Agreement on Subsidies and Countervailing Measures Classifies Subsidies into

12 Oct Agreement on Subsidies and Countervailing Measures Classifies Subsidies into

The World Trade Organization`s (WTO) Agreement on Subsidies and Countervailing Measures (SCM) is a comprehensive framework that sets out the rules and regulations governing subsidies provided by governments to their industries. It aims to ensure a level playing field for international trade by preventing unfair trade practices due to subsidies.

The SCM agreement classifies subsidies into three categories: prohibited, actionable, and non-actionable.

Prohibited subsidies are those that are deemed to distort international trade and are explicitly prohibited by the WTO. These include subsidies that are explicitly contingent on export performance (such as export subsidies) or subsidies that are tied to the use of domestic over imported goods (such as local content subsidies).

Actionable subsidies are those that are not explicitly prohibited but can still cause harm to other countries` industries. These subsidies can be challenged by a WTO member country and can result in countervailing measures (such as tariffs) being imposed on the offending country. Examples of actionable subsidies include subsidies that are contingent on the use of domestic over imported goods (such as subsidies for research and development, or subsidies for capital investment).

Non-actionable subsidies are those that are considered to be unlikely to cause harm to other countries` industries. These subsidies are generally not challenged by WTO members. Examples of non-actionable subsidies include subsidies that are provided to promote research and development, regional development, or environmental protection.

The SCM agreement plays a vital role in promoting fair trade practices and preventing unfair advantages being given to certain industries through subsidies. By classifying subsidies into prohibited, actionable, and non-actionable categories, it provides clarity and transparency for WTO members, allowing them to make informed decisions about the subsidies provided by other countries.

For businesses, the SCM agreement means that they can trade with greater confidence, knowing that their products are not being unfairly disadvantaged by subsidies provided to their competitors. For governments, it means that they must provide subsidies in a transparent and accountable manner, ensuring that they are not distorting international trade.

In conclusion, the SCM agreement plays a vital role in promoting fair trade practices and ensuring a level playing field for international trade. By classifying subsidies into prohibited, actionable, and non-actionable categories, it provides clarity and transparency for WTO members, allowing for more informed and fair trade practices.