The WTO Law of Subsidies

A Comprehensive Approach

Marc Benitah

0 Wolters Kluwer

Table of Contents

List of Abbreviations xxix

Introduction 1

PART I Scanning WTO Agreements for Cumulative Disciplines and Remedies to Counter an Alleged Subsidy Granted by Another Member (The Perspective of the Accusing Member) 3

I The Case of Subsidies Relating to Non-agricultural Products 5

A. Invoking the SCM for Subsidies Relating to Non-agricultural Products 5

CHAPTER 1 Defining the Set of Measures Subject to SCM Disciplines (So-Called "Specific Subsidies") 7 1.1 The "Financial Contribution" Criterion 10 1.2 The "Existence of Benefit" Criterion 16

1.2.1 First Infrequent Scenario: The Counterfactual Situation Does Not Lend Itself Naturally to a Commercial Marketplace Benchmark 19

1.2.2 Second Predominant Scenario: The Counterfactual Situation Lends Itself Naturally to a Commercial Marketplace Benchmark 20

1.2.3 Types of Evidence for Determining the Existence of a Benefit 22 1.3 The "Specificity" Criterion 24

v

Table of Contents

1.3.1 Explicit Limitation of Access to a Subsidy to "Certain Enterprises" Through a Law, Regulation, or Express Acts or Pronouncements Showing the Will of a Granting Authority (In Law Specificity) 27

1.3.2 Limitation of Access to a Subsidy to "Certain Enterprises" Not Explicitly Provided for in a Law or Regulation or Express Will of the Granting Authority (In Fact Specificity) 29

1.3.3 The "Regional Specificity" Scenario 37 1.3.4 The "Deemed Specificity of Prohibited Subsidies" Scenario 38

CHAPTER 2 Various Subtleties Relating to the Three Criteria Defining a Specific Subsidy (i.e., Financial Contribution, Benefit, and Specificity) 41 2.1 Subtleties Relating to Financial Contribution and Benefit 43

2.1.1 Subtleties Relating to Different Identities of the Receiver of the Financial Contribution and the Recipient of Benefit 43 2.1.1.1 The "Upstream Subsidy" Scenario 43 2.1.1.2 The "Successor Company" Scenario 44 2.1.1.3 The "Proex" Scenario 45 2.1.1.4 A Conceptually Possible Fourth Scenario (Not

Materialized in WTO Case Law) : Conferring a "Benefit" on a Firm by Providing a Financial Contribution to Its Owners 46

2.1.2 The Distinction Between the Existence of a Benefit and the Calculation of Its Amount 47 2.1.2.1 The Non-CVD Context 47 2.1.2.2 The CVD Context 48

2.1.2.2.1 Scenario Where a Numerical Commercial Market Benchmark Was Used During the Phase for Establishing Existence of a Benefit: "Killing Two Birds with One Stone" 49

2.1.2.2.2 Scenario Where a Numerical Commercial Market Benchmark Was Not Used During the First Phase Establishing Existence of Benefit 50

2.1.2.2.3 CVD Scenario Where There Is No Need for a Market Paradigm (E.g., Revenue Foregone) 51

2.1.3 Distinction Between "Gross Countervailable Benefit" and "Net Countervailable Benefit" 52

2.1.4 Subtleties Relating to Potential Overlap of Different Categories of Financial Contribution for Characterizing the Same Measure 54

vi

Table of Contents

2.1.5 Is a Financial Contribution to Oneself Possible? 55 2.1.6 Benefit Is Determined Ex Ante at the Time the Financial

Contribution Is Provided 56 2.2 Subtleties Relating to the Specificity Criterion 57

2.2.1 Specificity of a Subsidy Granted by a Central Government Versus a Subsidy Granted by a Provincial Government 58

2.2.2 Is an Examination of De Facto Specificity Conditioned by a Prior Determination of "Appearance of Non-specificity?" 59

2.2.3 Specificity Through Financial Contribution or Through Benefit? A False Debate 60

CHAPTER 3 Satisfying Ex Ante, the Anti-distortion "Object and Purpose" of the SCM: Determining the Subset of Subsidies Subject to per se Disciplines (So-Called "Prohibited Subsidies") 3.1 Subsidies Contingent upon Export Performance (So-Called "Export

Subsidies") 3.2 A Shortcut for Finding an Export Subsidy: Bypassing Article 3.1(a)

and Going Directly to the Illustrative List of Export Subsidies 3.3 Subsidies Contingent upon the Use of Domestic Over Imported Goods

(So-called "Import Substitution Subsidies") 3.4 Distinguishing Between Challenging a Prohibited Subsidy Program

"As Such" or "As Applied in Specific Transactions" 3.5 Challenging a Prohibited Subsidy Program "As Such" and the

Mandatory/Discretionary Doctrine 3.6 Some Subtleties About Prohibited Subsidies

3.6.1 Are "Counter-Subsidies" Another Category of Prohibited Subsidies Through Article 32.1 of the SCM?

3.6.2 Is There in the WTO a "Legal Interest" Procedural Test Before the Acceptation by a Panel of a Complaint Against a Prohibited Subsidy?

3.6.3 The Unimportance, in the Context of Prohibited Subsidies, of Showing an Additional Nullification or Impairment Besides Violation of an Obligation

CHAPTER 4 Alternative Remedies under the SCM Agreement for a Violation of Obligations Relating to Prohibited Subsidies 117 4.1 Auto-remedy of a Mutually Agreed Solution 118 4.2 Recourse under Article 4 of the SCM to a Panel in the WTO

Multilateral Forum, on the Basis That They Are Prohibited 118 4.2.1 Expedited Time Limits 119 4.2.2 A Special Body: The Permanent Group of Experts 121

vii

63

65

72

98

103

105 108

108

112

113

Table of Contents

4.2.3 The Issue of "Appropriate Countermeasures" When a Prohibited Subsidy Is Not Withdrawn Within the Time-Period Specified by a Panel

