agreement on subsidies and countervailing measures 16022011
TRANSCRIPT
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
1/32
Presented by:
Ankur Kohli 10020241063
Ravi Singh 10020241077
Sahil Verma 10020241078
Anu Moudgil 10020241095
Hrishikesh Malushte 10020241099
Supriya Bansal - 10020241113
AGREEMENT ON SUBSIDIES ANDCOUNTERVAILING MEASURES
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
2/32
BRIEF BACKGROUND
The agreement on Subsidies & Countervailing Measures(SCM) was a significant development that took place inthe Uruguay round of multilateral trade negotiations
(MTN), conducted within the framework of GeneralAgreement on Tariffs and Trade(GATT), spanning from1986 1994 and embracing 123 countries as contractingparties.
This Round transformed the GATT into the World Tradeorganisation or WTO as it is known today.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
3/32
PURPOSE
Principally, the SCM Agreement
- Disciplines the use of subsidies by membercountries.
- Regulates the actions countries can take to offsetthe effects of subsidies (Dispute-settlementprocedure & Countervailing duty)
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
4/32
DEFINITION
As per the SCM (Subsidies & Countervailing Measures) Agreementthe term subsidy is defined as a financial contribution, by agovernment or any public body within the territory of a member
,which confers a benefit .
Countervailing measures are defined as steps taken to negate theeffect of an action, event or an occurrence". In the context of
multilateral trade these are exercised in the form of countervailingduty (CVD) on exports from other member countries
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
5/32
FINANCIAL CONTRIBUTION
Direct transfer of funds loans, grants, equity infusions.
POTENTIAL Direct transfer of funds/liabilities loan guarantees.
Financial Incentives Revenue foregone, Tax Credits.
Provision of goods or services other than general infrastructure.
Purchase of goods.
PS: Under the provisions of Article XVI of GATT (1947 & 1994), theexemption of export or import duty or taxes shall not be deemedto be a subsidy.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
6/32
GOVERNMENT OR ANY PUBLIC BODY
National Governments
Sub-National governments, State/Countygovernments
State-owned companies (e.g. PSU in case of India)
Any private body entrusted or directed bygovernment to perform similar functions in
accordance with Article 2 of SCM Agreement.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
7/32
BENEFIT The existence of a benefit is to be determined by
comparison with the marketplace.
Amount (Principle + Interest) paid in availing a loan from
government vis--vis that paid while borrowing from themarket.
Amount paid in availing a guarantee from government vis--vis that paid when taken from the market.
Provision of goods & services is to be made for less thanadequate remuneration, while Purchase is to be made formore than adequate remuneration.
For the equity capital to be considered as a benefit, the
investment decision should be inconsistent with the usualinvestment ractice of rivate investors in that re ion.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
8/32
AGREEMENT STRUCTURE
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
9/32
Establish the substantive & procedural requirements of using CVMagainst subsidized imports
Establish the institutional structure and notification modalities forimplementation of the SCM Agreement
Contains transition rules for developed country and former centrally-planned economy Members
Introduces the concept of specificity of subsidyPART I
PARTSIV & V
PARTSVI & VII
PART IX
Categorize subsidies; establish rules & procedures
Contains special and differential treatment rules for variouscategories of developing country Members
Contain dispute settlement and final provisions
PART II& III
PARTVIII
PART X
& XI
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
10/32
SPECIFICITY CLAUSE
Subsidy must be provided specifically to anindustry/enterprise/group of industries.
Thus, specific subsidies are subject to the SCM agreement
Govt. targets a particular company orcompanies for subsidization
Enterprise-specificity
A government targets a particular sector orsectors for subsidization.
Industry-specificity
Regionalspecificity
A government targets export goods orgoods using domestic inputs forsubsidization.
Prohibited
specificity
A government targets producers inspecified parts of its territory forsubsidization.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
11/32
CATEGORIES
Classificationof subsidies
Prohibited
ExportSubsidies
Local Content
SubsidiesActionable
Non-actionable
Agricultural
Expired in Dec,1999
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
12/32
PROHIBITED SUBSIDIES
Directly affect the trade and have adverse effectson the interests of other members.
Export subsidies Subsidies contingent,completely or conditionally, on exportperformance.
Local content subsidies Subsidies contingent,
completely or conditionally, on use of domesticover imported goods.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
13/32
ACTIONABLE SUBSIDIES
Acceptable under normal circumstances, butchallengeable if found detrimental to the interestsof fellow member country.
Resolution Methods Multilateral disputesettlement, Countervailing measures.
However, the complainant must provide prima facie
evidence suggesting violation of SCM Agreement.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
14/32
ACTIONABLE SUBSIDIES
Types of adverse effectsTypes of adverse effects
INJURY to a domesticindustry caused bysubsidized imports in theterritory of the complainingMember.
SERIOUS PREJUDICE tothe exports of subsidizingmember.
NULLI ICATIONofimproved market access(obtained from tariffreduction) due tosubsidization.?????
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
15/32
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
16/32
NON-ACTIONABLE SUBSIDIES
(EXPIRED IN DEC, 1999) If provided by a developing country as part of a
program of privatization of government-ownedenterprises, some types of subsidies are not
actionable Direct forgivenessforgiveness of debts
Subsidies to covercoversocial costs
T
he subsidies must be granted for al
imitedl
imitedperiod The country must notifynotify the SCM Committee of
the program and the subsidies involved
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
17/32
AGRICULTURE SUBSIDIES
Until 2003, Article 13 of the Agreement on Agriculture
established special rules regarding subsidies for
agricultural products.
