Regulation of Subsidies and State Aids in WTO and EC Law

Name: Regulation of Subsidies and State Aids in WTO and EC Law | Conflicts in International Trade Law
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Conflicts in International Trade Law

Gustavo E. Luengo Hern Madrid(Autor*in)

Kluwer Law International (Verlag)

Erschienen am 1. August 2007

616 Seiten

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Beschreibung

Regulating subsidies in international trade is crucial to the efficient and equitable allocation of resources and ultimately to global welfare. Much of the serious instability that persists in today's interdependent world may be traced to government interventions that dilute or defy such regulation.
In this in-depth analysis of subsidies and State aids, Gustavo Luengo details the regulatory elements that reveal how governments undertake the granting of support to their national industries. Although in theory such support is aimed at two overriding economic objectives - the elimination of harmful distortions, and the correction of market failures - he shows that in practice it is political contexts that determine the principles and objectives of the regulation of subsidies.

The analysis focuses on two mature regulatory systems, those of the World Trade Organization (WTO) and the European Communities (EC). The author describes both legal frameworks, and then proceeds to examine the differences and conflicts between the two systems, along with their reasons, consequences, and possible solutions. Significant aspects of the regulation of subsidies that emerge from the analysis include the following:

the role of 'countervailing measures' the EC notion of 'State aid' as developed by the European Commission and the European Court of Justice
procedures for controlling subsidies under both systems and the consequences of granting subsidies in violation of applicable rulesthe elements of 'financial contribution' and 'benefit' under the Agreement on Subsidies and Countervailing Measures (ASCM) actionable and non-actionable subsidies agricultural subsidies in both systemsthe role of WTO dispute settlement procedures

Both for its clear and comprehensive overview of the regulation of subsidies and State aids and for its insightful recommendations, this book will be welcomed as a major contribution to the field of international economic law. Practitioners, policymakers, officials, and academics will all find it enormously valuable for its analytic depth and its direct applicability to the need to develop fair and enforceable regulation of subsidies and State aids.

