subsidies & counter..g

8/7/2019 subsidies & counter..g

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Agreement on Subsidies and Countervailing Measures (SCM

Agreement

Agreement on Subsidies and Countervailing Measures (SCM

Agreement

Presented by

Saroj Paswan(10020242026)

Swati charbhe(10020242030)Sushil Kamble(10020242035)


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Define subsidises and counterfiling

Define subsidises and counterfiling

Agreement of article on subsidies

Agreement of article on subsidies

Effect upon developing and developedcountries

Effect upon developing and developedcountries

Current overall situation

Current overall situation


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Definiti

onofsubsidy

Definitionofsubsidy

Financial contribution by a government or any

public body where government

Practice direct transfer of funds, potential transfer

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


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Aim: To balance potentially conflicting concerns.

Should not be obstacles for fair trade

Agreement on Subsidies and

Countervailing Measures


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Harmful effects of a subsidy

1)Material injury to domestic industry ofanother member country

2)Serious prejudice to the interests of

another WTO member country

3)Nullification or impairment of benefitsaccruing directly or indirectly to another

WTO Member, particularly with respectto binding commitments in WTO oncustom duties.


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Any reduction in import tariffs would likely increase imports

Increase in imports would cause industry to seek remedies


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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

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.

Whysu

bsidynece

ssary

Whysu

bsidynece

ssary

??


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financial contribution by a government or any public body

within the territory of a Member (referred to in this Agreement

as "government").

(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

1Definitiono

fsubsidies

Article

1Definitiono

fsubsidies


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There is any form of income or price support

And

a benefit is thereby conferred.

ArticleXVIofGAT

T1994


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Termsof the Benefit to the

RecipientGovernment provision of equity capital - If theinvestment decision was inconsistent with theusual 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 ofcommercial loan without guarantee.


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specific subsidies

Harmful

prohibited

Actionable non actionable.

open to challenge

T

ypes


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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

subsidie

s


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Categories of Specific Subsidies

Prohibited subsidies ("red" subsidies) are subsidiesthat either:

Depend upon export performance, or

Are contingent upon the use of domestic instead ofimported goods.


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Categories of Specific Subsidies. (cont.)

2)Actionable subsidies ("yellow" subsidies)

are subsidies that are trade distortingbecause, in the way they are used, they:

Injure a domestic industry of anothermember state.

Nullify or impair benefits due anothermember state under GATT 1994.

Cause or threaten to cause "seriousprejudice" to the interests of anothermember state.

yello

w"subsid

ies


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Categories of Specific Subsidies. (cont.)

3)No actionable subsidies ("green" subsidies) aresubsidies that either:

Are not nonspecific.

Are infrastructural subsidies that involve governmentfunding to:

Assist (but not fully cover) the cost of businessresearch activities.

Aid disadvantaged regions.

Help existing facilities adapt to new environmentalrequirements.


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Non actionablesubsidies Assistance to disadvantaged regions within the

territory of a Member provided that:

region must be a clearly designated contiguousgeographical area with a definable economic andadministrative identity

the region is considered as disadvantaged on the basis ofcriteria that must be clearly spelled out in law, regulation

the criteria shall include a measurement of economicdevelopment


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Non actionablesubsidies

Assistance to promote adaptation of existing facilitiesto 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 coverany manufacturing cost savings which may be achieved

available to all firms which can adopt the new equipment

and/or production processes.


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Actions an injured state may take

Request consultations with the subsidizing state.

Ask the WTO to authorize it to imposecountervailing duties.

Independently impose countervailing duties. Must follow the same procedures used for

imposing antidumping duties

t t f b idi il bl i t

structure of subsidies available in wto


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Prospects

structure of subsidies available in wtoagreement

structure of subsidies available in wtoagreement


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Structure

Part I Apply only to subsidies that aregiven 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 inthe traffic light category.

Part V requirements both of substanceand procedure


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Structure

Parts VI & VII concern the machinery of theagreement, establishing its institutions andits arrangements for notification andsurveillance.

Parts VIII & IX set out special provisions forvarious categories of developing countriesand for countries that are moving fromcentral planning to a market economy.

The final sections, Parts X and XI deal withdispute settlement and final provisions.


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Definition countervailing

Countervailing duties (CVDs) are duties imposedunder WTO Rules to neutralize the negative effects ofsubsidies.

They are imposed after an investigation finds that aforeign country subsidizes its exports, injuringdomestic producers in the importing country.

Since countries can rule domestically whether

domestic industries are in danger and whetherforeign countries subsidize the products, theinstitutional process surrounding the investigationand determinations has significant impacts beyondthe countervailing duties
http://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/Subsidyhttp://en.wikipedia.org/wiki/Subsidyhttp://en.wikipedia.org/wiki/World_Trade_Organization


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Duration & Review ofcountervailing duties To the extent necessary to counteract subsidization

which is causing injury.

Interested parties can request the authorities to reviewwhether 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 itsimposition.

omm ee on u s es


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omm ee on u s esand Countervailing

MeasuresRepresentatives from each of the MembersElection of chairman

The WTO Secretariat acts as the secretariat to theCommittee

The Committee may set up subsidiary bodies asappropriate

Permanent Group of Experts 5 persons highlyqualified in the fields of subsidies and trade relations

PGE consultations


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Determination ofInjuryVolume 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 countervailingduty, 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


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Public Notice

Initiation of investigation to member/members of theproduct & other interested parties.

Preliminary or final determination, whether affirmativeor negative.

Imposition of provisional measures Conclusion or suspension of an investigation in the case

of an affirmative determination.

Termination or suspension of an investigation.

omm ee on u s es


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omm ee on u s esand Countervailing

MeasuresRepresentatives from each of the MembersElection of chairman

The WTO Secretariat acts as the secretariat to theCommittee

The Committee may set up subsidiary bodies asappropriate

Permanent Group of Experts 5 persons highlyqualified in the fields of subsidies and trade relations

PGE consultations


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Existing Programmed

Subsidy programmed established before the signingthe WTO Agreement & which are inconsistent with theagreement should be:

notified to the Committee not later than 90 days after thedate of entry

brought into conformity with the provisions of thisAgreement within three years of the date of entry

Extension and renewal of such programmed is notpossible


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Current trend regardingsubsidies


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0

1

2

3

4

5

6

7

8

1948 1957 1966 1975 1984 1993 2002

GATT 48 WTO 95

Value of world trade 19482003US$ trillion, current prices

1997

MORE trade? Of course, but

look at the STABILITY >

If 67%had been

wiped out

Preliminaries

Source: WTO data


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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.

The governments resisted. They were bound by theirobligations 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: WTOEffectupondevelopin

gand

develope

dcountries


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NAMA and Agriculture Chairs Circulatedtheir blueprints for an Agreement (Feb

8 2008) AgricultureAgriculture

Domestic Support

Market Access SensitiveSensitive ProductsProducts Special

Products Export Competition

Next Room E meeting 31 March (Cancelled)


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ResultCURRENT NEGOTIATIONS

Better trade

MOST DIFFICULT:

to move forward What can as well as take

EASY OPTION:

Defensive no deal is better than a bad deal

)

h ld d


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The World TradeOrganization

THANK YOU

The World Trade OrganizationCentre William Rapped

rue de Lausanne 154

CH1211 Geneva 21Switzerland

website: www.wto.org

subsidies & counter..g

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