Why Should Non-Actionable Subsidy Be Non-Actionable?

Abstract

The Agreement of Subsides and Countervailing Measures (SCM Agreement) is considered on of the major areas for which the WTO system achieves significant improvement from the GATT system. During the Uruguay Round negotiation, the GATT contracting parties agreed on, inter alia, the new concept of non-actionable subsidy that would be mostly exempted from the rigorous disciplines of the SCM Agreement. This exemption was, however, due to expire after a period of five years, unless the Committee on Subsidies and Countervailing Measures (SCM Committee) determines to extend the application of non-actionable subsidies. The SCM Committee subsequently prepared elaborated procedural rules for notification under Article 8.3 and arbitration under Article 8.5. The SCM Committee could not agree on whether to extend the application of non-actionable subsidy within the time limit of Article 31 and finally, as of January 1, 2000, declared the termination thereof. If we reflect the WTO system through the famous traffic light analogy for subsidy disciplines, the current situation of subsidy traffics looks quite messy. All green lights for subsidy roads were taken off from the traffic signals, leaving only red and yellow lights. Most of subsidy traffics are either jammed at read lights or risking their lives to venture passing at yellow lights. This systemic fracture for subsidy disciplines has caused considerable uncertainty not only to WTO Members' government sectors but also to private business community when they cannot assure the legitimacy of the governmental policies under which they are sometimes vastly affected until the trade or economic effects of the policies are assessed only based on other Members' circumstances. Therefore, it is imminent to construct a new non-actionable subsidy mechanism under which WTO Members should feel safe and stable.