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Agreement on Subsidies and Countervailing Measures, 1994 (SCM CODE)

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Abstract

The problem of subsidies and countervailing measures became the intense subject of negotiations in the WTO on account of their rampant use in international trade since the birth of GATT in 1947. The use of subsidies in industry and agriculture in 1980s was resorted to by the governments under the influence of political and social pressures embarking on massive financial commitments.

Keywords

  • Countervailing Measures
  • Countervailing Duties
  • Contracting Parties
  • Uruguay Round
  • Subsidies Code

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Notes

  1. 1.

    GATT, GATT activities, 1988 47 (1989).

  2. 2.

    Ford and Suyker, Industrial Subsidies in the OECD Economics, OECD Working Paper No. 74 at 147 (Table I) (1990).

  3. 3.

    G. C. Hufbauer, Subsidies in Completing the Uruguay Round: in J. Schott (ed.) A Results Oriented Approach to the GATT Trade Negotiations 93–94 (1990).

  4. 4.

    Ibid., J. Schott. pp. 2–5. Ibid

  5. 5.

    G. Hufbauer, A view of the Forest in Subsidies and Countervailing Measures: Critical Issues for the Uruguay Round, World Bank Discussion Paper No. 53 at 13 (B. Balassa ed. 1989).

  6. 6.

    Tariff Act of 1890 deals with the bounties paid on the exportation of certain grades of sugar. By the Tariff Act of 1897, the U.S. enacted a general Countervailing Duty Law.

  7. 7.

    Article XVI: I GATT 1947.

  8. 8.

    Serious Prejudice’ has not been defined in GATT 1947.

  9. 9.

    A ‘primary product’ is defined as ‘any product of farm, forest, or fisheries, or any mineral, in its natural form or which has gone through such processing as is customarily required to prepare it for marketing in substantial volume in international trade’. Interpretative Note to Article XVI of the GATT, Section B, paragraph 2.

  10. 10.

    GATT 1947, Article XVI: 3.

  11. 11.

    Ibid., Article XVI: 4.

  12. 12.

    John H. Jackson, The World Trading System, Law and Policy of International Economic Relations 258 (1998).

  13. 13.

    Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the GATT 1947 Reprinted in GATT, BISD 26th supp. at, 56 (1980).

  14. 14.

    Ibid., Article 9.

  15. 15.

    Ibid., Article 10.

  16. 16.

    Ibid., Article 1 & 6.

  17. 17.

    Tokyo Round Code, Article 13.

  18. 18.

    John H. Jackson, supra note 12 at p. 265.

  19. 19.

    John H. Jackson, supra note 12 at p. 265.

  20. 20.

    R. Stern & B. Hoekman, The Codes Approach, in the Uruguay Round : in J. M. Finger and A. Olechowks, (ed). A Handbook for the Multilateral Trade Negotiations 59–61 (1987). Between 1980 and 1988, over ninety per cent of the countervailing duty cases initiated were brought by the USA and Chile. During this time, only one case was initiated against the USA and one case initiated against Chile. In general, countervailing duties are brought against a different group of countries more than they are initiated by the same group.

  21. 21.

    Supra note, 13, Article 17.

  22. 22.

    Ibid., Articles 18(8) and 18(9).

  23. 23.

    Tokyo Round Code, Article 11.

  24. 24.

    Ibid., Article 11(3).

  25. 25.

    Ibid., Article 1(1).

  26. 26.

    Ibid.

  27. 27.

    See GATT Activities 1979 and conclusion of the Tokyo Round Multilateral Trade Negotiations (1973-1979) 21 BISD (1980).

  28. 28.

    GATT, The Tokyo Round of Multilateral Trade Negotiations, Report by the Director General of GATT(1979).

  29. 29.

    John H. Jackson, supra note 12 at 259.

  30. 30.

    See US General Accounting Office, Benefits of International Agreement on Trade-Distorting Subsidies not yet Realized. GAO Doc. No. GAO/NSIAD-10 (August 15, 1983).

  31. 31.

    For an overview of these cases, see Patrick J. Mc Donough in T. O. Steward (ed.) The GATT, Uruguay Round, A Negotiating History 824–833; 1986–1992 (Kluwer Publications, 1993).

  32. 32.

    Ibid.

  33. 33.

    See Ministerial Declaration, Adopted on 29 November 1982 GATT Doc No. L/5424 reprinted in GATT, BISD 29 Supp. (1983).

  34. 34.

    See Trade Policies for a Better Future, ‘The Leutwiler Report’ (1987).

  35. 35.

    Ibid.

  36. 36.

    See Generally, Problems in the Area of Subsidies and Countervailing Measures, Note by the Secretariat, GATT, Doc No. MTN GNG/NGIO/W/3 (March 17, 1987).

  37. 37.

    See R. K. Lorentzed, Anti-dumping and Countervailing Duty Issues in the Uruguay Round of Multilateral Trade Negotiations in, The Commerce Department Speaks, (1990), The Legal Aspects of International Trade 459 (1990).

  38. 38.

    Ibid.

  39. 39.

    Ibid., p. 476.

  40. 40.

    Ibid.

  41. 41.

    Ibid.

  42. 42.

    Articles 1 and 2 of the Agreement on Subsidies and Countervailing Measures , See, Arun Goyal (ed.) WTO in The New Millennium 342 (4th Ed. 2002).

  43. 43.

    Article 2 of SCM Code.

  44. 44.

    Article 2.1(c), of SCM Code.

  45. 45.

