This agreement disciplines use of subsidies and also regulates the actions that can be taken by the countries to counter effects of subsidies. A country can have recourse to the WTO’s dispute settlement mechanism and seek the withdrawal of the subsidy or the removal of its adverse effects. Another alternative is to launch its own investigation and charge extra duty (known as “countervailing duty”) on the goods in question to nullify effects of subsidy given by our trading partners. The agreement defines a subsidy and also introduces a concept of a specific subsidy i.e. a subsidy available only to an enterprise/group of enterprises. The discipline applies only to specific domestic or exports subsidies.
The agreement deals with the following two types of subsidies:
Prohibited subsidies: Requiring recipients of subsidies to achieve certain exports targets, or to use domestic goods instead of imported goods in their manufacture. Such subsidies (trade distorting) can be challenged in the WTO’s dispute settlement mechanism. In case, it is found that the prohibited subsidies have been given, the respondent country will be ordered to withdraw those immediately. In case the respondent fails to comply, the complaining country can levy countervailing duty on such subsidized products after following the prescribed procedure.
Actionable subsidies: This category is less objectionable than “prohibited subsides”. Here a complaining country has to demonstrate that the subsidy has an adverse effect on its interests. The agreement defines three types of damage that can be caused by this class of subsidies (i) Domestic industry of the importing country is being hurt (ii) Rival exporters from another country may be hurt when the two compete in third markets (iii) Domestic subsidies in one country can hurt exporters trying to compete in the subsidizing countries’ domestic market.
Exception: Subsidies given by LDCs/developing countries with GNPs of less than US$1000 per capita per year are exempted from subsidy regime.
Relevance of the furniture sector Imports into Pakistan
In case prohibited and actionable subsidies are given to promote export of the furniture, affected interests in Pakistan can request the National Tariff Commission to impose countervailing duties. Exports from Pakistan
On the other hand if allegations are made by importing country about subsidies (trade distorting) on the part of Pakistan, this agreement provides the exporter with wherewithal to show that countervailing duty should not be imposed. Should the matter require reference to the WTO, the Ministry of Commerce would have to be approached.
The agreement deals with the following two types of subsidies:
Prohibited subsidies: Requiring recipients of subsidies to achieve certain exports targets, or to use domestic goods instead of imported goods in their manufacture. Such subsidies (trade distorting) can be challenged in the WTO’s dispute settlement mechanism. In case, it is found that the prohibited subsidies have been given, the respondent country will be ordered to withdraw those immediately. In case the respondent fails to comply, the complaining country can levy countervailing duty on such subsidized products after following the prescribed procedure.
Actionable subsidies: This category is less objectionable than “prohibited subsides”. Here a complaining country has to demonstrate that the subsidy has an adverse effect on its interests. The agreement defines three types of damage that can be caused by this class of subsidies (i) Domestic industry of the importing country is being hurt (ii) Rival exporters from another country may be hurt when the two compete in third markets (iii) Domestic subsidies in one country can hurt exporters trying to compete in the subsidizing countries’ domestic market.
Exception: Subsidies given by LDCs/developing countries with GNPs of less than US$1000 per capita per year are exempted from subsidy regime.
Relevance of the furniture sector Imports into Pakistan
In case prohibited and actionable subsidies are given to promote export of the furniture, affected interests in Pakistan can request the National Tariff Commission to impose countervailing duties. Exports from Pakistan
On the other hand if allegations are made by importing country about subsidies (trade distorting) on the part of Pakistan, this agreement provides the exporter with wherewithal to show that countervailing duty should not be imposed. Should the matter require reference to the WTO, the Ministry of Commerce would have to be approached.
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