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Inhalt

Cover
Half Title Page
Editorial Board
Title Page
Copyright Page
Dedication
Table of Contents
Preface
Acknowledgements
About the Author
Abbreviations
Part I: Introduction
Chapter 1: Preliminary Remarks
I. Subsidies in the International Context
A. What is a Subsidy?
B. Types of Subsidies
1. Export Subsidies
2. Domestic Subsidies
C. Conclusion
II. Scope of this Work: Subsidies in the WTO and the EC
Chapter 2: Economic Analysis of Subsidies
I. Introduction
II. Analysis of International Trade
A. Theory of Comparative Advantage
B. Theory of Proportion in Factors of Production
C. Economies of Scale
D. Imperfect Competition
E. Conclusion
III. Effects of Subsidies on International Trade
A. Effects of Export Subsidies
B. Effects of Domestic Subsidies
C. Conclusion
IV. Effects of the Adoption of Countervailing Duties
V. Concluding Remarks
Part II: The Regulation of Subsidies in the WTO
Introduction to Part II
Chapter 3: Evolution of the Regulation of Subsidies in International Trade: From the GATT to the WTO
I. Introduction
II. Subsidies in the Havana Charter
A. Negotiations for the Creation of the ITO: Origins of the GATT
B. Regulation of Subsidies in the HC
C. Conclusions
III. Subsidies in the GATT (1947-1979)
A. The GATT of 1947
1. GATT Negotiations
2. Obligations on Subsidies in the GATT
3. The Definition of 'Subsidy' in the GATT of 1947
4. Conclusion
B. The Reforms of 1955
1. Export Subsidies
a) Non-Primary Products
b) Primary Products
2. Revision Clause
3. Conclusion
C. The Situation after the Reform of 1955
1. Notification of Subsidies
2. Export Subsidies for Primary Products
3. Export Subsidies for Non-Primary Products
4. The Definition of Subsidy after the Reform of 1955
a) Price Support Systems
b) Subsidies Financed by a Non-Governmental Levy
c) Multiple Exchange Rates
d) Purpose of the Subsidy
e) Other Cases
5. Conclusions
IV. The Subsidies Code from the Tokyo Round of 1979
A. Negotiations During the Tokyo Round (1973-1979)
B. The Tokyo Round Subsidies Code of 1979
1. Track I-Countervailing Duties
2. Track II-Obligations on Subsidies
C. The Situation after the Reform of 1979
1. The Definition of 'Subsidy' after the Tokyo Round of 1979
2. Situation after the Tokyo Round
3. Relevant Cases after the Reform of 1979
a) Export Subsidies for Primary Products
b) Export Subsidies for Non-Primary Products
c) Countervailing Duties
D. Conclusions
V. Negotiations in the Uruguay Round (1986-1994)
A. The Negotiations on Subsidies in the Uruguay Round
1. Definition of 'Subsidy'
a) The Position of the US
b) The Position of the EC
2. The 'Traffic Light Approach'
3. Other Important Issues: Trade Remedies, Sub-National Entities and Developing Countries
4. Negotiations on Primary Products
B. Proposals Made during the Negotiations
1. The Cartland Draft
2. The Dunkel Draft
3. The De Zeeuw Draft
C. Conclusions
VI. The Final Result: Agreements on Subsidies in the WTO
VII. Concluding Remarks
Chapter 4: The Regulation of Subsidies in the Agreement on Subsidies and Countervailing Measures
I. Introduction
II. Definition of 'Subsidy': Article 1 ASCM
A. 1st Element: 1st Alternative-Financial Contribution
1. Government or Other Public Body
2. Territoriality of the Measure
3. Exhaustive List of Cases Considered to be Financial Contributions
a) Direct Transfer of Funds or Potential Transfers of Funds or Liabilities
b) Foregoing of Government Revenue That Would Be Collected Otherwise
c) Provision of Goods or Services
d) Payments to a Funding Mechanism or Entrustment/Direction of Private Bodies
B. 1st Element: 2nd Alternative-Income or Price Support
C. 2nd Element: Benefit
D. Conclusions
III. Specificity of the Measure: Article 2 of the ASCM
A. The Specificity Test
1. 'De Jure' Specificity
2. 'De Facto' Contingency
B. Specificity of Regional Subsidies
C. Specificity per se
D. Burden of Proof of Specificity
E. Conclusions
IV. Prohibited Subsidies: Article 3 of the ASCM
A. Export Subsidies