As per the Uruguay Round Protocol, Export subsidies
which are in full conformity with the Agriculture Agreement
are not prohibited by the SCM Agreement, although they
remain countervail able.
Domestic supports within the green box of the
Agriculture Agreement are not actionable multilaterally nor
are they subject to countervailing measures.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
18/32
COUNTERVAILING MEASURES
Substantive rules
Countervailing measures cannot be imposed unlesssubsidized imports & injury to a domestic industry is
ascertained and a causal link between the two is established. Procedural rules
Rules regarding the initiation, conduct of countervailinginvestigations, imposition of preliminary and final measures,
use of undertakings and duration of measures.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
19/32
Defines in numeric terms the circumstances underwhich there is sufficient support from a domesticindustry to justify initiation of an investigation.Standing
Ensures the conduct of a preliminary investigationbefore a preliminary measure can be imposed.Preliminary
Investigation
Places limitations on the use of undertakings to settleCVD investigations, in order to avoid VoluntaryRestraint Agreements or similar measuresmasquerading as undertakings.
Undertakings
Requires the termination of countervailing measureafter five years unless determined that continuation isnecessary to avoid the recurrence of subsidizationand injury.
Sunset
Requires that members create an independenttribunal to review the consistency of determinationsof the investigating authority with domestic law.Judicial review
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
20/32
SPECIAL & DIFFERENTIAL TREATMENT
Developed countries
Allowed to phase out the prohibitedsubsidies,three years from the date on which the SCMagreement enters into force for them.
Such subsidies must be notified within 90 daysof the entry into force of the WTO Agreement for
the notifying Member
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
21/32
SPECIAL & DIFFERENTIAL TREATMENT Developing Countries Exemption, either permanent or for a
stipulated time period, is given on prohibited subsidies forexports (refer to below table)
PS - For import-substitution subsidies the phase out period stands at 8 yrsfor LDCs and 5 yrs for Other Developing Countries
CATEGORY (Annex VII) INCENTIVE
Least Developed Countries(LDC)
Exempted from the prohibition on exportsubsidies.
GNP < $1000 per annum Exempted from the prohibition on export subsidies.
Other Developing Countries Eight-year period granted to phase out their export subsidies (cannot exceed the level ofsubsidy during this period)
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
22/32
SPECIAL & DIFFERENTIAL TREATMENT
The treatment is even more favourable w.r.tactionable subsidies.
Certain subsidies related to developing countrys
privatization programmes are not actionablemultilaterally.
With respect to countervailing measures, developingcountry Members' exporters are entitled to more
favourable treatment with respect to the termination ofinvestigations where the level of subsidization orvolume of imports is small.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
23/32
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
24/32
SURVEILLANCE
The Committee shall examine new and full notificationssubmitted at special sessions held every third year.
Notifications submitted in the intervening years(updating notifications) shall be examined at eachregular meeting of the Committee.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
25/32
DISPUTEDISPUTE SETTLEMENTSETTLEMENT
If a subsidy is causing adverse effects a WTOmember can seek resolution of the matter, if, after 60days, consultations have not resolved the issue.
The request for dispute settlement must includeinformation describing the subsidies.
A WTO member will request dispute settlement if : The subsidy is affecting the competitivenesscompetitiveness of its exports in
third markets.
The subsidy is distortingdistorting its domestic market, but the
domestic industry has not necessarily suffered injury. Other WTO members are likely to support its position.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
26/32
ANALYSIS OF AGREEMENT
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
27/32
SUGGESTIONS FOR IMPROVEMENT
The guiding principle behind the SCM Agreement has beento allow for trade in commodities that are free of duties ortaxes.
Current Scenario: Remission of duties on the import ofcapital goods used for export production is countervailedby importing Member countries.
Suggestion: Since tariff on import of capital goodsrepresents indirect tax and hence increased cost, thedrawback/refund provisions should also be applicable to
capital goods used in export production.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
28/32
SUGGESTIONS FOR IMPROVEMENT
Current Scenario: Currently, the subsidy level doesnot exceed de minimis level which is 2 or 3 per centinstead of 1 per cent, as is the case with the
developed country Member. For India, the deminimis level is 3 per cent.
Suggestion: Raising de minimis level for initiatingcountervailing action for developing countries likeIndia.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
29/32
SUGGESTIONS FOR IMPROVEMENT
Current Scenario: Once a developing country crosses thementioned GNP level, it ceases to get differential treatment.
Suggestion: Excluding developing country from thedifferential treatment only after its GNP has been above thelevel for a continuous period of three years and not just aone-time attainment at present.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
30/32
SUGGESTIONS FOR IMPROVEMENT
Current Scenario: Some countries when calculatingCVD only examine the total remission and countervailthe scheme by full benefits given to exporters under
that scheme, disregarding the fact that part of theremission was on account of the duties paid by theexporters.
Suggestion: CVDs to be restricted only to the amountby which the subsidy exceeds the de minimus level.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
31/32
SUGGESTIONS FOR IMPROVEMENT
Current scenario:A full dispute settlementprocedure still takes a considerable amount of time,during which the complainant suffers continued
economic harm if the challenged measure is indeed(WTO)-inconsistent.
Suggestion: Provisional measures (interim relief)
should be available to protect the economic andtrade interests of the successful complainantduring the dispute settlement procedure.
-
8/6/2019 Agreement on Subsidies and Countervailing Measures 16022011
32/32