4.2.4 The Absence of "Compensation" in the Event of Non-compliance in the Context of Prohibited Subsidies Disputes

4.3 Recourse to Countervailing Duties (CVDs) in the Domestic Forum of the Importing Country on the Basis That the Prohibited Subsidies Are "Countervailable" and Not on the Basis That They Are Prohibited 124

4.4 Undertakings as Alternative to CVDs 126

CHAPTER 5 Satisfying Ex-Post, the Anti-distortion "Object and Purpose" in the SCM: Defining the Subset of "Actionable Subsidies" Based on Their Adverse Trade Effects 131 5.1 Injury to the Domestic Industry of Another Member 133 5.2 Nullification or Impairment of Benefits under GATT 1994 134 5.3 Serious Prejudice 139

5.3.1 More Details in the SCM 141 5.3.2 Precision of Certain Terms in Article 6.3 of the SCM 143 5.3.3 The Requirement of a Causal Link Between Subsidy and the

Market Phenomena Constituting Serious Prejudice 148 5.3.4 Some Circumstances Where Some Market Phenomena

Constituting Serious Prejudice Are Deemed to Exist 150 5.3.5 Some Circumstances Where Displacement or Impediment

Constituting Serious Prejudice Shall Not Arise under Article 6.3 of the SCM 151

5.4 Is Challenging "As Such" an Actionable Subsidy Conceptually Different from Challenging It "As Applied?" 152

CHAPTER 6 Alternative Remedies under the SCM Agreement for a Violation of Obligations Relating to Actionable Subsidies 153 6.1 Auto-remedy of a Mutually Agreed Solution 154 6.2 Recourse to a Panel in the WTO Multilateral Forum under Article 7

of the SCM on the Basis of Their Adverse Trade Effects 154 6.2.1 Prior Consultations 155 6.2.2 Establishment of a Panel When Consultations Fail 155 6.2.3 Appellate Body Process 155 6.2.4 Compliance Process 156 6.2.5 Meaning of the Expression "Shall Take Appropriate Steps to

Remove the Adverse Effects or Shall Withdraw the Subsidy" 157 6.2.6 In Case of Non-compliance 159 6.2.7 The Possibility of Compensation 160

viii

Table of Contents

CHAPTER 7 Recourse to Countervailing Duties (CVDs) in the Domestic Forum of the Importing Country on the Basis That the Actionable Subsidies Are "Countervailable" and Not Because They Are Actionable 163 7.1 Initiation of a CVD Investigation (Article 11 of the SCM) 164 7.2 Is There Continuing Obligation for an Investigative Authority to

Continue to Assess the Sufficiency of the Evidence in the Application after the Initiation of the CVD Investigation? 169

7.3 Consultations in CVD Proceedings: Aside the Obligation of IA to "Invite" the Exporting Member for Such Consultations, Must They Take Place Before Initiation of the Investigation? 170

7.4 Evidentiary Rules and Due Process Rights in the Conduct of Countervailing Duties Investigations (Article 12 of the SCM) 172

7.5 Calculation of the Amount of a Subsidy in Terms of the Benefit to the Recipient 179

7.6 Determination of Present "Injury" 184 7.6.1 Determination of Present "Material Injury" 184 7.6.2 Determination of Present "Threat of Material Injury" 192

7.7 Determination of Causality Between Subsidized Imports and Material Injury 196

7.8 The Scope of the Imported Product "Under Consideration" and the Determination of the "Like Product" Produced by the Injured Domestic Industry 202 7.8.1 The Starting Point: The Scope of the Subsidized Imported

"Product under Consideration?" Is There Any Guidance in the SCM on How It Should Be Determined? 202

7.8.2 The Scope of the Like Product Produced by the Injured Domestic Industry 203

7.8.3 Defining "Domestic Industry" 205 7.9 Provisional Measures Following Affirmative Preliminary

Determinations: Cash Deposit or Bonds 206 7.10 Definitive Imposition of Countervailing Duties Following Final

Affirmative Determinations 207 7.10.1 The Issue of Retroactivity of Definitive Duties 207 7.10.2 Prohibition of Retroactivity for Provisional Measures 209

7.11 Duration of Countervailing Duties and the Possibility of Post-Investigation Periodic Reviews of the Need for Their Continued Imposition (Article 21.2 of the SCM) 210

7.12 The So-Called Five-Year "Sunset Review" ("Unless Clause" of Article 21.3 of the SCM) 211

7.13 Some Terminology Confusions About Various Kinds of "Reviews" in a Retrospective Duty Assessment System 213

7.14 Public Notice and Explanation of Determinations 214 7.15 Judicial Review 216

ix

Table of Contents

7.16 Undertakings as Alternative to CVDs 217

CHAPTER 8 Subtleties Relating to Actionable Subsidies 221 8.1 Could a Subsidy Be Challenged Simultaneously as a Prohibited and

as an Actionable Subsidy? 221 8.2 Who Has Legal Standing to Bring a Complaint Targeting an

Actionable Subsidy under Article 7 of the SCM? 222 8.3 Is the "Prima facie" Doctrine Tautological in the Context of

Actionable Subsidies? 223

B. Invoking GATT 1994 for Subsidies Relating to Non-agricultural Products 227

CHAPTER 9 How to Know If a Measure Is a "Subsidy" or an "Export Subsidy" under GATT 1994? 229 9.1 The Case of the Generic Term "Subsidy" 229 9.2 The Case of the Expression "Subsidy on the Export" in Article XVI

of GATT 1994 230

CHAPTER 10 GATT 1994 Per Se Disciplines 233 10.1 Per Se Disciplines Through Article XV1:4 of GATT 1994 233 10.2 Per Se Disciplines Through Articles 111:2 or 111:4 of GATT 1994: The

Potential "Double Face" of a Subsidy 234 10.2.1 The Case of Article 111:2 234 10.2.2 The Case of Article 111:4 235

CHAPTER 11 GATT 1994 Effects-Based Disciplines 239 11.1 Article XVI:3 of GATT 1994: The "More Than an Equitable Share"

Adverse Effect 239 11.2 "Serious Prejudice" under Article XVI: 1 of GATT 1994 241

