UNIT3 TRADE LAW

Unit-III: WTO Agreements

a. Agreement on Agriculture – 23,
b. Agreement on Subsidies and Countervailing Measures – 23, 19, 18(5), 18 , 16(5)
c. Agreement on Anti-Dumping -23(5), 20, 19, 18(5), 18, 16(5)
d. General Agreement on Trade in Services – 20, 19(5), 18

TOPIC B- IMP

Q- DISCUSS THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES?

Introduction: The Agreement on Subsidies and Countervailing Measures (SCM Agreement) addresses
subsidies and countervailing measures in international trade. Subsidies, regulated by the SCM Agreement,
involve financial aids provided by governments, while countervailing measures serve as remedies for
damages caused by subsidies.
Structure of the SCM Agreement: The SCM Agreement is structured into several parts:
 Part I: Contains definitions of subsidies, specificity, and outlines the extent of application of subsidies
to enterprises, industries, or groups of industries.
 Parts II & III: Divide subsidies into prohibited and actionable categories, addressing their effects,
remedies, and granting authority to the Dispute Settlement Body (DSB).
 Part V: Focuses on procedural requirements for executing countervailing measures, including
investigation procedures, evidence, consultations, and recourse to the DSB.
 Parts VI & VII: Establish institutions such as the committee on subsidies & countervailing measures,
subsidiary bodies, and notification & surveillance mechanisms for implementing the SCM
Agreement.
 Part VIII: Deals with rules and regulations related to special treatments for different types of
countries.
 Parts X & XI: Address the principles of the DSB and final provisions.
Subsidy
As discussed above, Article 1 (Part I) of the SCM Agreement defines Subsidies. The general definition of
subsidies can be understood with a simple word that is ‘financial aid/ help’, which means any kind of
financial aid/ help can be considered as ‘subsidies’. The SCM Agreement has mentioned three conditions and
explains that all of the conditions are to be fulfilled, then only the action will be considered as a subsidy,
where the conditions are-
 There must be a financial contribution either by the government or by any of the public body within
the territory of the member nation; and
 If the action is consistent with Article XVI of GATT 1994, which means if there is any form of
income or price support.
 After any financial contributions, there must a benefit.
The application of this agreement requires financial contributions such as loan, financial incentives, special
grants etc., and explains that any financial contribution even from the sub-governments is considered as
subsidies if they raise any benefit to the recipient.
Part I, also talks about the specificity, which means all the financial aid to enterprise or industry or group of
such industries will only be considered as subsidies and such specificity of subsidies are only considered
under SCM Agreement. Article 2 of the SCM Agreement explains different types of specificity which are as
follows:
 Enterprise- Under this type of specificity the financial contributors are only concerned with aiding
specific company or a specific set of companies.
 Industry- Under this type of specificity the contributors such as government and public body aim a
particular sector of the industry for giving them financial help and benefit.
 Regional- It is a condition when the government is helping industry/ company located in some
specific geographical area and subsidies them with benefits.
 Prohibited- Here, in this case, the government is aiming at providing subsidies to all such goods
which are exported to different countries.
Categories of Subsidies
1. Prohibited Subsidies– The SCM Agreement prohibits any government from providing any subsidies-
 Which are contingent with respect to law or fact upon export performance. These kinds of subsidies
are often called export subsidies.
 Which are contingent with respect to law or facts upon giving any protectionism of domestic goods
over imported goods. These kinds of subsidies are often called local content subsidies.
2. Actionable Subsidies– The SCM Agreement does not prohibits any nations from taking actions on
actionable subsidies rather they can be restricted and are subjected only when any nations bring an
action in terms of challenging either through DSB or through Countervailing Duties. The actionable
subsidy has three adverse effects on the member nation which are:-
 They cause injury to the domestic market of the member nations.
 Serious Prejudice to the interest of other members- It means when the government is helping and
giving subsidies more than 5% to cover any operating loss of any industry or sector by the process of
directly forgiving them from any government debts. The effects of granting such subsidies cause
displacement of other net exporter countries to the importing country of Like Products.
 Nullification or Impairment- it is a process of damaging the importer country’s benefits and
expectations from other member nations of WTO through another country’s or third country’s change
in its trade regime not according to the GATT/ WTO Agreements obligation.
3. Non- Actionable Subsidies– It is a kind of subsidy which is neither prohibited nor restricted by
GATT/ WTO and does not permit any of the member nations to impose countervailing duties against
them. It is observed that most of the subsidies are either restricted or prohibited by the GATT/ WTO
and whosoever overrule these guidelines agreed in the agreement then they are subjected to
countervailing measures by other member nations especially by the affected nations. However, Non-
actionable subsidies are not subject to these tariffs (Countervailing duties) like environmental
subsidies, agricultural subsidies, scientific subsidies etc.
COUNTERVAILING DUTIES/ MEASURES (CVDS)
