What is subsidy? 국제무역학과 권오혁 국제무역학과 최청림 국제무역학과 박지현.

Presentation on theme: "What is subsidy? 국제무역학과 권오혁 국제무역학과 최청림 국제무역학과 박지현."— Presentation transcript:

1 What is subsidy? 국제무역학과 권오혁 국제무역학과 최청림 국제무역학과 박지현

2 Table of Contents -Definition of Subsidy(Simply) - Subsidy and International trade -Subsidy in WTO -Present Condition -Q&A

3 Definition of Subsidy(Simply) Definition of subsidy(simply) subsidy to help an industry or business, or to pay for a public service. A subsidy is money that is paid by a government or other authority in order to help an industry or business, or to pay for a public service. GOVERNMENT INDUSTRY, BUSINESS PUBLIC SERVICE

4 Definition of Subsidy(Simply)

5 SUBSIDY AND INTERNATIONAL TRADE Subsidy and International trade FOCUS ON

6 confusion A subsidy cause a confusion to the world market. (Especially, production subsidy and export subsidy) Subsidy and International trade

7 Country ACountry B Subsidy Countervailing measure Subsidy and International trade

8 Countervailing duties (CVDs), also known as anti-subsidy duties, are trade import duties imposed under World Trade Organization (WTO) Rules to neutralize the negative effects of subsidies. They are imposed after an investigation finds that a foreign country subsidizes its exports, injuring domestic producers in the importing country. According to World Trade Organization rules, a country can launch its own investigation and decide to charge extra duties, provided such additional duties are in accordance with the GATT Article VI and the GATT Agreement on Subsidies and Countervailing Measures. Since countries can rule domestically whether domestic industries are in danger and whether foreign countries subsidize the products, the institutional process surrounding the investigation and determinations has significant impacts beyond the countervailing duties. Countervailing duties in the U.S. are assessed by the International Trade Administration of the U.S. Department of Commerce which determines whether imports in question are being subsidized and, if so, by how much. If there is a determination that there is material injury to the competing domestic industry, the Department of Commerce will instruct U.S. Customs and Border Protection to levy duties in the amount equivalent to subsidy margins. Petitions for remedies may be filed by domestic manufacturers or unions within the domestic industry, however the law requires that the petitioners represent at least 25% of the domestic production of the goods for which competition is causing material injury. Countervailing Measures Subsidy and International trade

9 A subsidy cause confusion to the world market! Subsidy and International trade

10 UNDERSTANDING THE WTO: THE AGREEMENTS -Subsidies and countervailing measures Subsidy In WTO

11 Multilateral Trade Agreements WTO Establishment Agreement TRIPs : Trade-Related Intellectual Property Rights Plurilateral Trade Agreement GATS : General Agreement on Trade in Services Annex 1C Annex 1B WTOAgreement Annex 1A Article XVI.4 Newly Introduced/ Adapted Areas Tokyo MTN Code Returning MTAs GATT.1994 SPS : Sanitary and Phyto-sanitary Measures TRIMs : Trade-Related Investment Measures ROO : Rules of Origins Safe Guard Preshipment inspection TBT : Technical Barriers to Trade Anti-dumping Subsidies & Countervailing duties Customs valuation Import Licensing Procedures Agriculture Textile MFA (Multilateral Fiber Agreement Subsidy In WTO

12 AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES Definition of a subsidy (Article 1.1 ~ 1.2) Three categories of subsidies -Prohibited subsidies (Article 3.1 ~ 4.12) -Actionable subsidies (Article 5) Non-actionable subsidies(ending on 31 December 1999) (Article 8.1~8.5) Subsidy In WTO

13 Prohibited subsidies Subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade, and are therefore likely to hurt other countries’ trade. They can be challenged in the WTO dispute settlement procedure where they are handled under an accelerated timetable. If the dispute settlement procedure confirms that the subsidy is prohibited, it must be withdrawn immediately. Otherwise, the complaining country can take counter measures. If domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed. (Article 3.1 ~ 4.12) Subsidy In WTO

