WTO rules on Subsidies WTO rules on Subsidies and and Countervailing Countervailing Measures Measures Prof. Gan Ying Prof. Gan Ying 12-Feb-2008 12-Feb-2008
Jan 12, 2016
WTO rules on Subsidies WTO rules on Subsidies and and
Countervailing MeasuresCountervailing Measures
Prof. Gan YingProf. Gan Ying
12-Feb-200812-Feb-2008
I IntroductionI Introduction
Dilemma ?
• 1), Government policies and social welfare v. adverse effects
• 2), Legitimate or not? –no distortion allowed.
II Basic WTO rules on SCMII Basic WTO rules on SCM
• GATT art.16--1994
• SCMA
Concept of subsidies
Treatment of subsidies
Response to injurious subsidies
III Determination of III Determination of subsidization:subsidization:
concept & categorizationconcept & categorization
• Concept (SCMA art.1.1)
• 1)—provider
• Government body• Public body• Funding mechanism (plan?)• Private body—no restriction
2) financial contribution2) financial contribution
• A) Types • a--Direct transfer of funds
Grants/ loans/ equity infusions• b--Potential direct transfer of funds &
liabilities
Loan guarantees• c--Government revenue, otherwise due, that
is foregone or not collected
Fiscal incentives-tax (US -FSC)
• d--Provision of goods and services other than general infrastructure
• e--Purchase goods
No services? Why? • f--Payments to funding mechanism
Canada --Diary
Cash/ payment in kind/ payment for services• g--Entrustment or direction of a private body
B) Comparison standardB) Comparison standard(art.14 calculation of benefit)(art.14 calculation of benefit)
• a) Market-based standard
• Equity infusion—the usual investment practice of private investors
• Loan—comparable commercial loan that could actually obtained on the market
• Loan guarantee—the amount that would pay on a comparable commercial loan absent the gov. guarantee
• Provision of goods and services: -- adequate remuneration in prevailing market
Conditions (quality/availability/transportation, etc.)
• b) Gov. revenue otherwise due
• Sovereignty—impose duty
• Give tax credit/ exemption CASE: Indonesia – auto1998
CASE: US -- FSC 2000
• Benchmark: taxation system of a country: revenue actually raised v. would have been raised otherwise.
• c) conferring a benefit
benefit v. “cost of government”
CASE: Brazil-aircraft:
• Can be passed from one to another? Privatization – arm’s-length business standard
( US—CVD on UK hot-rolled steel )
categorizationcategorization
• 1) Specificity (SCMA art.2)
A) De jure specificity
• Legislation –limit to certain enterprise or industry.
• Objective criteria or conditions governing the automatic eligibility, amount, condition must be strictly adhere to
• B) De facto specificity• Factors:• Use by limited number of enterprises.• Predominant use by certain enterprises. (the dominant use theory) ( US : 45%-100% )• Granting disproportionately large amounts to cer
tain enterprises. (the disproportionate beneficiary theory) Compared with the GDP/GNP contribution.
• C) Geographical specificity
Subsidy limited to certain enterprises located in a designated geographical region
• D) Deemed specificity
prohibited : export subsidies / import substitution subsidies
Traffic Light TheoryTraffic Light Theory
prohibited subsidies (red light)
actionable subsidies (yellow light)
non-actionable subsidies (green light)
Prohibited subsidiesProhibited subsidies
(SCMA art.3)• 1)Export subsidies• De jure or de facto contingent on actual or an
ticipated export performance• Subsidy for export-oriented enterprises?
• Annex I (a)-(l) 12
• 2) Import substitution subsidies
• De jure or de facto contingent on the use of domestic over imported goods
• ( local content requirements?)
Actionable subsidiesActionable subsidies
• Example:
adverse effects to the interests adverse effects to the interests of another memberof another member
• A) Injury to domestic industry
• a) Like product• b) Domestic industry• c) Injury to industry material injury threat of material injury material retardation of the establishment ) factors—volume/price/impact on producers• d) Causal linkOther factors may not be attributed to the subsidized
imports
• B) Nullification or impairment of benefits accruing directly or indirectly under GATT 1994
• Tariff concessions/ market access
• C) Serious prejudice, or threat thereof, to the interests
• The trade effects standard
Non-actionable subsidiesNon-actionable subsidies
• A) non-specified
• B) Some specified—2000/1/1 actionable
• Environment/R&D/Regional
IV Remedies IV Remedies
• 1) multilateral v. unilateral
• A) multilateral: DSU
• Special or additional rules and procedures
• Difference in time frames (prohibited-half as in DSU)
B) unilateral: CVDB) unilateral: CVD
apply to subsidies injuring domestic industries only.
Basic requirements :• Transparency• Opportunity to defend• Adequate explanation for determinations
Procedure for unilateral remediesProcedure for unilateral remedies
• Initiation (Sufficient evidence/ de minimis or negligible subsidy)
• Investigation (questionnaire/ on-spot)• Provisional determination• Final determination• Community/public interest ?• countervailing measures: provisional measures/
definitive duties/ voluntary undertakings (government eliminate or limit subsidies/ enterprises’ raising price)
Special and differential treatment for DCMSpecial and differential treatment for DCM (art. 27) (art. 27)
Examples:
• Prohibition of export subsidies not apply to LDCM or <$1000 per capita annual income.
• Some actionable subsidies in privatization programmes (direct forgiveness of debts, subsidies covering social cost) shall be treated as non-actionable.
V New Round Negotiation on V New Round Negotiation on SCMA & Hot IssuesSCMA & Hot Issues
• WTO subsidy discipline(2004 V.38(6))
• 1, Proposals in DOHA Round
• 2, Developing countries proposal
• 3, Developed countries
VI ChinaVI China
• China has been sued by Canada and US.MOFCOM:
http://www.cacs.gov.cn/DefaultWebApp/index.htm
USITC http://www.usitc.gov/CBSA http://www.cbsa-asfc.gc.ca/menu-eng.html
• Developing country? Transitional country?• Domestic rules (upstream subsidy/anti-
circumvention/ Best information available)