WTO Countervailing Measures Countervailing Measures

WTO Countervailing Measures

Countervailing Measures and the World Trade Organization

In the interest of promoting free trade, and to ensure that its members honor their commitment to fostering an international environment that facilitates the free exchange of goods, countervailing measures or punishments may be imposed upon a nation deemed to be in violation of WTO agreements. The World Trade Organization's Subsidies and Countervailing Measures Agreement was passed to enforce disciplinary action regarding the use of subsidies, and to regulate the actions countries can take to counter the effects of subsidies ("Understanding the WTO: Agreements," 2006, WTO Website). But according to Part V "certain substantive requirements" must be fulfilled in order to impose a countervailing measure (WTO: Subsidies and Countervailing Measures Overview, 2006, WTO Website). A member of the WTO "may not impose a countervailing measure" unless it determines that the other nation is subsidizing an import, causing injury to another nation's domestic industry, and that there is a causal link between the subsidized imports and the injury" (WTO: Subsidies and Countervailing Measures Overview, 2006, WTO Website).

The existence of a specific subsidy occurs when there is a financial contribution by a government or any public body within the territory of a member state that confers a benefit (WTO: Subsidies and Countervailing Measures Overview, 2006, WTO Website). A country can use the WTO's dispute settlement procedure to seek the withdrawal of the subsidy or the removal of countervailing measures that the nation believes were unfairly administered ("Understanding the WTO: Settling Disputes," 2006, WTO Website).

The difficulties of making countervailing measures, however, lie in the fact that the WTO mainly has the power to settle dispute and nations can go around the WTO to settle problems and circumvent its regulations. Furthermore, there are many exceptions to what constitutes a subsidy. For example, a WTO member may restrict imports of a product if its domestic industry is injured or threatened with injury, through what is known as a permitted safeguard. Also, there are different status accorded to certain countries, for example, developing countries' exports are largely shielded from safeguard actions. There is a good faith aspect to the use of safeguards that is difficult to regulate. When a country restricts imports in order to safeguard its domestic producers in principle it must give something in return to the affected competitor nations ("Anti-dumping, subsidies, safeguards: contingencies, etc.," 2006, WTO Website).

Countries also may take their own actions if they believe they are being threatened without resorting to dispute resolution by the WTO, for example, they may launch they own investigation and ultimately charge a countervailing duty on subsidized imports that are found to be hurting domestic producers. The WTO also has different classes of subsidies. There are entirely prohibited subsidies such as regulations that require nations to meet certain export targets, or demand the use of domestic goods instead of imported goods vs. actionable subsidies where "the complaining country has to show that the subsidy has an adverse effect on its interests" which can be difficult to prove ("Anti-dumping, subsidies, safeguards: contingencies, etc.," 2006, WTO Website).