Agreement On Subsidies And Countervailing Measures Classifies Subsidies Into


Developing countries The SCM Agreement recognizes three categories of developing countries: least developed members (LDCs), members with a per capita GNP of less than $1000 per year, listed in Annex VII of the SCM Convention, and other developing countries. The lower a member`s level of development, the more favourably it is treated with regard to subsidy disciplines. For example, least developed countries and Annex VII members, whose per capita GNP is less than $1,000 per year, are exempt from the export subsidy ban. Other developing countries have eight years to end their export subsidies (they cannot increase the level of their export subsidies during this period). With regard to import subsidies, the least developed countries have eight years and other developing countries five years to end such subsidies. There is also more favourable treatment with regard to countervailable subsidies. For example, some subsidies related to privatization programmes of member States of developing countries cannot be implemented multilaterally. As regards countervailing measures, exporters from Member States of developing countries are entitled to more favourable treatment when investigations are concluded when subsidies or the volume of imports are low. Article 3 of the agreement prohibits the use of local content and export subsidies for non-agricultural products. Least developed countries (and other countries with a per capita GNI of less than $1,000 in constant $1990 dollars) are exempt from the export subsidy ban (Article 27(2) and Annex VII of the Agreement and paragraph 10.1 of the Doha Ministerial Decision on Implementation Issues and Concerns (WT/MIN(01)/17). The scope of these prohibitions is relatively narrow. Industrialized countries had already accepted the ban on export subsidies under the Tokyo Round subsidy agreement, and subsidies for local content, prohibited by the subsidy agreement, were already inconsistent with Article III of the GATT 1947.

The essence of the new agreement in this area is the extension of obligations to developing countries subject to certain transitional rules (see section below on special and differential treatment) and the creation of a mechanism for the early resolution (of three months) of complaints concerning subsidies prohibited by Article 4 of the Subsidies Agreement. For an internal financial contribution to be a grant, it must be paid by or on the instructions of a government or public body in the territory of a member. Therefore, the SCM Convention applies not only to measures taken by national governments, but also to measures taken by governments and subnational public bodies such as state-owned enterprises. Members in transition to a market economy Members in transition to a market economy will have seven years to end prohibited subsidies. However, such subsidies must have been notified within two years of the entry into force of the WTO Agreement (i.e. before 31 December 1996) in order to qualify for special treatment. Members with economies in transition also enjoy preferential treatment with respect to countervailable subsidies. Feasible grants Most grants, such as. B production subsidies fall into the applicable category.

Countervailable subsidies are not prohibited. However, they may be challenged either by multilateral dispute settlement or by countervailing measures if they harm the interests of another Member. There are three types of side effects. First, there is injury to a domestic industry caused by subsided imports into the territory of the complaining Member. This is the only basis for counter-measures. Second, there are serious prejudices. As a general rule, the disadvantages are serious due to negative effects (e.B. export displacement) on the market of the subsidizing Member or on a third country market. .

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