SUBSIDY AGREEMENT

UNDER WTO AND GATT

P re s e n t a t i o n B y :
A n s h u l A g g a r wa l
BBA LLB (VIII Sem)
 What are subsidies?
A subsidy is a benefit given to an individual, business
or institution, usually by the government. It is usually
in the form of a cash payment or a tax reduction. The
subsidy is typically given to remove some type of
burden, and it is often considered to be in the overall
interest of the public, given to promote a social good
or an economic policy.
 What is the SCM-Agreement?
 The Agreement on Subsidies and Countervailing
Measures (SCM-Agreement) provides for the use of
subsidies, and regulates the actions that countries can
take to counter the effects of subsidies
 The Subsidies Agreement is ´two agreements in one´.
It comprises of two main provisions:
i) certain subsidies under the WTO can be challenged,
ii) a Member can carry out an investigation and impose
counterveiling measures.
 Multilateral And Unilateral
Approach
 Multilateral disciplines are the rules that states
whether a member can provide a subisdy or not They
are enforced through WTO dispute sttlement
mechanism.
 Countervailing duties are a unilateral instrument,
which may be applied by a Member after an
investigation by that Member and a determination that
the criteria provided in the Subsidies Agreement is
satisfied.
Types Of Subsidies

Prohibited

Actionable

(Non-Actionable)
 Prohibited Subsidies
( Article 3 of SCM Agreement)
A subsidy granted by a WTO member government
is prohibited by the Subsidies Agreement if it is
contingent, in law or in fact, on export performance,
or on the use of domestic over imported goods.

These subsidies are prohibited because they directly

affect trade and are most likely to have adverse effects
on the interests of other Members.
 Remedy Against Prohibited Subsidy

• Remedy through Dispute Settlement Undertaking

• It can be challenged in WTO on the basis of special
accelerated procedures
• Complaining Member not obliged to show trade
effects as these are regarded as trade distorting
subsidies
• Defaulting member required to withdraw the subsidy
without delay or face counter - measures
 Actionable Subsidies
Subsidies causing adverse effects to the interests of
other Members:
i) Injury to the domestic industry
ii) Nullification or impairment of benefits
iii) Serious prejudice

Actionable subsidies are not prohibited. However,

they are subject to challenge, either through
multilateral dispute settlement or through
countervailing action
Remedy for Actionable Subsidies

 Removal of adverse effects of the

subsidy or
 Withdrawal of subsidy or
 Imposition of countervailing duty on
imports
 Non-Actionable Susbidies

A subsidy on which the World Trade

Organization does not permit a member state to impos
e countervailing duties.

Remedy:
 Countervailing action can be taken only where there is
injury
• Serious prejudice and nullification or impairment can
be challenged at the multilateral level only
 Countervailing Measures
 Provisional countervailing duties: May be imposed before the conclusion of an
investigation, provided there is a preliminary affirmative finding of subsidy
causing injury

 Voluntary Untertakings: The government of the exporting Member agrees to

eliminate or limit the subsidy and The exporter agrees to revise its prices so that
the investigating authorities are satisfied that the injurious effect of the subsidy is
removed.

 Definitive Countervailing Duties: Such measures may only be imposed at the

end of an investigation. The Member imposing a definitive countervailing duty
must first have conducted an investigation at the conclusion of which it
determined that the conditions and criteria for the application of definitive
measures are satisfied.
 Are subsidies for agricultural products
subject to the Agreement?

 Agricultural export subsidies that are fully

consistent with the provisions of the
Agreement on Agriculture are not
prohibited under the SCM Agreement, but
instead are subject to the disciplines of the
Agreement on Agriculture. They can be
countervailed.