CHAPTER 12 Alternative Remedies under an (Unlikely) Exclusive GATT 1994 Claim Relating to a Non-agricultural Subsidy 243 12.1 Seeking a "Mutually Satisfactory Solution" 243 12.2 Recourse to a Panel in the WTO Multilateral Forum for a Violation

of GATT 1994 Disciplines 244 12.3 Recourse to Countervailing Duties (CVDs) in the Domestic Forum of

the Importing Country 245

x

Table of Contents

C. Invoking TRIMs for Trade Related Investment Measures Involving Subsidies 247

CHAPTER 13 How a TRIMs Measure Could Involve a Subsidy 249

CHAPTER 14 Remedy under TRIMs for the Measure at Issue and Consequence for the Involved Subsidy 251

D. Invoking the 1980 Plurilateral Aircraft Agreement: An Implausible but Theoretically Possible Scenario 253

CHAPTER 15 Principal Subsidies Disciplines of the ATCA 255

CHAPTER 16 Remedies under the ATCA and Why the ATCA Is Not Invoked as a Basis of a Complaint About Civil Aircraft Subsidies 257

II The Case of Subsidies Relating to Agricultural Products 261

A. Invoking Disciplines under the Agreement on Agriculture 263

CHAPTER 17 What Is Behind the Expression "Export Subsidy" in the AoA? 265 17.1 The Text of the AoA Does Not Provide Enough Clues About What Is

Behind This Expression: Need of Reference to the SCM as Contextual Support 265

17.2 The Text of the AoA Provides Enough Clues About What Is Behind This Expression: No Need for the SCM as Contextual Support 266

CHAPTER 18 What Is Behind the Expression "Domestic Support" in the AoA? 267 18.1 Fist Scenario: The Text of the AoA Provides Enough Clues About

What Is Behind the Expression "(Domestic) Support": No Need for the SCM as Relevant Context 267

18.2 The Text of the AoA Provides Enough Clues About What Is Behind the Expression "(Domestic) Support": Need of Reference to the SCM as Relevant Context 268

xi

Table of Contents

CHAPTER 19 Per Se Disciplines in the Agreement on Agriculture 269 19.1 Per Se Disciplines Relating to Agricultural Export Subsidies 269

19.1.1 Per Se Disciplines About Article 9:1 Export Subsidies Relating to Unscheduled Products 271

19.1.2 Per Se Disciplines About Article 9:1 Export Subsidies Relating to Scheduled Products 271

19.2 Per Se Disciplines Relating to Agricultural Domestic Support 272 19.2.1 The Boxes Approach 273

19.2.1.1 Amber Box 273 19.2.1.2 Blue Box 274 19.2.1.3 Green Box 274 19.2.1.4 Developmental Box 279

19.2.2 Per Se Disciplines Relating to the Amber Box 279 19.2.2.1 How the Aggregate Measure of Support (AMS) Is

Calculated 280 19.2.2.2 The Fundamental Per Se Discipline Relating to

AMS 283 19.2.3 Notification and Review of the Implementation of

Commitments 284 19.3 Disciplines in the AoA Based on the Avoidance of Certain Effects:

The Case of Export Subsidies Not Listed in Article 9.1 285 19.3.1 Existing Circumvention in the Context of Unscheduled

Products 287 19.3.2 Existing Circumvention in the Context of Scheduled

Products 288 19.3.3 Threat of Circumvention in the Context of Scheduled or

Unscheduled Products: An Unclear Jurisprudence 289 19.3.4 The Pitfall of Distinguishing Mechanically Article 9.1

Subsidies from Non-Article 9.1 Subsidies: The Strange Panel's Reasoning in Canada Dairy 292

19.4 Remedies under Agreement on Agriculture for a Violation of the AoA Disciplines 293 19.4.1 Recourse to a Panel in the WTO Multilateral Forum 293 19.4.2 What About the Basis in the AoA for Countervailing Duties

Aimed at Agricultural Subsidies? 294

B. Invoking GATT 1994 for Agricultural Subsidies 295

CHAPTER 20 GATT 1994 Disciplines Based on the Avoidance of Adverse Trade Effects 297 20.1 Serious Prejudice under Article XVI:1 of GATT 1994 297 20.2 "More Than an Equitable Share" under Article XVI:3 298

xii

Table of Contents

20.3 The 1958 Australia-France Dispute: Absence of the Concept of "Displacement" in Specific Markets in the "More Than an Equitable Share" Definition 300

20.4 The 1979 "Sugar Cases": Adoption of the Concept of "Displacement" in Specific Markets in the Definition Itself of "More Than an Equitable Share" 301

20.5 The 1983 "Wheat Flour" Case: Still the Same Picture as in the Sugar Cases 304

20.6 Analysis of This "Inability to Conclude" 304

CHAPTER 21 Per Se Disciplines under Article XVI:4 of GATT 1994: A Discord Between Article XV1:4 of GATT 1994 and the AoA? 307

C. Invoking the Prohibited Subsidies Provisions of the SCM for Agricultural Subsidies 311

CHAPTER 22 The Appellate Body's Clarification in US - Upland Cotton of the Meaning of the Expressions "Subject to" and "Except as Provided in the AoA" 313

CHAPTER 23 "EC Sugar": Confirmation by the Appellate Body of the "Specific Provisions Dealing Specifically with the Same Matter" Doctrine 317

PART II Scanning WTO Case Law for Strategies to Refute Violation of Subsidies Disciplines (The Perspective of the Accused Subsidizing Member) 321

A. The "Threshold Strategy" in a Complaint Invoking the SCM: Denying That a Measure Could Be Challenged as a Subsidy 323

CHAPTER 24 Invoking a Missing "Financial Contribution" 325 24.1 In Connection with the Expression "a Government Practice Involves a

Direct Transfer of Funds" 325 24.1.1 Contesting Unsuccessfully That the Modification of an

