THE WTO AGREEMENT ON SUBSIDIES: SPECIAL RULES FOR SPECIAL ECONOMIC ZONES? PRESENTATION FOR THE WTO FORUM, KALININGRAD (25 TH MARCH 2015) BY JELENA BAEUMLER Potsdam University, Germany

Outline I. Overview of WTO Agreement on Subsidies and Countervailing Measures (SCM) II. 4 possible ways out of the SCM III. Conditions in Kaliningrad SEZ and compatibility with the SCM

Approach of the SCM (1)  SCM acknowledges 3 different categories of subsidies:  Prohibited subsidies, Article 3 SCM  Actionable subsidies, Article 5 and 6 SCM  Non-actionable subsidies, Article (8 and 9 SCM)  According to Article 31 SCM non-actionable subsidy category has expired => thus all subsidies are generally either prohibited or actionable under WTO SCM

Approach of the SCM (2)  Prohibited subsidies, Art. 3 SCM  Export subsidies  Import substition subsidies  Actionable Subsidies, Art. 5 and 6 SCM  All other kinds of subsidies  Main aspect is that subsidy creates and adverse effect for other Member

Possible ways out of SCM  Exit 1: Measure?  Exit 2: SEZ?  Exit 3: Member?  Exit 4: Sector?

Definition of Subsidy  Elements of Subsidy Definiton, Articles 1 and 2 SCM Article 1:  Financial contribution by a government  Conferrring a benefit Article 2:  De jur or de facto Specificity

Footnote 1 SCM Footnote 1 to Article 1.1(a)(1)(ii) SCM with regard to tax due that is forgone or not collected: 1. In accordance with the provisions of Article XVI of GATT 1994 (Note to Article XVI) and the provisions of Annexes I through III of this Agreement, the exemption of an exported product from duties or taxes borne by the like product when destined for domestic consumption, or the remission of such duties or taxes in amounts not in excess of those which have accrued, shall not be deemed to be a subsidy.

Conclusion  There are no special rules with regard to Special Economic Zones in the WTO SCM  Measures in the Kaliningrad SEZ with regard to trade in goods are subsidies in terms of SCM  Yet, they are not prohibited subsidies but actionable subsidies requiring to cause adverse effect to another Member

Thank you!