1. 'De Jure' Contingency
2. 'De Facto' Contingency
B. The Illustrative List of Export Subsidies
C. Domestic Content Subsidies
D. Conclusions
V. Non-Actionable Subsidies: Article 8 of the ASCM
A. Assistance for R&D Activities
B. Assistance to Disadvantaged Regions
C. Assistance for Adapting Infrastructures to New Environmental Requirements
D. Notification and the Opportunity for Appeal
E. Other Non-Actionable Subsidies
F. Conclusions
VI. Actionable Subsidies: Articles 5 and 6 of the ASCM
A. Injury to the Domestic Industry of Another Member
B. Nullification or Impairment of GATT Benefits
C. Serious Prejudice
1. Cases Where a Serious Prejudice is Presumed (Subsidies Prohibited Prima Facie)
2. Cases Where Serious Prejudice May Exist (Prohibited Subsidies)
a) Displacement or Impediment of Imports
b) Displacement or Impediment of Exports
c) Price Undercutting by the Subsidized Product
d) Increase in the World Market Share of the Subsidized Primary Product
D. Conclusions
VII. Remedies: Disputes and Countervailing Duties
A. Multilateral Forum: Disputes before the DSB
1. Procedures for the Different Categories of Subsidies
a) Red Category: Prohibited Subsidies (Article 4 of the ASCM)
b) Amber Category: Actionable Subsidies (Article 7 of the ASCM)
c) Green Category: Non-Actionable Subsidies (Article 9 of the ASCM)
2. Results of These Procedures: Withdrawal, Repayment or Removal of the Effects
3. Conclusion
B. National Forum: Countervailing Duties
1. Substantive Requirements
a) Existence of a Specific Subsidy
b) Material Injury to a Domestic Industry
c) Causal Link
2. Procedural Requirements
a) Initiation and Consultation
b) Calculating the Amount of Countervailing Duties
c) Duration and Termination of Countervailing Duties
d) Possibilities for Judicial Review of the Countervailing Duties
C. Conclusions
VIII. Notification and Monitoring of Subsidies: The Role of the SCM Committee
IX. Exceptions for Developing Countries: Article 27 of the ASCM
A. Prohibited Subsidies
B. Actionable Subsidies
C. Countervailing Duties
D. Conclusions
X. Concluding Remarks
Chapter 5: The Regulation of Subsidies in the Agreement on Agriculture
I. Introduction
II. The Agreement on Agriculture
A. Commitments on Domestic Support
1. Amber Basket
2. Blue Basket
3. Green Basket
a) General Services
b) Food Security Industry
c) Domestic Food Aid
d) Direct Payments to Producers
4. Conclusion
B. Commitments on Export Subsidies
1. Export Subsidies for Products Subject to Reduction Commitments
a) List of Export Subsidies (Article 9.1. of the AoA)
1. Direct Subsidies
2. Export Sales under the Domestic Market Price
3. Export Payments for Agricultural Products
4. Subsidies to Reduce Costs of Marketing or Transporting Exports
5. Upstream Subsidies
b) Other Export Subsidies (Article 10.1 of the AoA)
c) Conclusion
2. Export Subsidies for Products Not Subject to Reduction Commitments
3. Conclusion
C. Conclusions
III. The Application of the ASCM to Basic Agricultural Products: The Relationship Between the ASCM and the AoA
A. Definition of 'Subsidy' in the AoA
B. Specificity in the AoA
C. Conclusions
IV. Trade Remedies: The Expiration of the Peace Clause
A. The Peace Clause: Exceptions to Article 13 of the AoA
1. Exceptions for Domestic Support
2. Exceptions for Export Subsidies
3. Expiration of the Peace Clause: Application of the ASCM
B. Lack of Conformity of a Measure With the AoA: Withdrawal of the Subsidy (Article 4.7 of the ASCM)
C. Conclusions
V. Concluding Remarks
Chapter 6: Subsidies in the WTO: The 'Foreign Sales Corporations' Case
I. Introduction
II. The DISC Case
A. Group of Experts in DISC
B. Group of Experts in the European Cases
C. The Aftermath of These Cases
D. Conclusions
III. The US-FSC Case
A. The FSC-First Panel and AB Reports
1. Measures in Relation to the FSCs
2. First Panel Report
a) EC Arguments
b) US Arguments
c) Conclusions of the Panel
3. First AB Report
4. Conclusions
B. The ETI-Second Panel and AB Reports
1. Measures Introduced by the ETI
