Subsidies in the context of the World Trade Organization

During the Uruguay Round (UR), regulations concerning subsidies were substantially modified. In the WTO three types of subsidies are distinguished: prohibited, actionable and non-actionable. The export subsidies are prohibited, while production subsidies are actionable, if they cause an injury to the domestic industry. The remaining subsidies are considered to be non-actionable. This categorization reflects standard theory: distortion in international trade caused by an export subsidy is stronger than that caused by a production one. The number of notifications of countervailing (CVD) duties is quite small, in comparison with A-D actions, and is decreasing after 1999. The countries most frequently targeted by CVD actions were: India, Republic of Korea, Italy, EC (as a whole) and Canada. The export subsidies in agricultural sector are permitted within the commitments undertaken during the UR. The total financial support provided to agriculture by OECD countries remains high. The liberalization proposals presented during preparations to a new WTO round differ significantly. Under so called « compromise » scenario, the liberalization of agricultural trade and reduction of subsidies may increase world welfare by US$ 13 billion. In the EU an increase in the consumer surplus might be accompanied with a significant reduction in producer surplus.