Existing Loan May Properly Be Treated as a "Transfer of Funds" 325

24.1.2 Attempting Unsuccessfully to Give a Filtering Role to the Expression "Government Practice" 327

24.1.3 Arguing Unsuccessfully That the Term "Direct" Precludes Any Intervening Agency 328

xiii

Table of Contents

24.1.4 Contending Unsuccessfully That the Direct Transfer of Funds Must Emanate from Government Title or Possession over the Funds Transferred 329

24.2 In Connection with "Potential Direct Transfer of Funds or Liabilities:" Arguing (Almost Successfully) That It Can Only Exist When a Direct Transfer of Funds Is Assured upon the Occurrence of a Triggering Event 330

24.3 In Connection with the Theme "Revenue Otherwise Due Is Foregone": Variations on the Theme "Nothing Was Due in the First Place" 332 24.3.1 The FSC Scheme: Arguing Unsuccessfully That Nothing

Was Due in the First Place 332 24.3.2 ETI ACT: Arguing Once Again That a Member May

Exclude from Taxation a Category of Income Even If It Does Not Exclude All the Income in That Category 334

24.3.3 Invoking Various Tax Rates for Various Activity Categories to Deny the Existence of an "Effective" Privileged Rate Applying to the Aircraft Sector 335

24.3.4 Brazil Tax Incentives-. Invoking Unsuccessfully A Non-existent Rule in Brazil's Taxation System, According to Which "Predominantly Credit-Accumulating Companies" Are Not Subject to a Certain Tax 337

24.4 In Connection with the Theme "Provides Goods or Services Other than General Infrastructure) " 338 24.4.1 Arguing Unsuccessfully That the Term "Goods" in the

Expression "Provides Goods" Is Limited to Tradable Items with an Actual or Potential Tariff Classification 338

24.4.2 Invoking Unsuccessfully a Restrictive Interpretation of the Expression "Provides Goods ..." in the Sense That Granting the Right to Harvest Standing Timber Cannot Be Equated with Providing the Standing Timber Itself 339

24.4.3 A Variation on the Previous Theme: Arguing Unsuccessfully That the Grant of Mining Rights by a Government Is Too Remote from the Extracted Minerals 341

24.4.4 Distinguishing Successfully Between Infrastructure "Provided" and Infrastructure "Created" 342

24.5 In Connection with "Entrusts or Directs a Private Body" 343 24.5.1 Invoking Unsuccessfully That Entrustment or Direction of a

Private Body Must Be Done Through an "Explicit and Affirmative Act" of the Government 344

24.5.2 Arguing Successfully That Entrustment or Direction Must Have as Its Object One of "Types of Function" Mentioned in Article l.l(a)(l)(iv) of the SCM 345

24.5.3 Arguing Successfully That Entrustment or Direction Cannot Be a Mere By-Product of Governmental Regulation 348

xiv

Table of Contents

24.5.4 Arguing Unsuccessfully That the Expression "Private Body" Must Refer to an Organized Entity Having a Separate and Independent Existence 350

24.6 In Relation with the Definition of a "Public Body": Rejecting Successfully a Definition Based Only on Majority Government Ownership 351 24.6.1 Governmental Control Approach 351 24.6.2 The Governmental Function Approach 352 24.6.3 The "Governmental Authority to Perform Governmental

Functions" Approach 352

CHAPTER 25 The Threshold Strategy Through the Benefit Criterion (I) 359 25.1 Proposing Unsuccessfully the "Net Cost for the Government" as a

Substitute to the Market Benchmark 360 25.2 Alleging Unsuccessfully That Benchmarks Proposed by the

Complainant Member Do Not Involve the Same Collateral (The Case of APRGs Provided to Daewoo) 361

25.3 Accepting That Failure to Apply a Credit Risk Spread Confers a Benefit (The Case of pre-12 March 1998 APRGs Provided by KEXIM) 362

25.4 Invoking Unsuccessfully Differences Between Rating Practices of KEXIM and Corporate Bond Credit Rating Agencies to Invalidate the Benchmark Proposed by the Complainant Member (The Case of PSLs Provided by KEXIM) 363

25.5 Pretending Unsuccessfully That the Proposed Corporate Bonds Benchmark Is Not Based on Actual Yield Rates (The Case of PSLs Provided by KEXIM) 364

25.6 Pretending Unsuccessfully That KEXIM Has a Greater Capacity for Risk Management, Allowing It to Propose Lower Rates (The Case of PSLs Provided by KEXIM) 366

25.7 Attempting Unsuccessfully to Exclude Out-of-Country Loans as Benchmarks (The Case of APRGs Provided by KEXIM) 366

25.8 French Government's Capital Investments in Aerospatiale: Alleging Unsuccessfully That the Panel Viewed a "Reasonable Rate of Return" as Connoting a Different Test Than the "Usual Investment Practice" Standard 368

25.9 Consistency with the Usual Investment Practice of Private Investors: Alleging Unsuccessfully That the Panel Failed to Give Proper Weight to Evidence Relating to the Behavior of Boeing Investors 369

25.10 Transfer of the French Government Shares in Dassault Aviation to Aerospatiale: Alleging Successfully That the Panel Erred in Its Application of the Legal Standard to the Facts 370

xv

Table of Contents

25.11 FIT Program: Arguing Successfully That a Benefit Analysis Should Not Be Conducted Within the Competitive Wholesale Electricity Market as a Whole, but Within Competitive Markets for Wind and Solar Generated Electricity 372

25.12 Attempting Unsuccessfully to Contend That a Complaining Party Must Demonstrate the Existence of a "Continuing Benefit" to Show That a subsidy Can Cause Present Adverse Effects 375

25.13 Benefit When the Provision of a Good Is Made for Less than Adequate Remuneration: Contesting Unsuccessfully the Use of a Benchmark Other than Private Prices in the Country of Provision (When These Private Prices Are Distorted Because of the Government's Predominant Role) 377

25.14 Asking Unsuccessfully for a Strictly Comparable Loan as a Benchmark, Even When the Market Is Distorted (Article 14(b) of the SCM) 383

25.15 Arguing Unsuccessfully That the Benefit Analysis Should Assess the Impacts on Increased Output or Lower Prices of the Good Produced by the Receiver of the Financial Contribution 385

