The Definition Of Subsidy Under The WTO

Nations have a clash of competing goals in the negotiation of subsidy under international law. On the one hand, governments have legitimate reasons for implementing subsidies, but on the other hand, importing nations have legitimate reasons for being concerned about the importation of subsidized goods when those goods cause distress to their own industries. The basic problem is how to balance these competing interests. It is in this connection that the definition of subsidy is crucial: it is the fundamental issue that should be focused on in the negotiation for reaching a consensus.The paper, divided into three parts, will present a conceptual analysis of the definition of'subsidy'in the WTO law. The first section reviews the evolution progress of some important international rules in the field of subsidy, i.e., the GATT of 1947 and the Subsidies Code from the Tokyo Round of 1979. The WTO Agreement on Subsidies and Countervailing Measures Agreement (SCM Agreement) contains a definition of the term'subsidy', which is one of main novelties and achievements of the SCM Agreement. The second part deals with the constitutive elements of the definition of'subsidy'contained in the SCM Agreement, namely the element of financial contribution by a government or any public body within the territory of a Member and the element of benefit. Strictly speaking, specificity of the measure is not regarded as one of the constitutive elements of the definition of a'subsidy', but its determination is closely linked to the issues concerning the definition. The jurisprudence on the specificity test by the WTO is also briefly examined in this chapter. The third part discusses China's current subsidy policies and provides several solutions for China to comply with the SCM Agreement and protect its interests under the WTO framework.