International Control of Subsidies and Countervailing Duties

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Abstract
The range and number of cases of administered protection in the 1980s suggests that it has begun to play an important role in shaping international trade flows. As most of such cases are brought by the United States against developing country exporters, they are also a matter of concern for developing countries in the Uruguay Round of trade negotiations. The internationally negotiated code on subsidies and countervailing duties is ambiguous in its definition of “legal” subsidies, and thus in the appropriate use of countervailing duties. Because the code is applied at the national level, there is considerable pressure by domestic producers on administering agents to increase the use of such protective measures through the adoption of provisional measures while the investigation is being conducted, and through the interpretation of criteria for coverage. Given that the most successful developing countries have been those which adopt the most neutral policies toward imported and domestic goods, and between sectors domestically, the very biased application of the subsidies and the trade policy distortions common in the countries examined, together with the frequency of countervailing actions against the subsidies, suggest that developing countries would benefit from abandonment of the subsidies.

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