An introduction to the Agreement on Subsidies and Countervailing Measures

The following International Trade practice note provides comprehensive and up to date legal information covering:

  • An introduction to the Agreement on Subsidies and Countervailing Measures
  • Introduction
  • Scope of the Agreement
  • What is a subsidy?
  • It is a financial contribution?
  • Is the financial contribution made by a government or public body?
  • Does the financial contribution confer a benefit?
  • Is the subsidy specific?
  • Types of subsidies
  • What are prohibited subsidies?
  • More...

An introduction to the Agreement on Subsidies and Countervailing Measures

This Practice Note introduces the basic concepts of subsidisation and countervailing measures as contained in the WTO’s Subsidies and Countervailing Measures Agreement. It covers the main aspects relevant to subsidy matters, such as the determination of the like product, the domestic industry, what constitutes a subsidy, what is a prohibited subsidy, what is an actionable subsidy, the two different tracks to resolve subsidy issues, the affect that a subsidy must have to be actionable and the different countervailing duties that may be imposed.

Introduction

The General Agreement on Tariffs and Trade (GATT) 1947 contained several provisions dealing with subsidies. Article VI deals with countervailing duties to counter the effect of a subsidy. Article XVI GATT provided for certain disciplines on domestic subsidies as well as export subsidies. The disciplines as contained in the GATT 1947 were weak. This led to the negotiation and conclusion of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) which came into force with the establishment of the World Trade Organization (WTO) on 1 January 1995.

The SCM Agreement disciplines the use of subsidies. Importantly it does not prohibit most forms of subsidies, only some. The SCM Agreement classifies subsidies into two groups, namely prohibited and actionable subsidies. Only two kinds of subsidies are prohibited:

  1. export subsidies, and

  2. local content (import substitution) subsidies

In

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