Agreement of Subsidies and Countervailing Measures

The concept of financial contribution was only included in the grant agreement after lengthy negotiations. Some members have argued that there can be no subsidy unless there are fees in the public account. Other members argued that forms of State intervention that did not entail any cost to the Government nevertheless distorted competition and should therefore be considered as subsidies. The SCM agreement essentially adopted the previous approach. The agreement requires a financial contribution and contains a list of the types of measures that constitute a financial contribution, e.B grants, loans, equity injections, loan guarantees, tax incentives, the provision of goods or services, the purchase of goods. If State loans, loan guarantees and other financial contributions are granted in SEZs on terms that are no more favourable than the market would offer, such SEZ measures would not be considered an advantage and would therefore not be classified as `grants`. In this context, Article 14 of the SCM Agreement lays down the conditions under which certain financial contributions are not to be regarded as the granting of an advantage. Another case is that of China – measures related to the production and export of clothing and textile products. On October 15, 2012, Mexico requested consultations with China on various subsidies, including tax incentives, preferential prices for land use rights, and electricity rebates for qualified enterprises located in “special economic zones” or “economic development zones”.25 However, this dispute did not extend beyond the consultation phase.

Part I provides that the SCM Agreement applies only to subsidies specifically granted to an undertaking or industry or group of undertakings or group of undertakings or sectors of activity and defines both the concept of subsidy and the concept of specificity. Parts II and III divide all specific subsidies into two categories: prohibited and countervailable(1) and lay down certain rules and procedures for each category. Part V sets out the substantive and procedural conditions to be met before a Member can apply a countervailing measure against subsidised imports. Parts VI and VII define the institutional structure and reporting/monitoring modalities for the implementation of the SCM Agreement. Part VIII contains specific and differential treatment rules for different categories of developing countries. Part IX contains transitional rules for industrialized countries and former members of the centrally planned economy. Parts X and XI contain dispute settlement and final provisions. Article 27.2 of the SCM Agreement exempts two categories of developing countries from the export subsidy ban: Rules and countervailing measures All Members are required to notify their countervailing customs laws and regulations to the Committee on Subsidies in accordance with Article 32(6) of the SCM Agreement. Members are also required to notify all countervailing measures taken every six months and provisional and definitive countervailing measures at the time of their implementation.

Members must also indicate which authorities are responsible for initiating and conducting compensatory investigations. The objective of this article is to examine the legal status of incentives in SEZs under the WTO Agreement on Subsidies and Countervailing Measures (`the Subsidies Agreement`) by identifying existing legal constraints and flexibilities vis-à-vis SEZs. In particular, Part II describes the WTO subsidy regime and related practice with respect to SEZs. Part III examines the conditions for making SEZ incentives subject to the provisions of the SCM Agreement. Part IV identifies WTO tolerable measures and policy space for the unilateral promotion of the SEZ, followed by Part V, which concludes this analysis. This article argues that due to the absence of tailor-made rules in the SUBSIDY AGREEMENT that take into account subsidies for SEZs as such, governments should apply “safe” types of support measures to preserve the uniqueness of the SEZ and the associated “unilateral economic right”. Research and development subsidies are no longer considered eligible or “non-countervailable” subsidies under the SCM Agreement. Under the SCM Agreement, if a WTO Member Government considers that a prohibited or countervailable subsidy is being granted or maintained by another Member Government, it may request consultations with that Government under WTO dispute settlement procedures.

Prohibited subsidies do not require the complaining country to demonstrate adverse effects on its own industry (exceptions apply to developing countries). For subsidies that can be implemented, the complaining country must demonstrate a negative effect. Subsidies In accordance with Article 25 of the SCM Agreement, Members notify the Committee on Subsidies of all specific subsidies (at all levels of government and for all product sectors, including agriculture). New and complete notifications are due every three years, with update notifications in the intervening years. Notifications are subject to in-depth review and discussion by the SCM Committee. All other subsidies are eligible but countervailable (through national countervailing duty measures or WTO dispute settlement measures) if they are (i) “specific”, i.e. limited to an enterprise, industry or group of economic activities; and (ii) which have been shown to have adverse trade effects, such as.B. material injury to a domestic industry or serious injury to the commercial interests of another WTO Member.

With the expiry of the transitional provisions of the Green Light Subsidies Agreement, the only non-countervailable subsidies are those that are not specific, as described above. Examples of countervailing duty investigations in relation to SEZs In addition, Article 12.7 of the SCM Agreement was also used in US – Facts Available. In response to the DOC questionnaire, the Korean company POSCO denied having facilities in a “free economic zone” and receiving subsidies there, but the DOC then verified this information and discovered the POSCO global R&D center in the Incheon zone. The Korean Government`s response to the Protocol`s questionnaire did not address whether POSCO maintained a facility in an area, but rather stated that none of the parties under investigation, including POSCO, had benefited from “tax reductions or exemptions, reductions or exemptions from rental duties, or subsidies or financial support because of their location in a free economic zone”. The Panel found that the DOC acted contrary to Article 12(7) by resorting to the facts available with respect to the information on the POSCO facility in question because it had wrongly ignored the Korean Government`s response to the question.29 The SUBSIDY Agreement theoretically divides subsidy practices into three categories: prohibited subsidies (red lights); eligible but achievable grants (yellow light); and non-countervailable subsidies (green light)eligible. .