Agreement on subsidies and countervailing measures

The Agreement on Subsidies and Countervailing Measures (SCM Agreement) is a multilateral trade agreement administered by the World Trade Organization (WTO). It provides a framework for addressing the use of subsidies by governments and the actions that can be taken by other WTO members in response to those subsidies. The SCM Agreement aims to ensure that subsidies do not distort international trade or harm the interests of other WTO members. It sets out rules and disciplines on the types of subsidies that are considered to be trade-distorting and provides a mechanism for countervailing measures to be taken when subsidies cause injury to domestic industries in other countries. The agreement defines three categories of subsidies: 1. Prohibited subsidies: These are subsidies that are deemed to have the most significant distortive effects on trade. Examples include subsidies contingent upon export performance or the use of domestic over imported goods. 2. Actionable subsidies: These subsidies are considered trade-distorting but not to the same degree as prohibited subsidies. WTO members can initiate dispute settlement proceedings and seek remedies against actionable subsidies that cause injury to their domestic industries. 3. Non-actionable subsidies: These subsidies are not subject to countervailing measures because they are deemed to have minimal trade-distorting effects. They include subsidies that are generally available to all enterprises in a country without specific sectoral or regional targeting. The SCM Agreement establishes the rules and procedures for the investigation and imposition of countervailing measures. A WTO member can initiate an investigation into the existence and effects of subsidies and can impose countervailing duties or other measures to offset the effects of those subsidies on its domestic industries. It’s important to note that the SCM Agreement allows developing countries more flexibility in providing subsidies compared to developed countries. This recognizes the need for development policies and the fact that developing countries may have different economic circumstances. The SCM Agreement is an integral part of the WTO’s efforts to ensure fair and open international trade by addressing the impact of subsidies on global markets. It provides a legal framework for addressing subsidies and countervailing measures and promotes transparency, predictability, and stability in international trade relations.

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