Think Piece

Rethinking Countervailing Duties

March 2015
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The Agreement on Subsidies and Countervailing Measures (ASCM), adopted by the newly created World Trade Organization (WTO) during the Uruguay Round, was a breakthrough in disciplining the use of subsidies. It established disciplines prohibiting the subsidies that the members agreed were the most trade distorting and established both multilateral and unilateral remedies when a member’s interests were harmed by another’s provision of a subsidy. This paper focuses on countervailing duties, the more frequently used unilateral measure, to determine if there are changes that should be made in light of the changing trade landscape. It also looks briefly at other subsidy discipline options.

Although there have been complaints about WTO countervailing duty rules, such proceedings are rarely addressed in other trade agreements, leaving their regulation to the WTO. Some regional and bilateral trade agreements contain limitations on the use of export subsidies, but the vast majority do not address the use of countervailing duties. Since the WTO went into effect, there has been the growth of services trade globally. Countervailing duties (and the ASCM) address only trade in goods. Similarly, the growth of global supply chains has strained the ability of countervailing duty laws to address the full impact of subsidies. Finally, the increasing importance of state-owned enterprises in global trade has led to disputes over the use of these laws.

Examining the concerns over countervailing duties and other subsidy disciplines, it is apparent that the political pressure to retain unilateral countervailing duties as a form of subsidies discipline will continue to exist. In light of these concerns, the paper suggests a range of areas—from measuring subsidisation and its benefits to procedural changes and revisions to dispute settlement—that could be considered for reform to effectively regulate the use of this unilateral measure.

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