CHAPTER 26 The Threshold Strategy Through the Benefit Criterion (II): "Pass-Through" of Benefit 387 26.1 The "Input Scenario" 388

26.1.1 Scenario Where Subsidies Are Bestowed in Respect of a Product (The Input Product) Different from the Product Subject to Countervailing Duty, and Where the Input Producers Are Unrelated to the Producers of That Subject Merchandise: Arguing Successfully That a Pass-Through Analysis Is Required 389

26.1.2 A Variant of the Previous Scenario: Arguing Successfully That a Pass-Through Analysis Is Still Required 390

26.1.3 Scenario Where a Tree Harvester Owning Sawmills Sell at Arm's Length Primary Lumber (Subject to the CVD Investigation) to Lumber Remanufacturers (Subject Also to the CVD Investigation) for Further Processing: Arguing Unsuccessfully That a Pass-Through Analysis Is Required Even in an Investigation Conducted on an Aggregate Basis 391

26.2 The Privatization Scenario: Invoking Successfully There Is No Inflexible Rule Requiring Investigating Authorities to Determine Automatically That a "Benefit" Derived from Pre-privatization Financial Contributions, Expires Following Privatization for Fair Market Value 393

26.3 The "Hot Idle Funding" Scenario: Arguing Successfully That the Benefit from the Hot Idle Funding Did Not Pass-Through to the Buyer (i.e., PWCC/PHP), Because It Accrued Right from the Start Only to the Seller (i.e., Newpage PH) 395

xvi

Table of Contents

26.4 US - Upland Cotton: Arguing Unsuccessfully That Pass-Through of Benefit Analysis Is Critical Also in a Non-CVD Context 396

CHAPTER 27 The Threshold Strategy Through the Contestation of the Specificity of the Measure at Issue 399 27.1 Attempting Unsuccessfully to Transform the Specificity Test from a

Test About a Discrete Segment of Firms to a Test About Product Specificity 399 27.1.1 First Variant: In the Discrete Segment of Firms Receiving

the Subsidy, Certain Firms Do Not Produce the Merchandise at Issue 400

27.1.2 Second Variant: The Producers of the Merchandise at Issue Produce Also Other Products 400

27.1.3 Third Variant: Invoking the Diversity of Products Manufactured by the Producers Eligible for a Subsidy 401

27.1.4 Fourth Variant: Invoking Unsuccessfully the "Inherent Characteristics" of a Good to Deny in Fact Specificity in the Context of Governmental Provision of Such a Good 402

27.2 Arguing Successfully, That in Principle, the Wider Entire Program and Not the Individual Subproject, Is the Relevant Frame of Reference for Specificity Analysis 403

27.3 Arguing Unsuccessfully That a Subsidy Is De Jure Specific Only if Its Enabling Legislation Explicitly Limits Access to Both Financial Contribution and Benefit 404

27.4 Regional Specificity: Attempting Unsuccessfully to Distinguish Between an "Enterprise" and the "Facilities" of Such an Enterprise 406

27.5 Regional Specificity: Arguing Unsuccessfully That a Subsidy Is Not Regionally Specific Because It Did Not Explicitly "Designate" the Geographical Region for Subsidization 407

27.6 Arguing Unsuccessfully That the Small Territorial Size of a Region Constitutes a Criterion Relevant to the Concept of Regional Specificity 409

CHAPTER 28 Some Examples of the Threshold Strategy in the Context of a Complaint Invoking the Agreement on Agriculture 411 28.1 Asserting Unsuccessfully That a "Payment," in the Sense of

Article 9.1(c) of the AoA, Must Be in the Form of Money 412 28.2 Asserting Unsuccessfully That a "Payment" Within the Meaning of

Article 9.1(c) Requires Two Distinct Legal Entities 413 28.3 Arguing Unsuccessfully That to Establish the Existence of a "Payment"

under Article 9.1(c) of the AoA, a Complaining Party Needs to Show a "Benefit" to the Recipient 414

xvii

Table of Contents

28.4 Arguing Unsuccessfully That Canadian Dairy Provincial Marketing Boards Cannot Be Said to Be "Government Agencies" in the Sense of Article 9.1(a) of the AoA 415

28.5 Contesting Unsuccessfully That a Measure Is "Financed by Virtue of Governmental Action" 417 28.5.1 "Governmental Action" 418 28.5.2 "By Virtue Of" 418 28.5.3 "Financed" 419

B. "Denying Violation of a Discipline" Strategy 421

CHAPTER 29 Denying Violation of the Prohibition of "Contingency upon Export Perfor­mance" 423 29.1 Attempting Unsuccessfully a Restrictive Interpretation of In Law

Export Contingency, Limited to a Formulation Expressis Verbis of This Contingency 423

29.2 Arguing Successfully That an In Law Contingency Complaint Is Not Entitled to Rely upon Material Extraneous to the Legal Document Underlying the Measure at Issue 425

29.3 Arguing Successfully That the Standard for De Facto Export Contingency upon Anticipated Export Performance Cannot Be Equated with the "Reasons" or the "Motivation" of the Granting Government 426

29.4 Attempting Unsuccessfully to Limit the Scope of the Prohibition on Subsidies Contingent in Fact upon Anticipated Exportation to Only Measures Containing an Obligation to Achieve That Anticipated Exportation 429

29.5 Pretending Unsuccessfully That, When Determining That Canada's TPC Subsidies in the Regional Aircraft Sector Were De Facto Contingent upon Export Performance, the Panel Confused Eligibility Criteria with "Conditions" 431

29.6 Arguing Unsuccessfully That De Facto Export Contingency Should Focus on the Reasonable Knowledge of the Recipient That There Is a Requirement to Export 431

29.7 De Facto Export Contingency: Arguing Unsuccessfully That Some Financial Contributions under a Program Were Made to Companies Not Involved in Exports 432

29.8 Pretending Unsuccessfully That Export-Orientation Should Not Be Considered at All in Considering Whether De Facto Export Contingency Exists 433

xviii

Table of Contents

CHAPTER 30 Denying Violation of the Prohibition of "Contingency upon the Use of Domestic over Imported Products" 435 30.1 Arguing Unsuccessfully That Article 3.1 (b) Does Not Extend to