14 Ex. Prohibited subsidy MICRON wails to ITC about HYNIX get subsidy from GOVERNMENT OF KOREA EXTREME TECH(July 23, 2003) Micron Wins ITC DRAM Injunction Against Hynix A U.S. trade agency levied a 44 percent duty against DRAMs manufactured by Korean DRAM manufacturer Hynix Semiconductor. The U.S. government’s International Trade Commission reached a final verdict Wednesday, concluding its investigation that the Korean government had illegally subsidized Hynix, allowing the DRAM maker to sell computer memory at drastically discounted prices. U.S. DRAM maker Micron Technology had pressed the ITC to conduct an investigation, claiming the subsidies gave Hynix an unfair advantage in the cutthroat price wars ravaging the DRAM market. Hynix is currently ranked fourth among all DRAM suppliers in dollar sale with a 12.3 percent market share, according to market research firm iSuppli Corp. As a result of the decision, a 44.29 percent duty will be levied against all Hynix chip imports into the U.S., payable to the U.S. Treasury. “I am pleased with the final determination of injury announced by the International Trade Commission,” said Steve Appleton, president and chief executive of Micron, in a statement. “The Department of Commerce’s and International Trade Commission’s reviews of subsidies to Hynix were exhaustive and their respective determinations were based on substantial evidence. These actions validate that Hynix received billions of dollars in illegal subsidies, reaffirms that free trade must also be fair trade, and demonstrates our government’s commitment to enforce trade laws.” Subsidy In WTO

15 Actionable subsidies In this category the complaining country has to show that the subsidy has an adverse effect on its interests. Otherwise the subsidy is permitted. The agreement defines three types of damage they can cause. One country’s subsidies can hurt a domestic industry in an importing country. They can hurt rival exporters from another country when the two compete in third markets. And domestic subsidies in one country can hurt exporters trying to compete in the subsidizing country’s domestic market. If the Dispute Settlement Body rules that the subsidy does have an adverse effect, the subsidy must be withdrawn or its adverse effect must be removed. Again, if domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed. (Article 5) Subsidy In WTO

16 Non-actionable subsidies (ending on 31 December 1999) A subsidy that is not subject to countervailing duties under the rules of the WTO. These include non-specific subsidies, subsidies for industrial research, regional aids, and some environmental subsidies. (Article 8.1~8.5) Subsidy In WTO

17 DDA Ministerial Meeting Demand of subsidy claim abstention for developing countries is as follow Development Subsidy Balanced National Development Subsidy Research and Development in Technology Subsidy Diversify Products Subsidy Respect for Environment Sustainable Production and Development Subsidy Subsidy In WTO

18 Ex. Non-actionable subsidies HELSINGIN SANOMAT(November 21, 2008) EU allows Finland to keep production subsidies for milk and beef Anttila: EU understands Finland’s special needs At talks among agriculture ministers of the European Union countries on Thursday, Finland succeeded in getting special permission from the EU to maintain a higher level of output- based farm subsidies than other member states. The decision could prove to be a trump card in future agricultural disputes. The outcome shows a willingness on the part of the EU to understand the difficulties that Finland’s northerly location poses to agriculture. “Finland’s special needs are understood in the EU”, said Minister of Agriculture and Forestry Sirkka- Liisa Anttila (Centre) in Brussels on Thursday, after negotiations with her European colleagues that continued through the night. The partial reform in EU agricultural policy moves away from production subsidies, toward the development of agriculture and rural areas. Subsidy In WTO

19 Present condition SUBSIDY DISPUTES : 16 OTHER DISPUTES : 71 TRADE REMEDIES DISPUTES Trade claim(WTO, 1995-2006)

20 Present condition Safeguards : 11 Countervailing Measures : 11 Anti-dumping : 33 The number of openings of panels concerned with trade claim(WTO, 1995-2006) Present condition

21 What is Subsidy? Q & A Thank you