US seeks WTO ban on industrial subsidies

By Arun Kumar


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Washington : The United States Monday demanded that the World Trade Organization (WTO) prohibit what it called "certain particularly trade-distorting subsidies" in industries ranging from steel to semiconductors.

However, in the light of the ongoing agriculture negotiations, the proposed new subsidy rules are not intended to apply to the agriculture sector, it clarified submitting a paper to the WTO Negotiating Group on Rules discussing the Doha Development Agenda.

"It's time to take the next step in the development of stronger WTO rules that will rein in the use of industrial subsidies," US Trade Representative Susan C. Schwab said.

"The subsidies we want to prohibit maintain inefficient production capacity in industries ranging from steel to semiconductors. Stronger rules for these types of subsidies would address significant trade-distorting practices of many of our trading partners that often lead to unfair trade," she said.

In an increasingly global economy, foreign government subsidies provide a distinctly unfair competitive advantage," Schwab added.

The US paper also proposes additional WTO transparency procedures applicable to state-owned companies and government subsidies to them.

The US proposal would prohibit the following five types of subsidies if they are "specific" (i.e., are only given to a particular company or industry) and benefit a product that is exported or competes with imports:

Coverage of operating losses; forgiveness of government-held debt; lending to "uncreditworthy" companies; equity investments in "unequityworthy" companies; and other financing, such as "royalty-based" financing, that is not commercially available.

The WTO Agreement on Subsidies and Countervailing Measures currently only prohibits two types of subsidies: export subsidies and import substitution subsidies. The US proposal would expand the existing category by adding five additional types of particularly trade-distorting subsidies.

Under the current rules on prohibited subsidies, a WTO member can request a WTO dispute settlement panel to examine an alleged prohibited subsidy. If the panel finds that a prohibited subsidy is being provided, the subsidy must be withdrawn "without delay".

The US had last month filed a complaint at WTO against India last month saying its duties on alcoholic beverages and other imports violate global trade rules.