Subsidies That Are "In Fact" Contingent upon the Use of Domestic over Imported Goods 435

30.2 Arguing Unsuccessfully in the Abstract That under No Circumstances Could a Value-Added Requirement Scheme Result in a Finding of Contingency "In law" upon the Use of Domestic over Imported Goods 437

30.3 Arguing Successfully That the Complainant Confused Conditions Relating to the Siting of Certain Manufacturing Activities with a Condition Requiring the Use of Domestic over Imported Goods 438

CHAPTER 31 Contesting (in the CVD Context) That the Causal Link Between Subsidized Imports and Injury to A Domestic Industry Is Adequately Established 443 31.1 Attempting Unsuccessfully to Distinguish the Effects of Subsidies

from the Effects of Subsidized Imports 444 31.2 Arguing Successfully That Investigative Authorities Must Show That

Subject Imports Have "Explanatory Force" For the Occurrence of Significant Depression or Suppression of Domestic Prices 446

31.3 Arguing That the Investigative Authorities Did Not Satisfactorily Explain the Nature and Extent of the Injurious Effects of Factors Other than Subsidized Imports 449

31.4 Arguing Unsuccessfully That the "Break the Causal Link" Approach Is Inconsistent with Article 15.5 of the SCM 455

31.5 Arguing Unsuccessfully That the Absence of a Temporal Correlation Between the Evolution of Certain Self-Selected Variables Disproves Causality Between Subsidized Imports and Injury 458

CHAPTER 32 Contesting (in a Non-CVD Context) That a Causal Relationship Has Been Demonstrated Between a Subsidy and Adverse Effects to the Interests of Other Members: The Paradox of a More Sophisticated Causality Analysis Than in a CVD Context 461 32.1 US: Upland Cotton: Arguing Unsuccessfully That Marketing Loan and

Counter-Cyclical Payments Do Not Insulate US Cotton Producers from Market Signals and Therefore Do Not Cause Word Price Suppression 465

32.2 Boeing 787: Contesting Unsuccessfully the Product Theory of Causation for R&D Subsidies 468 32.2.1 The First Link in the Chain of Causation: Impact of

Aeronautics R&D Subsidies on the 2004 Launch of the Technologically Advanced 787 470

xix

Table of Contents

32.2.2 The Second Link in the Chain of Causation: Effects of the R&D Subsidies on Airbus' Prices and Sales of the Competing Product to the 787 476

32.3 Boeing 787: Successfully Rejecting the "Price Effects" Causation for R&D Subsidies 482

32.4 Airbus LCA: Unsuccessfully Rejecting the "Product Theory" of Causation for the LA/MSF Subsidies to LCA Models (The Case of "Displacement") 483

32.5 Airbus LCA: Successfully Rejecting the "Pricing Theory" of Causation for LA/MSF Subsidies (The Case of Serious Prejudice under Different Forms) 489

CHAPTER 33 Countering Successfully That There Was Not an Appropriate Matching by the CVD Authorities Between the Elements in the Numerator and The Elements in the Denominator When Calculating the Per-unit Subsidy Ratio 493 33.1 Washing Machines: Rejecting Successfully That a Subsidy Is

Connected to a Specific Product Only When the Intended Use of the Subsidy Is Known to the Subsidy Giver 494

33.2 Supercalendered Paper: Arguing Successfully That the Investigative Authority Was Required to Show That Subsidies Benefited the Investigated Product, Despite That These Subsidies Were Provided for Specific Projects Not Involved in the Production of the Investigated Product 496

33.3 Rejecting Successfully the Assumption by Investigative Authorities That the Totality of Subsidized Inputs Produced by an Entity Are Used in the Production of the Finished Investigated Product 497

C. The "Exemption or Exception Strategy" 499

CHAPTER 34 Invoking Explicit Exemptions for Developing Countries (SCM Based Complaint) 501 34.1 Special and Differential Treatment for Prohibited Subsidies 502

34.1.1 Export Subsidies 502 34.1.1.1 Annex 7 Developing Countries: LDC Countries

and Low-Income Countries 502 34.1.1.2 " Export Competitiveness " for LDC Countries

and Low-Income Countries 503 34.1.1.3 All Other Developing Countries Not Covered

under Annex VII of the SCM 507 34.2 Local Content Subsidies 507 34.3 S&D for Actionable Subsidies 508 34.4 S&D for Countervailing Duties 511

xx

Table of Contents

CHAPTER 35 Invoking Implicit Exemptions (SCM Based Complaint) 513 35.1 Invoking Unsuccessfully an Implicit Exception (Relating to the

Financial Contribution Criterion) for Harvestings Rights Granted by Governments to Exploit in Situ Natural Resources 513

35.2 Invoking Unsuccessfully Implicit Policy Exemptions (Relating to the Specificity Criterion) for Measures "Adopted in the Context of a Member's Broader Economic and Social Policy Framework" 514

35.3 Attempting Unsuccessfully to Find an Implicit Exemption Through a Contrario Reasoning Relating to Paragraph 1 of Item (k) of the Illustrative List of Prohibited Subsidies: The Proex Case 515

35.4 Invoking Unsuccessfully an Implicit Exemption (Relating to the Benefit Criterion) Through the Relevance of the 1992 Bilateral Agreement Between the EU and the US 518

35.5 Invoking Unsuccessfully an Implicit Exemption Stemming from an Alleged Conflict Between Article 111:2 of GATT 1994 and the SCM 519

CHAPTER 36 Arguing Successfully in EU - PET (Pakistan) That There Is No Exception to the Excess Remissions Principle When Determining How Remissions under Duty Drawback Schemes Are to Be Identified as Subsidies 523

CHAPTER 37 Invoking Unsuccessfully the Exception Strategy in the AoA: Does Article 10.2 of the AoA Exempts Agricultural Export Credits from the Export Subsidy Disciplines of the AoA? 527

