Q9: Subsides

Question 1

Agreement on subsidies and countervailing measures,

Answer 1

• Disciplines the use of subsidies

* Regulates the actions countries can take to counter the effects of subsidies.

Question 2

Characteristics of subsides

Answer 2

1. financial contribution
2. by a government or any public body
3. Benefit
4. Specificity
   - Enterprise-specificity. A government targets a particular company or companies for subsidization;
   - Industry-specificity. A government targets a particular sector or sectors for subsidization.
   - Regional specificity. A government targets producer in specified parts of its territory for subsidization.
   - Prohibited subsidies. A government targets export goods or goods using domestic inputs for subsidization.

Question 3

Categories of subsides

Answer 3

Prohibited and actionable. It originally contained a third category: non-actionable subsidies.

Question 4

Prohibited subsidies:

Answer 4

Subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade and are therefore likely to hurt other countries’ trade. They can be challenged in the WTO dispute settlement procedure where they are handled under an accelerated timetable.

Question 5

Categories of prohibited subsides

Answer 5

• export subsidies

- local content subsidies

Question 6

Actionable subsidies:

Answer 6

The complaining country has to show that the subsidy has an adverse effect on its interests. Otherwise the subsidy is permitted. T

Question 7

What are the adverse effects of actionable subsides?

Answer 7

1. First, there is injury to a domestic industry caused by subsidized imports in the territory of the complaining Member. This is the sole basis for countervailing action.
2. Second, there is serious prejudice. Serious prejudice usually arises as a result of adverse effects (e.g., export displacement) in the market of the subsidizing Member or in a third country market. Thus, unlike injury, it can serve as the basis for a complaint related to harm to a Member’s export interests.
3. Finally, there is nullification or impairment of benefits accruing under the GATT 1994. Nullification or impairment arises most typically where the improved market access presumed to flow from a bound tariff reduction is undercut by subsidization.