Subsidies are explained briefly and the parts which only talks about the Subsidies of the SCM Agreement, but
remedies to all these restricted activities are introduced from Part V of the SCM Agreement. Part V
specifically defines what countervailing measures are and how do they work. WTO counts Countervailing
Measures as a safeguard from all those practising subsidies which are either restricted or prohibited under the
SCM Agreement. The WTO explains it as a kind of tariffs imposed on imported goods to counterbalance the
subsidies enjoyed by the producers in the exporting country either by their government of any public body.
CVDs are the counterbalance tariff to maintain a balance between domestic producers and other foreign
producers of the like product because the subsidies producers can afford to sell it at a relatively lower price
than that of other producers because all the producers don’t get the same or even such types of subsidies by
their government or any public body. If these are left unchecked, then there could be a great possibility that
these subsidized imports may severely affect any importer country like deflation/ inflation, loss of
employment etc., that’s the only reason why GATT/ WTO has reflected the concept of CVDs in the agreement
and mentioned that these export subsidies are unfair trade practice and must be restricted or prohibited.
Part V of the SCM Agreement has mentioned a substantive rule to check if the imported goods can be
subjected in imposing CVDs, the rules contain three essentials to establish the objective of imposing CVDs on
imported goods which are as follows:-
 To impose CVDs on any imported goods the importer country has to determine whether there are any
subsidies provided to the producers in their country by their government or any such public body.
 When these subsidize goods are imported in the country they must create some threat to their
domestic market.
 There must be a direct causal link between subsidized goods and a threat to the domestic market.
Part V of the SCM Agreement also contains rules and procedure of conducting an investigation for the
purpose of imposing CVDs. Apart from this, it is very important to understand the concept
of ‘Sunset’ and ‘Judicial Review’. Where ‘Sunset’ means CVDs will be collapse automatically after every 5
years and can be continued only after the condition that if the importer country determines that the exporter
country still not following the key regulations of the SCM Agreement. Whereas ‘Judicial Review’ is the
power given under Article 23 that GATT/ WTO member can create an independent tribunal to review the
decisions of investigation authority or investigation panel of GATT/ WTO with respect to the domestic law of
the country only if the country has its own national legislation or law relating to CVDs.
Special or Preferential Treatment
Part VIII specifically deals with the social treatment for nations other than developed nations. It is also
observed that subsidies play a vital role in economic stability & development and also helps in improving the
living standard and other such standards in the country.
Article 27 of the SCM Agreement provides that Article 3 (Para 1.a) does not apply to the developing nations
for the period 5 years from the commencement of WTO, and it does not applies to least developing nations
(LDC) for a period of 8 years from the commencement of WTO, which practically means that now it applies
to all the member nations equally and no favourable treatment is given with respect to Import Subsidies.
Although LDCs & member nations with less than $1000 capita income per year are totally exempted from the
list and can enjoy freedom over export subsidies.
The SCM Agreement has categorised the member nations into three different categories which are:
1. Least Developing Nations(LDCs).
2. Member nation with less than $1000 capita income per year.
3. Any other developing country not falling into the categories discussed above.
It is noted that there is no favourable treatment with respect to non-actionable subsidies.
Notification and Surveillance
WTO has surveillance on every member nation and mandates rules that every member nation have to notify
the SCM committee regarding their internal policies related to Subsidies and Countervailing Measures. Where
the member nations has to notify SCM Committee regarding their Subsidies and Countervailing legislations
and law within their country, with the SCM agreement these member nations have to notify the SCM
Committee regarding all such aspects under Article 25 (Notification of Subsidies to SCM Committee) and
under Article 36.2 (Notification of Countervailing Measures to SCM Committee).
The member nations have to notify the SCM Committee every 3 years with all the latest amendments or any
new regulations or any activity related to Subsidies in their country for the purpose of an extensive review by
the SCM Committee. Whereas in the case of Countervailing Measures the member nations have to notify all
the countervailing actions taken on every basis like pre or final actions; and the member also has to notify the
SCM Committee regarding their respective authority and their legislation that who and how these authorities
have imposed any countervailing measures.
Dispute Settlement
It is the most crucial and important part of any law and no law can function properly unless it is benefited by
any such regulatory body and here, in this case, Dispute Settlement Understanding is the regulatory body for
governing or deciding any disputes related to SCM Agreement. Article 30 of Part X of SCM Agreement
speaks about the Dispute Settlement Understanding and DSU is the only international body, which is
responsible for consultations and settlement of disputes. The agreement contains all the special rules and
procedures for the settlement of disputes arising in respect of this SCM Agreement.