F. The "Implementing" Strategy 531

CHAPTER 38 Rejecting Successfully That a Certain Measure Is Not a "Measure Taken to Comply" and Therefore Does Not Fall Within Article 21.5 Proceedings: The "Inextricable Link" or "Clear Connection" Test 533

CHAPTER 39 Arguing Unsuccessfully That the Original Recommendations and Rulings Do Not Remain Operative Through Compliance Panels Proceedings Unless New Recommendations Are Issued by These Panels: The Case of FSC Subsidies 537

CHAPTER 40 Arguing Unsuccessfully That Similar Payments Made after the Original Proceedings Are Beyond the Scope of Article 21.5 541

xxi

Table of Contents

CHAPTER 41 Arguing Unsuccessfully Before an Article 21.5 Panel That, When an Article Covers Multiple Obligations, the Mere Listing of This Article in the Panel Request Is Sufficient for the Panel Request to Cover All These Obligations 545

CHAPTER 42 Attempting Unsuccessfully to Introduce in Compliance Proceedings a New Claim Relating to Unchanged Aspects of the Original Measure 549

CHAPTER 43 Arguing Successfully That If the Underlying Subsidy Has Ceased to Exist (And Therefore Has Been "Withdrawn" in a Passive Way), There Is No Additional Requirement, under Article 7.8 of the SCM, to Remove Any Lingering Effects That May Flow from That Subsidy 553

PART III Scanning Pending Legal Issues in the Context of Present Norms 555

A. Issues Recently Answered (At Least Partially) 557

CHAPTER 44 Confirming a Narrow Interpretation of the Concept of "Price or Income Support" 559

CHAPTER 45 GATT Article XX Exceptions Carried Forward to Violations of the SCM and the AoA? 563

CHAPTER 46 Double Counting Hypothesis for Non-market Economies: Recent Recognition by the Appellate Body of Its Possibility When Concurrent Countervailing Duties and Antidumping Duties Are Levied (The Case of Domestic Subsidies) 567

CHAPTER 47 Confirming the Prospective Nature of WTO Remedies 571

CHAPTER 48 Calculating the Ratio of Per Unit Subsidization in CVD Proceedings: Could the Denominator Include the Subsidy Recipient's Production Overseas? The US Washing Machines Jurisprudence 573

CHAPTER 49 Dual Pricing (Gas, Oil, Etc.): Not a Challengeable Subsidy Because the Specificity Criterion Is Probably Not Satisfied 577

xxii

Table of Contents

CHAPTER 50 Final Clarification on Why Article IIl:8(b) of GATT 1994 Does Not Shield Discriminatory Internal Taxes on Imported Products from the National Treatment Disciplines of Article III of GATT 1994 579

B. Issues Not Still Answered 585

CHAPTER 51 Is an Undervalued Exchange Rate System a De Facto Export Subsidy? 587 51.1 Financial Contribution: A Direct Transfer of Funds? 588 51.2 Benefit to the Recipient? 589 51.3 Contingency in Fact upon Export Performance? 590 51.4 Specificity 592

CHAPTER 52 Open Legal Questions Relating to Fisheries Subsidies under Present Norms 593 52.1 The Specificity Criterion: Are Subsidies Provided Across the Entire

Fishing Industry "Specific" or Is the Fisheries Sector "Too Broad?" 593 52.2 The Financial Contribution Criterion: Does the Failure of a

Government to Impose Adequate Fishing Charge or Taxation Constitute a Financial Contribution under the Form of a "Revenue Foregone" 595

52.3 Does Commercial Fishers' Access for Free to Fish Constitute a "Subsidy" in the Sense of Article 1 of the SCM? 596 52.3.1 Financial Contribution: Is There a Provision of Goods by a

Government? 596 52.3.2 Is This Provision of Goods Made for Less Than Adequate

Remuneration? 596 52.4 Is the Payment by a Government of Access Fees to Foreign Waters a

Specific Subsidy Benefitting Commercial Fleets under Its Jurisdiction? 597

CHAPTER 53 Carbon Dioxide Emissions 599 53.1 Could Fossil Fuel Producers Be Targeted under the SCM for Support

Received by Purchasers of Their Product? The Unnoticed Proex Doctrine 599

53.2 Free Carbon Dioxide Emission Permits: Are They Subsidies in the Sense of Article 1 of the SCM? 601 53.2.1 Scenario Where All Carbon Dioxide Emission Permits Are

Free 601 53.2.1.1 Is There a Financial Contribution? 601

53.2.1.1.1 Provision of a Good? No 601 53.2.1.1.2 A Direct Transfer of Funds?

Probably Not 602

xxiii

Table of Contents

53.2.1.1.3 A Revenue Foregone? Much Uncertainty

53.2.2 Scenario Where Free Emission Permits of Carbon Dioxide Are Granted Only to Certain Enterprises

CHAPTER 54 The Adequate Legal Approach to "Transnational Subsidies" (Also Called "Extended Subsidies")

CHAPTER 55 Fisheries Subsidies in the New Draft SCM: At Last a Recognition of the Concept of Environmentally Harmful Subsidies?

CHAPTER 56 The Paradox of the Absence of Complaints in the WTO Against Measures Taken in Export Processing Zones, Special Industrial Zones, or Free Trade Zones

CHAPTER 57 Would the US "Destination-Based Cash-Flow Tax" Be WTO Consistent? 57.1 Would the DBCFT Be Eligible to a BT A? 57.2 Does the DBCFT Contain a Component Discriminating Between

Imported and Domestic Products?

CHAPTER 58 Is a Carbon Tax Eligible to BT A?

