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World Trade Organization Toolkit : Trade Remedies
(b) Subsidy and Counterveiling MeasuresThe Agreement on Subsidies and Countervailing Measures ('ASCM') adopted during the Uruguay Round is two-fold: on the one hand, it disciplines the use of subsidies; on the other hand, it deals with the measures which countries can take to counter the effect of subsidies, i.e. the so-called "countervailing measures". SubsidiesA subsidy will be deemed to exist if there is some form of financial contribution by a government that confers a benefit. The financial contribution can be made directly by a government or public body, or by the government through a private body or other funding mechanism, and can take the form of a direct transfer of funds, revenue that is forgone or not collected, the provision or purchase of goods or services, or any other form of income or price support. Not all subsidies are covered by the ASCM, rather only specific subsidies where access is expressly limited to "certain enterprises" or to a designated geographic region. Specificity will not exist in cases where access to a subsidy is established through objective criteria or conditions that are neutral, economic in nature and horizontal in application. However, a subsidy may be considered specific in view of the manner in which it is used by certain enterprises or granted, despite the fact that there are no express limitations on access and objective criteria are used to determine eligibility. The fact that a specific subsidy exists under the ASCM does not necessarily imply that it is an illegal subsidy. Accordingly, the ASCM differentiates between "prohibited" subsidies, those that are not allowed in any circumstances, and "actionable" subsidies, which may be challenged under the ASCM if the complaining Member can demonstrate the existence of adverse effects. Prohibited subsidies are defined under Article 3 of the ASCM as subsidies contingent, in law or fact, whether solely or as one of several other conditions upon export performance (i.e. export subsidies), including those illustrated in Annex I of the ASCM. It is generally felt that these types of subsidies are specifically designed to distort international trade and therefore should be disallowed. Prohibited subsidies also include subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods (i.e. import substitution subsidies). If a subsidy is found to be prohibited by a panel under the ASCM, it will be recommended that the subsidy be withdrawn without delay. If a subsidy is not prohibited under the ASCM, Article 5 provides that it may be actionable if it is a subsidy that meets the requirements of specificity described above and causes adverse effects to the interests of other Members. Unlike prohibited subsidies, the complaining Member must show that the subsidy in question has an adverse affect on its interests, otherwise the subsidy will be considered permissible (i.e. non-actionable). The provisions relating to actionable subsidies under the ASCM, however, do not apply to certain domestic measures relating to agricultural products. Adverse affects are defined under the ASCM as either injury to the domestic injury of another Member, nullification and impairment of benefits accruing to other Members under the GATT 1994, or serious prejudice to the interests of another Member. Countervailing MeasuresUnder the ASCM, a WTO Member may not impose a countervailing measure unless it has determined (1) the existence and amount of a countervailable subsidy, (2) injury to a domestic industry, and (3) a causal link between the subsidised imports and the injury. The substantive elements relating to the determination of injury and a causal link of the ASCM Agreement are nearly identical to that under Article 3 of the AD Agreement. Office of the General Counsel
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