    The term direct taxes shall mean taxes on wages, profits, interests, rents, royalties and all other forms of income and taxes on the ownership of real property. Import charges connote tariffs, duties and other fiscal charges as outlined above. Indirect taxes cover sales, excise, turnover, value added, franchise, stamp, transfer, inventory, and equipment taxes, border taxes and all taxes other than direct taxes and import charges. ‘Prior stage’ indirect taxes are those levied on goods or services used directly or indirectly in making the product. ‘Cumulative indirect taxes’ are multi-staged taxes levied where there is no mechanism for subsequent crediting of the tax if the goods or services subject to tax at one stage of production are used in a succeeding stage of production. ‘Remission of taxes includes the refund or rebate of taxes’. ‘Remission’ or ‘drawback’ includes the full or partial exemption or deferral of import charges. The deferral need not amount to an export subsidy where, for example, appropriate interest charges are collected. Further, the principle that prices for goods in transactions between exporting enterprises and foreign buyers under their or same control should for tax purposes be the prices which would be charged between independent enterprises acting at arm’s length. If administrative or other practices contravening the above principle results in significant saving of direct taxes in export transactions, consultations between Members may take place resolving the differences under existing bilateral treaties or other specific international mechanisms, without prejudice to rights and obligations of Members under GATT 1994, Original Footnote to the SCM Code.

  46. 46.

    Ibid.

  47. 47.

    SCM Code.

  48. 48.

    SCM Code.

  49. 49.

    Articles 3(1)(a)and (b), SCM Code.

  50. 50.

    Proposals submitted by USA, See Elements of the Negotiating Framework: Submission by the United States, GATT Doc. No. MTN GNG/NG. 10/W/39 (Sept. 27, 1990).

  51. 51.

    Article 3., SCM Code.

  52. 52.

    Article 4., SCM Code.

  53. 53.

    Article 4.3 to 4.8. of SCM Code.

  54. 54.

    Article 4.4.

  55. 55.

    Article 4.5.

  56. 56.

    Article 4.9, SCM Code.

  57. 57.

    Brazil—Export Financing Programme for Aircraft, Panel Report, WT/DS46/RW/2, Adopted 23 Aug. 2001, para. 7.13.

  58. 58.

    US—Tax Treatment for ‘Foreign Sales Corporations’, Appellate Body Report WT/DS108/AB/R, 20 March, 2000, para. 90.

  59. 59.

    US—Tax Treatment for Foreign Sales Corporation’s supra note, 58, para. 117–118.

  60. 60.

    Appellate Body Report on Canada—Measures Affecting the Export of Civilian Aircraft, Appellate Body Report WT/DS70/AB/R, DSR 199: para. 157.

  61. 61.

    US—Imposition of Countervailing Duties on Certain Hot Rolled Lead and Bismuth Carbon Steel Products originating in the United Kingdom, Appellate Body Report, WT/DS138/AB/R, para. 68.

  62. 62.

    Article 5, SCM Code.

  63. 63.

    Article 6, SCM Code.

  64. 64.

    Ibid.

  65. 65.

    Article 6 of SCM Code.

  66. 66.

    Article 11 and 27 of SCM Code.

  67. 67.

    Article 15 of SCM Code.

  68. 68.

    Footnote 23 to Article 8.1, SCM Code.

  69. 69.

    See Minutes of the Meeting of 6 Nov. 1990, Note by the Secretariat, GATT Doc. No. MTN. GNC/NG 10/24 (Nov. 29, 1990).

  70. 70.

    Article 2.1 (c), SCM Code.

  71. 71.

    Ibid.

  72. 72.

    Article 27(4) of SCM Code.

  73. 73.

    Article 27(4) of SCM Code.

  74. 74.

    Article 27.1, SCM Code.

  75. 75.

    Article 10, SCM Code.

  76. 76.

    Article VI, GATT 1994.

  77. 77.

    Article VI (3), GATT 1994.

  78. 78.

    Article VI (4), GATT 1994.

  79. 79.

    Article VI(5), GATT 1994.

  80. 80.

    Article VI(6), GATT 1994.

  81. 81.

    Article VI(7), GATT 1994.

  82. 82.

    Article 2 of the Agreement on Article VI of GATT 1994.

  83. 83.

    Article 2(1) and 2(2) of the Agreement on Article VI of 1994.

  84. 84.

    Ibid., Article 2.2.1.

  85. 85.

    Ibid.

  86. 86.

    Ibid., Article 2(1) and 2(2).

  87. 87.

    Article 2.2.1 of the Agreement on Article VI of GATT 1994.

  88. 88.

    Article 2.2.2 of the Agreement on Article VI of GATT 1994.

  89. 89.

    Ibid., Article 2.3.

  90. 90.

    Article 2.4 of Agreement on Implementation of Article VI.

  91. 91.

    Ibid., Article 2.4.1.

  92. 92.

    Article 2.4.2. of Agreement on Implementation of Article VI.

  93. 93.

    Ibid., Article 2.5.

  94. 94.

    Ibid., Article 2.6.

  95. 95.

    Ibid., Article 2.7 of Agreement on Implementation of Article VI Article VI.

  96. 96.

    Article 15.3 of the SCM Code.

  97. 97.

    Article 15.2 of the SCM Code.

  98. 98.

    Article 15.3 of the SCM Code.

  99. 99.

    Article 15.4 of the SCM Code.

  100. 100.

    Article 15.8 of the SCM Code.

  101. 101.

    Article 15.8 of the SCM Code.

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Koul, A.K. (2018). Agreement on Subsidies and Countervailing Measures, 1994 (SCM CODE). In: Guide to the WTO and GATT. Springer, Singapore. https://doi.org/10.1007/978-981-13-2089-7_14

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