1. The WTO Agreement on Subsidies and Countervailing Measures (SCM)
Achim Seiler, Trade Consultant and Capacity Building Specialist, Kathmandu
EU-Project: Trade and Private Sector Development (TPSD)
TPSD is implemented by
in cooperation with
and

2. Table of Contents
What is the Agreement on Subsidies and Countervailing Measures (SCM-Agreement)?
What are Subsidies?
What kind of remedies are available?
What are Countervailing Measures?
Financial Contribution
The Concept of Specificity
Conferring a Benefit
Exemption from the Prohibition on Export Subsidies
Are Subsidies on Agricultural Products Subject to the Agreement?

3. What is the SCM-Agreement?
The Agreement on Subsidies and Countervailing Measures (SCM-Agreement) disciplines the use of subsidies, and regulates the actions countries can take to counter the effects of subsidies
The Subsidies Agreement is ´two agreements in one´. It comprises the multilateral track to challenge certain subsidies under the WTO, as well as the national track, according to which a Member can carry out an investigation and impose counterveiling measures.

4. Multilateral and unilateral approach
Multilateral disciplines are the rules regarding whether or not a subsidy may be provided by a Member. They are enforced through invocation of the WTO dispute sttlement mechanism. This is the so-called multilateral track.
Countervailing duties are a unilateral instrument, which may be applied by a Member after an investigation by that Member and a determination that the criteria set forth in the Subsidies Agreement are satisfied. This is known as the national or unilateral track.

5. What are subsidies?
A support programme, measure, incentive etc., which constitutes a financial contribution by a government or any public body within the territory of a member conferring a benefit to the recipient. The subsidy must be specific for the purposes of the Agreement.

6. What are subsidies? (II)
Three types of subsidies:
Prohibited
Actionable
(Non-Actionable)

7. What are subsidies? (III)
Prohibited:
Subsidies contingent in law or in fact upon export performance
Subsidies contingent on the use of domestic over imported goods

8. What are subsidies? (IV)
Actionable:
Subsidies causing adverse effects to the interests of other Members:
Injury to the domestic industry
Nullification or impairment of benefits
Serious prejudice

9. What are subsidies? (IV)
(Non-Actionable)
Subsidies which are not specific
Assistance for research activities
Assistance to disadvantaged
regions
Assistance to adapt to new
environmental requirements
These provisions expired at the end of They are therefore no longer applicable

10. (Non-Actionable) = Actionable
What are subsidies? (V)
`Three´ types of subsidies:
Prohibited
Actionable
(Non-Actionable) = Actionable

11. What kind of remedies are available?
Multilateral Track
National Track
export subsidies
import substitution subsidies
Injury to the domestic industry
Nullification or impairment
Serious Prejudice

12. National Track: Counterveiling measures
Determination of:
Subsidized imports
Injury to a domestic industry
Causal link
Subsidized imports
Injury to a domestic industry
Causal link

13. What are countervailing measures?
Provisional countervailing duties
Voluntary Undertakings
Definitive countervailing duties

14. What are countervailing measures? (II)
Provisional countervailing duties:
May be imposed before the conclusion of an investigation, provided there is a preliminary affirmative finding of subsidy causing injury

15. What are countervailing measures? (III)
Voluntary Untertakings:
The government of the exporting Member agrees to eliminate or limit the subsidy or take other measures concerning its effects; or
The exporter agrees to revise its prices so that the investigating authorities are satisfied that the injurious effect of the subsidy is eliminated

16. What are countervailing measures? (III)
Definitive Countervailing Duties:
Such measures may only be imposed at the end of an investigation. The Member imposing a definitive countervailing duty must first have conducted an investigation at the conclusion of which it determined that the conditions and criteria for the application of definitive measures are satisfied.

17. What is Injury?
Injury:
Injury is the negative effect of subsidized imports on the position of a domestic industry in an importing country. There are three types of injury:
Current material injury
Threat of material injury
Material retardation of the establishment of a
domestic industry

18. What is Nullification or Impairment?
Arises most typically where the improved access to a market that is presumed to flow from a bound tariff reduction is undercut by subsidization in that market. It can serve as a basis for a complaint related to harm to a Member´s exporting interests.

19. What is Serious Prejudice?
Focuses on situations where a subsidy causes
Displacement or impedance of imports or exports, either in the market of the subsidizing Member or in a third country market
Significant price undercutting, price suppression or depression, or lost sales of the complaining Member´s product in a given market,
An increase in the subsidizing Member´s world market share in a subsidized primary product or commodity

20. Financial Contribution
The Subsidies Agreement requires that the measure, programme, incentive, etc. provides a financial contribution and contains the following closed list of the types of measures that are deemed to provide a financial contribution:
Direct transfers of funds (example, a grant, a loan, etc.)
Potential direct transfers of funds or liabilities (example, a loan guarantee)
Governnment revenue that is otherwise due is foregone or not collected (example: fiscal incentives such as tax credits)

21. Financial Contribution (II)
A government provides goods or services other than general infrastructure, or purchases goods
A government makes payments to a funding mechanism
There is any form of income or price support in the sense of Article XVI of GATT 1994

22. The concept of specificity
Only subsidies that are specific – given to particular enterprises or industries – are subject to the disciplines of the agreement
Enterprise-specificity
Industry-specificity
Regional specificity
Prohibited subsidies (deemed to be specific)

23. Conferring a Benefit
A financial contribution by a government is not a subsidy unless it confers a `benefit´.
The Appelate Body has ruled that the existence of a benefit is to be determined by comparison with the market-place (i.e. on the basis of what the recipient could have received on the market)

24. Exemption from the prohibition on export subsidies
The prohibition on export subsidies does not apply to least-developed Members, nor to certain Members specifically identified in Annex VII(b) of the Agreement until the GNP per capita of such Members has reached US$ 1,000 per annum

25. Are subsidies for agricultural products subject to the Agreement?
There is no general carve-out from the Subsidies Agreement for agricultural products.
However, the Agreement on Agriculture provides for a number of specific rules regarding subsidies on agricultural products that override certain specific provisions of the Subsidies Agreement

26. Are subsidies for agricultural products subject to the Agreement? (II)
On the other hand, except with respect to the „green box“ subsidies, subsidized agricultural products may nevertheless be subject to countervailing duties, and agricultural subsidies must be notified to the Committee on Subsidies and Countervailing Measures

27. Are subsidies for agricultural products subject to the Agreement? (III)
Agricultural export subsidies that are fully consistent with the provisions of the Agreement on Agriculture are not prohibited under the SCM Agreement, but instead are subject to the disciplines of the Agreement on Agriculture. They can be countervailed.