Annex I

C. The Procedural and Evidentiary Strategy (of the Accused Subsidizing Member)

THE NON-CVD CONTEXT

CHAPTER 59 In Connection with the Panel Request 59.1 Arguing Successfully That Whether a Measure Is Sufficiently

Identified in the Panel Request Depends on the Extent to Which That Measure Is Specified in the Public Domain

59.2 Arguing Successfully That in Certain Circumstances an Instrument Included in the Request for Establishment of a Panel but Absent from the Request for Consultations Could Nevertheless Be a Measure At Issue and Therefore Part of the Panel's Mandate

59.3 Arguing Unsuccessfully That Expired Actionable Subsidies Cannot Be the Subject of a Panel Request

60

60

60

60«

61

61. 61

61

62

6z,

6*

6^

63

63

xxiv

Table of Contents

59.4 Arguing Unsuccessfully That the Accused Subsidizing Country Is Not under the Duty to Comply with the Panel's Request to Provide Information 634

59.5 "Future Measures:" Arguing Unsuccessfully That a Payment Made after the Date on Which the Panel Was Established Is Automatically Not Within the Panel's Terms of Reference 636

59.6 Confirming by the US - Coated Paper (Indonesia) Panel That Arguments Must Be Relevant to a Claim Properly Stated by the Complainant in the Panel Request: If Not, They Must Be Disregarded by the Panel 638

59.7 Alleging Unsuccessfully That the Complainants Were "Estopped" from Challenging Certain Elements of the EU Sugar Regime 640

CHAPTER 60 In Relation with Collection of Information 643 60.1 Getting Confirmation of the Principle That and Adverse Inference

May Be Drawn from Non-cooperation of a Party (Without Reasonable Ground) 643

60.2 Arguing Unsuccessfully That the Panel Was Not Obliged, under Article 13 of the DSU, to "Develop Information on Behalf of the Complaining Party" in Certain Particular Circumstances 644

60.3 US - Large Civil Aircraft (2nd Complaint): Proposing Unsuccessfully an Injury Period of Reference Different from the One Proposed by the Complaining Member 646

CHAPTER 61 Attempting Unsuccessfully to Produce Evidence Based on the Practice of Other Members 649

CHAPTER 62 Arguing Successfully That the Fact, That a Measure Induces the Exercise of Rights That Are WTO Consistent, Is Not a Valid Consideration in Deciding Whether Such Measure Is a Specific Action "Against" a Subsidy under Article 32.1 of the SCM 651

CVD CONTEXT

CHAPTER 63 Arguing Successfully That the SCM Leaves to Individual Members How to Determine in Their Internal Regime What Constitutes the Date of Initiation of a CVD Investigation 653

xxv

Table of Contents

CHAPTER 64 Arguing Unsuccessfully There Is a Requirement in Article 13.1 of the SCM to Allow Sufficient Time for Consultations to Be Held Before Initiation of the Investigation

CHAPTER 65 Invoking Successfully That a System of Limited Disclosure Provides a Derogation from, or Replaces, the Obligations of an Investigating Authority under (This) Article to Require Justification for Treatment of Information as Confidential and, If Such Treatment Is Justified, to Require Non-confidential Summaries of the Confidential Information, or, Alternatively, to Require Justification for the Non-summarization of Certain Information (Article 12.4.1 of the SCM) 661

CHAPTER 66 Invoking the Failure by the Investigative Authorities to Inform the Interested Members and Interested Parties of the "Essential Facts under Consideration Which Form the Basis for the Decision Whether to Apply Definitive Measures" 665

CHAPTER 67 Arguing Unsuccessfully That an Enterprise or Group of Enterprises (Fortuny in This Case) May Not Be Considered to Constitute a Domestic Industry If, at the Time the Application Is Filed or During the Subsidy POI, It or They Were Not Actually Producing Output 669

CHAPTER 68 Contesting Unsuccessfully the CVD Application Is "by or on Behalf of the Domestic Industry," Namely That Economla's Examination of the Degree of Support for the Application Was Inadequate 671

CHAPTER 69 Invoking Successfully a Bad Selection of the Injury Period of Analysis in the CVD Context 675

CHAPTER 70 Arguing Successfully That the Panel Failed to Apply the Proper Standard of Review 679

CHAPTER 71 Claiming Unsuccessfully That a Panel Is Justified to Exclude During Its Proceedings Evidence That, Although Contained in the Record of the CVD Investigation, Had Not Been Cited in the CVD's Decision 683

xxvi

Table of Contents

CHAPTER 72 Issues Relating to the Use of Adverse Facts Available 685 72.1 Claiming Unsuccessfully That the Missing Information Was Not

"Necessary" to Complete a Determination on Subsidization of the Product under Investigation 686

72.2 Claiming Unsuccessfully That the Facts Relied upon by the Investigative Authorities Did Not "Reasonably Replace" the Missing "Necessary Information" 687

72.3 Arguing Unsuccessfully Absence of Failure to Cooperate in Providing Necessary Information 688

72.4 Challenging Successfully the "Other Forms of Assistance-Adverse Facts Available Measure" as "Ongoing Conduct" Inconsistent with Article 12.7 of the SCM 690

CHAPTER 73 Claiming Unsuccessfully That the Investigative Authorities Should Have Made a Factual Inference from Evidence on the Record That Would Not Reasonably Have Suggested Such an Inference 695

CHAPTER 74 Arguing Successfully That the Panel Did Not Use the Expression "Probative and Compelling" in the Sense of a New Evidentiary Standard for Examining Evidence on the Record of a CVD Investigative Authority 699

CHAPTER 75 Failing to Counter US' Allegation That the Panel Appeared Not to Have Considered Seriously Any Evidence That Did Not Amount to a "Smoking Gun" (for Showing Entrustment or Direction) 701

CHAPTER 76 Arguing Successfully That in the Case of Non-recurring Subsidies, If the POI Used for Determining the Existence of a Subsidy Indicates That the Subsidy Benefit Will No Longer Exist at a Future Time When a CVD Is Imposed, Then This CVD Is Inconsistent with the SCM 705

CHAPTER 77 Requesting Successfully That the Panel Make Findings Regarding Expired Measures Which Ceased to Have Legal Effect 707

CHAPTER 78 Arguing Successfully That the Investigative Authorities Failed to Provide the "Results" of a Verification Visit in Violation of Article 12.6 of the SCM 709

xxvii

Table of Contents

Assrx II WTO Dispute Settlement Reports ami Aibitration Awauls as at 1 Man h

Index

Contact

xxviii