TOPIC C: AGREEMENT ON ANTI-DUMPING- 5MARKS

The Agreement on Anti-Dumping is a significant component of the World Trade Organization (WTO)
framework, designed to address unfair trade practices associated with dumping. It establishes rules and
procedures for member nations to counteract the negative effects of dumping on their domestic industries.
Dumping refers to the practice of exporting goods to foreign markets at prices lower than their normal value,
often resulting in material injury to domestic producers.
Key aspects of the Agreement on Anti-Dumping include:
1. Definition of Dumping: The agreement defines dumping as exporting goods to another country at
prices lower than those charged in the exporting country's domestic market.
2. Anti-Dumping Measures: Member nations are allowed to impose anti-dumping duties on imported
goods to counteract the effects of dumping. These duties are intended to bring the imported goods'
prices back to fair market value.
3. Anti-Dumping Investigations: The agreement outlines procedures for initiating and conducting anti-
dumping investigations. These investigations involve assessing whether dumping is occurring, the
extent of injury to domestic industries, and the causal link between the dumped imports and the
injury.
4. Calculation of Dumping Margins: Member nations calculate the dumping margins, which represent
the price difference between the export price and the normal value of the goods. This calculation
helps determine the level of anti-dumping duties to be imposed.
5. Transparency and Due Process: The agreement emphasizes transparency and due process in anti-
dumping investigations. It requires notifying all involved parties, providing opportunities for them to
present evidence and arguments, and ensuring that decisions are based on objective and verifiable
information.
6. Review and Monitoring: The agreement allows for the review and monitoring of anti-dumping
measures to ensure their effectiveness and compliance with WTO rules.
Overall, the Agreement on Anti-Dumping provides a framework for addressing unfair trade practices
associated with dumping while promoting fair competition and protecting domestic industries from harm.
TOPIC A: How Agreement on Agriculture under WTO balance the regional differences with regards to
agriculture?
The Agreement on Agriculture (AoA) under the World Trade Organization (WTO) aims to balance the diverse
agricultural needs and capabilities of member countries, taking into account regional differences.
The Agreement on Agriculture (AoA) under the World Trade Organization (WTO) recognizes the inherent
regional differences in agricultural production, resources, and development levels among member countries.
To effectively balance these disparities, the AoA incorporates several provisions aimed at accommodating the
diverse needs and capabilities of nations while promoting fair and equitable agricultural trade.
1. Special and Differential Treatment (SDT):
 The AoA acknowledges the varying levels of development among member countries and
provides for Special and Differential Treatment (SDT) for developing and least developed
countries (LDCs).
 SDT allows these countries flexibility in meeting their AoA commitments, recognizing their
limited capacity to fully integrate into the global trading system.
2. Tariffication and Market Access:
 The AoA introduced the concept of tariffication, which requires countries to convert non-
tariff barriers (such as quotas and import licenses) into tariffs.
 This allows countries to set tariffs at levels that reflect their regional agricultural practices,
production capacity, and development needs.
 By providing flexibility in tariff setting, the AoA accommodates regional differences in
agricultural trade policies and market access conditions.
3. Domestic Support:
 The AoA categorizes domestic support into different boxes based on their trade-distorting
effects: green box (non-trade distorting), amber box (trade-distorting), and blue box
(production-limiting but less trade-distorting).
 Developing countries are allowed higher levels of domestic support compared to developed
countries, recognizing their need for policy space to support rural livelihoods and food
security.
 This provision acknowledges regional disparities in agricultural development and allows
countries to provide targeted support to their agricultural sectors without unduly distorting
trade.
4. Special Products and Special Safeguard Mechanism (SSM):
 The AoA recognizes the importance of certain agricultural products for food security, rural
development, and livelihoods.
 Developing countries can designate specific products as "special products" and apply less
stringent tariff reductions on them, reflecting regional priorities and sensitivities.
 Additionally, the AoA includes a Special Safeguard Mechanism (SSM) that allows
developing countries to temporarily increase tariffs in response to import surges or price
depressions, safeguarding vulnerable domestic producers.
5. Technical Assistance and Capacity Building:
 The AoA mandates the provision of technical assistance and capacity building to help
developing and least developed countries implement their AoA commitments effectively.
  This assistance addresses regional differences in infrastructure, technology, and agricultural
practices, enabling countries to enhance their competitiveness and benefit from agricultural
trade liberalization.
In conclusion, the Agreement on Agriculture (AoA) under the WTO effectively balances regional differences
in agriculture by incorporating provisions such as Special and Differential Treatment, tariffication, targeted
domestic support, special products, special safeguard mechanisms, and technical assistance. These measures
ensure that member countries can pursue their agricultural policies in a manner that reflects their unique
circumstances while promoting fair and equitable trade in agricultural products on the global stage.