Subsidies and countervailing measures new

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Subsidies and countervailing measures new

  1. 1. Subsidies and Countervailing Measures in International Trade
  2. 2. Subsidies and Countervailing Measure 1. Definition and features 2. International legislation on subsidies 3. Categories 4. Remedies
  3. 3. monetary support or financial preference Domestic producer/ exporter Government/ public body May harmful, Protective device promote the competitive ability of domestically produced goods in local and international market.
  4. 4. Definition and features          • I. Definition (Art 1 of SCM) – It is the final contribution, income or price support by a government or any public body within a territory of a Member to domestic producers and exporters. – Subject • A government or any public body within a Member – Beneficiary Object • Domestic producers or exporters
  5. 5. Definition and features          • I. Definition (Art 1 of SCM) – Forms • A government practice involves a direct transfer of funds (e.G. Grants, loans, and equity infusion); Potential direct transfers of funds or liabilities (e.g. Loan guarantees) • Forego or do not collect a due government revenue • A government provides goods or services, or purchases goods • A government makes payments to a agent to carry out above functions • Any form of income or price support
  6. 6. Definition and features          • II. Features – Governmental Behavior – To domestic manufacturers and exporters – various forms (legislation, administrative act, monetary support or duty-free) – Aim——promote the competitive ability of domestically produced goods in local and international market – Effect ——benefit conferred, so as to hinder import and encourage export – Specificity (must be restricted)
  7. 7. Specificity Enterprises A subsidy Industry Prohibited subsidy certain enterprises located within a designated geographical region • Principle of determination of specificity 1. ~ in law • Legislation or pursuant to which government operate explicitly indicate the subsidy limit to certain enterprises 2. ~ in fact • Strictly adhered to the objective criteria established in the legislation, but are not automatically granted subsidy
  8. 8. International legislations on subsidies • Art6,Art16 of GATT1947 • Tokyo Round Subsidy Code in 1979 • Agreement on Subsidies and Countervailing Measures (SCM) in 1994 – Totally 11 parts, 32 provisions and 7 annexes (Substantial and procedural problems) – Contains a definition of subsidy – Introduces the concept of a "specific" subsidy
  9. 9. Categories (Part II-IV of SCM) • Prohibited subsidies • Actionable subsidies • Non-actionable subsidies
  10. 10. Red subsidy Prohibited subsidies • Subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. Total 12 types in Annex1 • specifically designed to distort international trade, and are therefore likely to hurt other countries' trade.
  11. 11. Yellow subsidy Actionable subsidies Adverse effect on other Members No Be permitted Non-actionable Yes Be Restricted Actionable May take countervailing measures • Adverse effect • Injury to the domestic industry of another Member • Nullification or impairment of benefits accruing directly or indirectly from GATT1994 to other Members • Serious injury to the interests of another Member
  12. 12. Green subsidy Non-actionable subsidies • Non-specific subsidies • Specific subsidies – Research subsidies • covers not more than 75% of the costs of industrial research, or • not more than 50% of the costs of pre‑ competitive development activity – Assistance to disadvantaged regions – Environmental subsidies • Assistance for adapting existing facilities to new environmental laws or regulations. •Cannot be challenged in the WTO's dispute settlement procedure, and countervailing duty cannot be used on subsidized imports.
  13. 13. Comparison of different subsidies Prohibited Effect “Injury” not be considered Content 12 types clearly listed in Annex1 determination Clear legal criteria Actionable “Injury” must be considered Not clarified No criteria, depends on discretion of authority Prohibited/ Actionable Non-actionable Specific? Yes No (exceptions) Get remedies? Yes. Restricted by SCM No. Justified
  14. 14. Remedies (parallel mechanism) • By WTO Dispute Settlement System – Initiative BodyGovernment • By Domestic Countervailing Investigation • Initiative BodyDomestic industry or government Prohibited ~ Actionable ~ Consultation within 30 days within 60 days Panel process within 90 days within 120 days Appeal to DSB within 30~60 days within 60~90 days •Non-actionable ~ Implementation Withdraw subsidy or retaliation Withdraw subsidy or retaliation /
  15. 15. Countervailing Investigation 1 year, at most 18 months Initiation Obligation of the Member who initiate investigation Consultation Investigation Administrative review Judicial review Existence of subsidy Amount of subsidy Injury causality 1. Provisional Measures 2. Undertaking 3. Imposition and Collection of Countervailing Duties
  16. 16. Provisional Measures • Form: provisional countervailing duties (cash deposits or bonds) • Requirement for application – An investigation has been initiated (no sooner than 60days from the initiation) – Interested members and parties have been given adequate opportunities to submit information and make comments – A preliminary affirmative determination • A subsidy exists • There is injury to a domestic industry caused by subsidized imports; – Necessary to prevent injury being caused during the investigation. • Duration – Normally less than 4 months.
  17. 17. Undertaking -after a preliminary affirmative determination • The government of the exporting member agrees to eliminate or limit the subsidy or take other measures concerning its effects • The exporter agrees to revise its prices so that the investigating authorities are satisfied that the injurious effect of the subsidy is eliminated • Investigation maybe suspended or terminated without the imposition of provisional measures or countervailing duties
  18. 18. Countervailing Duties • After a final affirmative determination – The existence and amount of the subsidy – The effects of the subsidy, the subsidized imports are causing injury Imposition and collection of countervailing duties •Not excess of the amount of the subsidy •Last 5 years

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