreement on Agriculture are not prohibited by the SCM Agreement, although they are still countervailable. Domestic aid that is in full compliance with the Agreement on Agriculture is not countervailable at the multilateral level, although it may also be subject to countervailing duties. Finally, domestic support under the Green Box of the Agreement on Agriculture is neither questionable at multilateral level nor subject to countervailing measures. At the end of the implementation period, the subsidy agreement shall apply to subsidised agricultural products, subject to the provisions of the Agreement on Agriculture, in accordance with Article 21 of the Agreement on Agriculture. The creation of a system of multilateral remedies that allows Members to challenge subsidies that have negative effects is a major step forward from the pre-WTO regime. However, the difficulty in most cases will be that a complaining Member will have to demonstrate the negative impact of subsidies on trade, a factual analysis that may be difficult for panels in some cases(2).
The Agreement on Subsidies and Countervailing Measures (SCM Agreement) deals with two distinct but closely related issues: multilateral disciplines governing the granting of subsidies and the application of countervailing measures to compensate for injury caused by subsidised imports. A U.S. company harmed by unfairly subsidized imports into the U.S. may also file a complaint or « petition » with the U.S. Department of Commerce requesting the initiation of a countervailing duty investigation. A countervailing duty investigation is a unilateral measure taken by a WTO member government to determine whether a domestic industry is suffering injury as a result of subsidized imports. Under the Subsidy Agreement, countries can impose a special import duty called a countervailing duty (CVM) to offset the benefit of prohibited or countervailable subsidies for imported goods. Countervailing duties may be imposed only if the investigating body of the importing country finds that imports of the product concerned are subsidized and causing injury to a domestic industry. For more information on the Department of Commerce`s grant enforcement efforts, visit the Grant Enforcement Office website. In addition, you can learn more about applying for countervailing duties by visiting the Import Administration`s website. The petitioner`s advice is available by email: Petitioners_Support@ita.doc.gov. A subsidy granted by a WTO member government is « enforceable » under the agreement (again, some exemptions are granted for agricultural subsidies) if it « harms » the domestic industry of another country or if it « seriously harms » the interests of another country.
Serious disadvantages can arise in cases where a subsidy is granted: the WTO Agreement on Subsidies and Countervailing Measures (also known as the Subsidy Agreement or the Subsidy Agreement) establishes multilateral disciplines for the use of subsidies and provides mechanisms to challenge state measures that violate these rules. The subsidy agreement nominally divides subsidy practice into three categories: prohibited subsidies (red light); eligible but achievable grants (yellow light); and eligible non-countervailable subsidies (green light). Export subsidies and import subsidies are prohibited. On 2 February and 27 April 2007, the United States requested additional consultations and consultations with China on subsidies in the form of refunds, reductions or exemptions from income taxes or other payments. Since they are offered on condition that enterprises purchase domestic products through imported goods or meet certain export performance criteria, these subsidies appear to be inconsistent with several provisions of the WTO Agreement, including Article 3 of the Agreement on Subsidies and Countervailing Measures, Article III, paragraph 4, of the General Agreement on Tariffs and Trade 1994 — and Article 2 the Agreement on Trade-Related Investment Measures and China`s specific commitments in its WTO Accession Agreement. Mexico has also initiated a dispute over the same subsidies. Developed country Members that are not eligible for special and differential treatment have three years from the date of entry into force of the Subsidy Agreement to phase out prohibited subsidies. Such subsidies must be notified to the notifying Member within 90 days of the entry into force of the WTO Agreement.
Under the agreement, measures can only be taken against « specific » subsidies. A specific subsidy is a subsidy granted only to a specific company or group of companies. Subsidies In accordance with Article 25 of the SCM Agreement, Members notify the Committee on Subsidies of all specific subsidies (at all levels of government and for all product sectors, including agriculture). New and complete notifications are due every three years, with update notifications in the intervening years. Notifications are subject to in-depth review and discussion by the SCM Committee. The World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures regulates the use of state subsidies and the application of remedies against subsidized trade with injurious trade effects. Such remedies may be pursued in WTO dispute settlement proceedings or in the context of a countervailing duty investigation that may be conducted unilaterally by any WTO member government. 1.The Agreement, which originally entered into force, contained a third category of non-countervailable subsidies. This category (together with a provision giving rise to a presumption of serious depreciation in respect of certain types of countervailable subsidies) is provisionally applied for a period of five years until 31 December 1999 and could be extended by consensus of the Committee on Subsidies in accordance with Article 31 of the Agreement. Until the 31st. No such consensus was reached in December 1999. back to text 2.
In order to mitigate this problem, the SCM Agreement introduced a subcategory of countervailable subsidies for which there was a rebuttable presumption of serious injury for a provisional period of five years ending on 31 December 1999. In accordance with Article 31, this provision (as well as the provisions on non-countervailable subsidies) could be extended by consensus of the SCM Committee. As at 31 December 1999, no such consensus had been reached. A subsidy granted by a WTO member government is prohibited by the SCM Agreement if it depends, in law or in fact, on export performance or the use of domestic products compared to imported products. These prohibited subsidies are commonly referred to as export subsidies or import subsidies. They are considered specific and are considered particularly harmful under the grant agreement and U.S. law. (Special rules apply to agricultural subsidies under the WTO Agreement on Agriculture.) Specificity. However, assuming that a measure constitutes a subsidy within the meaning of the SCM Agreement, it is subject to the subsidy agreement only if it has been expressly granted to an undertaking or industry or to a group of undertakings or sectors.
The basic principle is that a subsidy that distorts the allocation of resources within an economy must be disciplined. If a subsidy is prevalent in an economy, it is assumed that such a distortion does not occur in the allocation of resources. Therefore, only specific grants are subject to the disciplines of the SCM Agreement. There are four types of specificity within the meaning of the Grant Agreement: Prohibited Subsidies Two categories of subsidies are prohibited under Article 3 of the SCM Agreement. The first category includes subsidies which, in law or in fact, depend on export performance in whole or under one of the following conditions (export subsidies). A detailed list of export subsidies is annexed to the SCM Agreement. The second category includes subsidies which, alone or as one of the other conditions, depend on the use of domestic products in relation to imported products (subsidies for the local share). Both types of subsidies are prohibited because they are intended to directly affect trade and are therefore most likely to have negative effects on the interests of other members. The concept of financial contribution was included in the grant agreement only after lengthy negotiations […].