Wto Subsidies Agreement

In principle, safeguard measures cannot be directed towards imports from a given country. However, the agreement describes how quotas can be distributed among supplier countries, even in exceptional cases where imports from certain countries have increased disproportionately. A protective measure should not last more than four years, although it may be extended to eight years, subject to the finding of the competent national authorities that the measure is necessary and that there is evidence that the sector is adapting. Measures imposed for more than a year must be progressively liberalized. Legal definitions are more precise, but overall, the WTO agreement allows governments to combat dumping in the event of actual (substantial) harm to competing domestic industry. To do so, the government must be able to demonstrate dumping, calculate the extent of dumping (how much the export price is below the exporters` real estate prices) and demonstrate that dumping causes harm or threatens to do so. But the WTO is an organization of countries and their governments. The WTO does not deal with business and cannot regulate businesses through measures such as dumping. Therefore, the anti-dumping agreement only concerns the measures that governments can take to combat dumping. With subsidies, governments act on both sides: they subsidize and act against each other. As a result, the grant agreement disciplines both grants and reactions.

20 Current WTO rules reflect, at least to some extent, a fundamental theory of trade policy on production and export subsidies. Overall, production subsidies can be a more effective instrument than import duties if the state is to increase domestic production. This argument can be presented in a simplified graphic form. 29 Brander and Spencer (1985) showed that export subsidies to the domestic producer as a duopolist in the world could increase national welfare at the expense of foreign producers. To prove it, they started from increased yields at scale and quantitative competition (Cournot) between duopolists. These welfare effects resulting from this “strategic” trade policy are sensitive to the model`s assumptions.