5 The EC has introduced significant changes to subsidies. The agricultural agreement required WTO members to reduce direct export subsidies. In the “rule-setting agreements,” negotiators reformulated the rules of action set out in the original GATT. Subsequently, the new agreement on subsidies and countervailing measures (“SCM agreement”) was adopted. 34 The top three developed countries, particularly the United States, have traditionally played the role of “guardian” of fair competition in the multilateral trading system. A significant number of CVD cases in the United States have only been initiated and have not been closed, indicating the introduction of trade restrictions for bilateral agreements. The WTO Agreement on Subsidies and Countervailing Measures disciplines the use of subsidies and regulates the measures countries can take to counter the effects of subsidies. The agreement allows a country to use the stock market fund dispute settlement procedure to request the withdrawal of the subsidy or the elimination of its adverse effects. Or the country can open its own investigation and ultimately impose additional duties (countervailing duties) on subsidized imports, which harms domestic producers. 7.9 If, within six months of the date the DSB adopts the panel`s report or the appellate body`s report, the member has not taken appropriate steps to eliminate the adverse effects of the subsidy or withdraw the subsidy, the DSB authorizes the requesting member to take counter-measures corresponding to the degree and nature of the negative effects found, unless the DSB agrees to reject the request.
51 The United States has proposed the removal of export subsidies and strict disciplines for export credits. The similar proposal was circulated in the Harbinson text and in the proposal put forward by developing countries. The same approach was supported by the Cairns group . The EU and the US have jointly proposed the abolition of export subsidies for unspecified products, which are of particular interest to developing countries, and the reduction of export subsidies for the remaining products. 39 One case concerned the EU. In October 1997, the United States requested consultations with the EC on export subsidies allegedly granted by the EC to processed cheeses, ignoring the EC`s commitment to reduce export subsidies (WT/DS 104). The United States has alleged violations of several articles (8,9,10 and 11) of the Agriculture Convention and Article 3 of the SCM Convention. But the panel in this case has not been set up. In general, WTO members have avoided litigation over agricultural subsidies. This position reflected the “peace clause” that was adopted between the United States and the European Communities during the final phase of the UR negotiations (the Blair House Agreement) . The peace clause gave immunity from the complaint against the subsidies as part of the reduction. A financial contribution from a government is not a subsidy, unless it grants an advantage.
In many cases, such as a cash grant, the existence of an advantage and its assessment will be clear. However, in some cases, the issue of performance will be more complex. For example, when to grant a loan, a capital injection or the purchase of a good performance by a government? Although the SCM agreement does not provide comprehensive guidelines on these issues, the appellate body (Canada Aircraft) has decided that the existence of a benefit must be determined in relation to the market (i.e. on the basis of what the recipient could have obtained in the market). With respect to countervailing duties, Article 14 of the SCM Convention contains a number of elements to determine whether certain types of measures are beneficial.