A Study Of Subsidies In The Multilateral Trading System

The administration of the U.S.A have appealed to WTO against the clauses relevant to the subsidies for the manufacturing industry of China, and call for the government of China to remove the subsidies of import and export granted to the steel, lumber, paper and information products. With this background, this article will give an insight into the subsidies in the multilateral trading system from the following aspects.In the first part, we summarize the definition of subsides, features and classifications. What we have got from the concept of subsidies of the SCM is that subsidies are direct transfers of funds, such as government grants; Direct transfers of funds or debts, such as loan guarantees; goods and services provided by the government other than general infrastructure, such as government purchases; a government entrusts or directs a funding mechanism or a private body to carry out one or more of the type of functions; any form of income or price support. According to the disciplines of subsidies of the SCM ,subsidies have the following characteristics ,namely, a subsidy is, (i) a financial contribution by a government; (ii) Provided by a member government or public body in their territories; (iii) an action which can generates benefits for the subsidizing producers; (iv) Specificity in nature.Subsidies are classified by different criteria, (i) subsidies are classified as export subsidies and domestic subsidies according to the recipients of subsidies, export subsidies are one type of encouraging subsidies which are contingent oh exports only. Domestic subsidies apply to output regardless of its market destination; (ii) subsidies are classified as prohibited subsidies, actionable subsides and non-actionable subsidies according to the incidence of countervailing measures. As far as prohibited subsidies are concerned, their only considerations are export performance or import substitution .Actionable subsidies are such that an act of subsidies by a government cause losses to other member states no matter whether domestic subsidies or export subsidies. Non-specific subsidies are non-actionable subsidies by the SCM art 2 including specific subsidies which meet requirements of exemption; (iii) subsidies are classified as agricultural subsidies and on non-agricultural subsidies.In the second part, In order to further analyzing the role played by the instrument of subsidies, we demonstrate why governments use subsidies and how subsidies impact international trade in economic way, so that readers can better understand it. We shall first examine the welfare implications of subsidies in a world of perfect markets, a world in which subsidies can never be justified in terms of economic welfare. We shall then introduce a range of market imperfections or "failures" that correspond more to reality and see if this modifies the welfare analytics of subsidization. The market failures we consider are economies of scale and externalities. finally, we shall examine a number of additional considerations that may influence subsidy outcomes, in particular challenges facing policymakers in actually implementing sound subsidy policy, and the influence of political economy factors on subsidy decisions.In the third part, this article analyzes the related aspects of subsides, which involves the evolution of subsidies, the discipline of subsidies in the multilateral trading system-the SCM agreement and the arrangements of DOHA agenda on subsidies and countervailing measures, from the perspective of subsides and WTO. For the sake of an reduction in the implications of international trade triggered by unreasonable subsidies and countervailing measures, and of maintaining a competitive order of fairness, freedom, transparency and nondiscrimination, the international society has been working hard to stipulate the related disciplines for regulating the acts of subsidies and countervailing measures of states. In principle, in 1947 GATT ratified some rules which form a core of international legal system of subsidies and countervailing measures. In 1979, the Tokyo Round talks ended up with the ratification of subsidies code, and after that the SCM agreement was accepted by contracting parties, so this symbolized a high level of legislation of subsidies and countervailing measures. With new problems or conditions springing up in the field of subsidies and countervailing measures, WTO members comes to demand improvements of the ambiguous rules when they implement the SCM agreement. So the task of how to regulate the act of unreasonable subsidies and countervailing measures and how to develop rules of the SCM as a response to the new developments of international trade, has occupied an important place of the agenda of DOHA Round.The SCM has established disciplines for the distortive effects of subsidies on international trade flow. In order to discipline the action of subsidies and maintain the order of fair play in the world, The SCM constructs a dual lawsuit system of countervailing measures, which empowers those who suffer losses as a result of subsidies of other member states, bring lawsuits to DSB, and also the related firms from victims of subsidies submit their complaints against subsides to domestic governing body, who takes such a administrative measure as countervailing duties for remedy.In the fourth part, this article proposes the improvements of subsidies of China in the multilateral trade system.Subsidies are one of many policy instruments subject to rales in the multilateral trading system, but they present more complex issues for policy-makers than many other instruments subject to GATT/WTO rules. One reason for this is that subsidies can be defined in different ways. Another is that they are used in pursuit of a wide array of objectives. The challenging task of determining which sorts of subsidies are problematic from the perspective of the trading system, and what might be done about them, has occupied an important place on the agenda of the WTO/GATT system.