Agreement On Subsidies And Countervailing Measures Classifies Subsidies Into

Part V of the SCM agreement contains certain physical requirements that must be met to impose a compensatory measure, as well as detailed procedural requirements for cross-investigation and imposition and maintenance instead of compensatory measures. Non-compliance with the physical or procedural requirements of Part V may be invoked to allow disputes to be resolved and may form the basis for the cancellation of the measure. The CMS agreement disciplines the use of subsidies and regulates the measures countries can take to counter the effects of subsidies. The scope of these prohibitions is relatively narrow. Developed countries had already accepted the ban on export subsidies under the Tokyo SCM Convention and subsidies for local content, as prohibited by the SCM Convention, were already at odds with Article III of the 1947 GATT. The most important feature in the new agreement in this area is the extension of obligations to members of developing countries subject to certain transitional rules (see section on special and different treatment), as well as the creation of a rapid settlement mechanism (of three months) for complaints relating to prohibited subsidies contained in Article 4 of the SCM Convention. After graduation, countries are no longer allowed to grant export subsidies for non-agricultural products. Starting in mid-2020, a proposal from the LDC group will be considered, which would allow progressive LDCs to continue to provide non-agricultural export subsidies, while their GNI per capita is less than $1,000. According to the latest information available in mid-2020, Bangladesh, PDR, Nepal and the Solomon Islands remained below this threshold. In the absence of a decision or clarification on this issue, LDCs would no longer benefit from the exemption. Few LDCs provide this type of subsidy. According to the latest WTO analyses, Bangladesh and Nepal would be affected by the loss of this flexibility among countries approaching graduation in 2020 (WTO/FEI, 2020).

The concept of financial participation was only incorporated into the SCM agreement after lengthy negotiations. Some Members argued that there could be no subsidies unless there was a charge on the public account. Other MPs felt that forms of public intervention that do not cost the government, but distort competition and are therefore considered subsidies. The SCM agreement essentially took the previous approach. The agreement requires a financial contribution and contains a list of the types of measures that constitute a financial contribution, such as grants. B, loans, capital inflows, loan guarantees, tax incentives, the provision of goods or services, the purchase of goods.

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