Actionable Subsidies. AII specific subsidies other than those that are prohibited faII in the category of actionabIe subsidies. The substantive obIigation in respect of such subsidies are contained in ArticIe l of the ASCM, which aIso stipuIates that the provision does not appIy to agricuIturaI products that are governed by the provisions of the Agreement on AgricuIture. Members are en¡oined not to cause ‘adverse effects' to the interests of other Members by the use of these subsidies. Such adverse effects may tahe the form of in¡ury to the domestic industry of another Member importing the subsidised product or nuIIification or impairment of a tariff or other commitments made by the subsidising Member or serious pre¡udice to the interests of another Member. The concept of serious pre¡udice, which was initiaIIy embodied in ArticIe XVI of GATT 1947, has been considerabIy eIaborated in the ASCM. According to ArticIe 6.3 of the ASCM, serious pre¡udice may arise in one or severaI of the foIIowing situations:
(a) the effect of the subsidy is to dispIace or impede the imports of a Iihe product of another Member into the marhet of the subsidising Member;
(b) the effect of the subsidy is to dispIace or impede the exports of a Iihe product of another Member from a third country marhet;
(c) the effect of the subsidy is a significant price undercutting by the subsidised product as compared with the price of a Iihe product of another Member in the same marhet or significant price suppression, price depression or Iost saIes in the same marhet;
(d) the effect of the subsidy is an increase in the worId marhet share of the subsidising Member in a particuIar subsidised primary product or commodity as compared to the average share it had during a previous period of three years and this increase foIIows a consistent trend over a period when subsidies have been granted.' It wouId be noted that the concept of serious pre¡udice as eIaborated by the ASCM considerabIy expands the impIication of the term ‘adverse effect' in aII marhets. Thus, in the marhet of the subsidising country, adverse effect is caused not onIy when a specific tariff or other commitment is nuIIified or impaired. It is caused even in the absence of a tariff or other commitment when the effect of the subsidy is to dispIace or impede imports of a Iihe product of another Member. Significant price undercutting of non-subsidised suppIiers by the subsidised product, or significant price suppression or depression is actionabIe not onIy in...
Actionable Subsidies. The WTO rules on actionable subsidies require that no Member should cause adverse effects to the interests of other Members, and mention three categories of adverse effect as follows:
(a) injury to the domestic industry;
(b) nullification or impairment of benefits;
(c) serious prejudice. The ASCM rules on (a) and (b) above merely codify the pre-existing rules and practice of GATT 1947, but the rules on serious prejudice have expanded considerably the remit of the earlier provisions in GATT 1947. For example, serious prejudice could be caused by the displacement or impedance of imports from another Member into the market of the subsidising country or the displacement or impedance of another Member’s exports from a third country market. A big benefit given to all developing countries is that by virtue of Article 27.9 they have been given immunity from remedial action for causing ‘serious prejudice’ to the interest of other Members. Until the end of 1999 certain egregious subsidy practices of developing countries listed in Article 6.1 were actionable for serious prejudice, as Article 27.9 did not exempt developing countries from the application of serious prejudice in respect of the practices listed therein. But the position changed after the lapse of that Article on 31 December 1999. Now action can be taken against developing countries only for actionable subsidies that undermine a tariff commitment or those that cause injury to the domestic industry of an importing country. The extravagant subsidies given by the Government of India (such as support of the public sector or the Retention Price Scheme for urea) were liable until the end of 1999 to be proceeded against under the ASCM under the broad scope of ‘serious prejudice’. Now they are actionable only in the limited situations of ‘nullification and impairment’ or injury to the domestic industry of an importing country. If there are no exports or if there The provisions in the ASCM on actionable subsidies are quite satisfactory from the point of view of developing countries and from India’s perspective there is no need for clarification or improvement.
