The Law and Economics of Contingent Protection in the WTO

The Law and Economics of Contingent Protection in the WTO

Elgar International Economic Law series

Petros C. Mavroidis, Patrick A. Messerlin and Jasper M. Wauters

In this important book, three of the leading authors in the field of international economic law discuss the law and economics of the three most frequently used contingent protection instruments: anti-dumping, countervailing measures, and safeguards. When discussing countervailing measures, the authors also discuss legal challenges against prohibited and/or actionable subsidies. The authors’ choice is mandated by the fact that the effects of a subsidy cannot always be confined to the market of the WTO Member wishing to react against it. Assuming there are effects outside its market, an injured WTO Member can challenge the scheme as such before a WTO Panel. Taking the three agreements for granted as a starting point, the book provides comprehensive discussion of both the original contracts, and the case law that has substantially contributed to the understanding of these agreements.

Chapter 10: Thou shall not be punished in any other way

Petros C. Mavroidis, Patrick A. Messerlin and Jasper M. Wauters

Subjects: economics and finance, international economics, law - academic, international economic law, trade law


9. Counteracting subsidies – a two-track approach A COUNTERVAIL AS A UNILATERAL REMEDY In the case where a WTO Member can demonstrate that subsidized imports are causing injury to the domestic industry, it is allowed to take unilateral action against such a subsidy, in order to offset or counteract the subsidy causing injury.1 Such countervailing duties are therefore a form of unilateral relief, much like anti-dumping measures. This implies that a Member does not need the WTO’s approval before it can impose a countervailing duty. While the unilateral nature of the remedy has obvious advantages, it also presents some shortcomings in dealing with subsidies. First, countervailing measures may protect a domestic industry from country A from injury suffered in country A’s domestic market due to subsidized imports from country B, but it does not provide any relief in case the subsidies are distorting a third country market (country C) in which the domestic industry has an interest. Neither can one address the negative effects of the subsidies (from the point of view of the domestic industry) in the market of the subsidizing Member (the market of country B). Second, to conduct a countervailing duty investigation in accordance with the rules and procedures of the SCM Agreement is a complicated, time and resource-consuming enterprise. As a countervailing duty investigation concerns the subsidization practice of another government and not a private company’s practice as is the case in anti-dumping, such an investigation may prove to be particularly difficult and delicate. Moreover, the end-result...

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