2. Second Panel Report
3. Second AB Report
4. Conclusions
C. Developments of the FSC/ETI Case
IV. Conclusions from the FSC Case
Part III: EC Rules on State Aids
Introduction to Part III
Chapter 7: Evolution of the State Aid Rules in the EC
I. Introduction
II. State Aids in the History of the EC
A. Rules on State Aids: From ECSC to EEC
B. Evolution of the Rules on State Aids After the EEC Treaty
C. Conclusions
III. State Aids Nowadays: Statistics
IV. Concluding Remarks
Chapter 8: The Notion of 'State Aid': Article 87.1 of the EC Treaty
I. Introduction
II. The Notion of 'Aid in Any Form'
A. Examples of Advantages Granted by the State
1. Participation in the Capital of Enterprises
2. Loans
3. Government Guarantees
4. Sale of Public Goods
5. Acquisition of Products or Services by the State
6. Provision of Public Services by the State
7. Conclusions
B. Intention of the Government When Granting the Measure
C. Indirect Advantages
D. Form of the Aid
III. Granted by a Member State or through State Resources
A. The Meaning of 'State'
B. Notion of 'State Resources'
C. Aids 'Granted by the Member States or through State Resources'
D. Conclusions
IV. Distortion in Competition: Selectivity
A. Distortion in Competition
B. Selectivity of the Measure
C. Conclusions
V. Effect on Trade between Member States
VI. Concluding Remarks
Chapter 9: State Aids Compatible with the Common Market
I. Introduction
II. State Aids per se Compatible with the Common Market
A. Aids with Social Character
B. Aids to Repair Damages Caused by Natural Disasters
C. Aids to Certain Regions of the Federal Republic of Germany
D. Conclusions
III. State Aids Which May be Compatible with the Common Market
A. Aids to Improve the Development of Certain Regions Where the Standards of Living are Abnormally Low or Where There is a Serious Unemployment Situation
B. Aids for Projects of Common European Interest or to Remedy a Serious Disturbance in the Economy of a Member State
C. Aids to Promote the Development of Certain Activities or Regions: Sectoral, Horizontal and Regional Aids
1. Regional Aids in Article 87.3(c) of the EC Treaty
2. Sectoral Aids
a) Transport
b) Motor Vehicles
c) Steel and Coal
3. Horizontal Aids
a) Aids for the Protection of the Environment
b) Aids for R&D
c) Aids for Employment and Training
d) Aid for SMEs
e) Aids for Rescuing and Restructuring Companies in Crisis
D. Aids to Promote Culture
E. Aids Authorized by the Council
IV. Conclusions
Chapter 10: Procedural Issues: Control of State Aids in the EC and Recovery of State Aids
I. Introduction
II. Procedures to Control State Aids in the EC
A. State Aid Control by the European Commission
1. Notified Aids
2. Non-Notified (Unlawful) Aids
3. Control of Existing Aids
B. Appeals before the CFI/ECJ on State Aids
1. Commission Decisions Subject to Appeal
2. Types of Actions and Locus Standi
3. Review by the ECJ
4. Consequences of the Review
C. Role of National Courts in the Control of State Aids
D. Conclusions
III. Remedies-Recovery of State Aids
A. Powers of the European Commission in State Aids: Suspension, Modification or Recovery
B. Exceptions on the Recovery of State Aids
C. Calculation of the Amount of Aid to be Recovered
D. Subjects Obliged to Return the Aid
E. Conclusions
IV. Concluding Remarks
Chapter 11: Agricultural Subsidies in the EC
I. Introduction
II. State Aids to Agricultural Products
III. The CAP: Agricultural Subsidies in the EC
A. The CAP in the EC Treaty: Objectives
B. CMOs: Types of Subsidies for Agricultural Goods in the EC
1. Price Support through Regulation of the Markets
2. Income Support: Production Subsidies
3. Storage Systems and Compensation for Remnants
4. Common Mechanisms for the Stabilization of Imports and Exports
5. CAP Funding: EAGGF
C. The Reform of the CAP
IV. Concluding Remarks
Part IV: Comparative Analysis of the Regulation of Subsidies in the WTO and the EC: Consequences
Introduction to Part IV
Chapter 12: Comparison of the WTO and EC Rules on Subsidies and State Aids
I. Introduction
II. Systemic Approach to Disciplining Subsidies
A. Analysis of National Measures in the WTO
1. Framework of the ASCM
2. Framework of the AoA
B. Analysis of Government Measures in the EC
C. Notification and Control of Subsidies and State Aids
D. Conclusions
III. Definition of 'Subsidy' versus Notion of 'State Aid'
A. Origin of the Measure: Government versus State
B. Benefit versus Aid
C. Nature of the Resources Used
1. FSC versus Sloman Neptun
2. Canada-Aircraft and US-Export Restraints versus PreussenElektra
3. Price Fixing Systems
D. Conclusions
IV. Specificity versus Selectivity
A. The Term 'Certain'
B. Undertakings and Industries/Productions
C. Measures Granted by Sub-National Entities
D. Conclusions
V. Prohibitions and Exceptions in the WTO and the EC
A. Red Category-Prohibited Subsidies and Aids Incompatible with the Common Market
1. Export Subsidies
2. Import Substitution/Domestic Content Subsidies
3. Conclusion
B. Green Category-Permitted Subsidies and Aids Compatible with the Common Market
1. Aid for R&D
2. Aid for Underdeveloped Regions
3. Aid for the Adaptation of Existing Facilities to New Environmental Requirements
4. Conclusion
C. Amber Category-Actionable Subsidies and Aids Which May be Compatible with the Common Market
1. The Adverse Effects Standard
2. The Compensatory Justification Standard (Community Interest)
3. Comparison of Both Standards
D. Conclusions
VI. Remedies: Withdrawal of the Subsidy versus Recovery of the Aid
A. Remedies at the Multilateral Level: Withdrawal of Prohibited Subsidies versus Recovery of Unlawful Aid
B. Coercive Means of Enforcement
C. Remedies at the National Level: The Role of Individuals
D. Conclusions
VII. Reasons for the Differences between the WTO and the EC
A. Scope and Systemic Approach
B. Definitions of 'Subsidy' and 'State Aid'
C. Prohibited and Permitted Government Measures
D. Control and Remedies
E. Conclusions
VIII. Concluding Remarks
Chapter 13: Conformity of the EC State Aid Rules With the WTO: Suggestions
I. Introduction
II. Conformity of State Aids With the WTO Rules on Subsidies: Conflicts
A. Scope of the Regulation: Subsidy versus State Aid
B. Objectives of the Regulation: Adverse Effects on Trade versus Community Objectives
C. Conclusion: Lack of Conformity
III. A Different Case: Conformity of Agricultural Subsidies in the EC with the AoA
A. Domestic Support
B. Export Subsidies
C. Other Issues: Expiration of the Peace Clause
D. The AoA in the EC Legal System
E. Negotiations on Agriculture in the Doha Round
F. Conclusions
IV. Consequences of the Lack of Conformity
A. Consequences for the EC and the Member State
1. Government Measure = Subsidy State Aid
a) Multilateral Level-WTO
(i) Distribution of Competences with Respect to the WTO Agreements
(ii) The Dispute Settlement System in Practice: Representation on Behalf of the EC
(iii) Retaliatory Actions: The Requirement of Uniformity in the Action
(iv) Conclusions: Joint Responsibility of the EC and the Member State
(v) Consequences for the EC and the Member State Derived from the ASCM
b) Community Level-EC
c) Conclusions
2. Government Measure = Subsidy = Authorized State Aid
a) Multilateral Level-WTO
b) Community Level-EC
c) Conclusions
B. Consequences for Individuals
1. Government Measure = Subsidy = Authorized State Aid
2. Government Measure = Subsidy State Aid
3. Conclusion
C. Conclusions
V. Suggestions: Ways to Improve the Conformity of the EC Rules on State Aids with the WTO
A. Modification of the Notion of 'State Aid'
B. The Community Interest 'Plus' Standard
C. Indirect Effect of the Provisions of the ASCM
D. Conclusions
VI. Concluding Remarks
Chapter 14: Final Remarks
I. Introduction
II. Main Conclusions of This Work
III. Subsidies in an International Context: Reflections and Room for Improvement
IV. Conclusion: A Look into the Future
Table of Cases
I. GATT/WTO
A. GATT
B. WTO
II. EC
A. ECJ
B. CFI
Bibliography
Index
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