./.WORLD TRADE
ORGANIZATIONWT/GC/W/348
11 October 1999
(99-4255)
General Council Original:  English/
French
PREPARATIONS FOR THE 1999 MINISTERIAL CONFERENCE
Improved Disciplines and Remedies under the
Agreement on Subsidies and Countervailing Measures
Communication from Canada
The following communication, dated 1 October 1999, has been received from the Permanent
Mission of Canada.
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1. Disciplining the use of government subsidies is one of the key challenges facing WTO
Members in their efforts to reduce distortions to trade and investment and foster global competition on
the basis of comparative advantage.  The trade problems created by trade distorting agricultural
subsidies are well recognized by the WTO and there is a commitment to undertake comprehensive
negotiations towards the objective of improved disciplines.  The problem of subsidies is not, however,
restricted to the agricultural sector.  It is unfortunately a more general problem that has become
relatively more important as we make progress on reducing more overt trade barriers such as tariffs.
2. It is the natural inclination of governments to want to encourage economic activity and
employment within their borders.  However, wh en government intervention takes the form of
subsidies, price and cost factors may be altered resulting in distortions to trade and investment.  The
increasing globalization of production and marketing strategies can result in greater pressures on
governments to provide investment incentives and other forms of assistance which can then lead to
escalating subsidy practices.  If countries have to deal with this situation individually, they areunlikely to be able to respond to both domestic demands and to principles of international trade.  It is
largely for this reason that we must continue our efforts to strengthen and refine subsidy disciplines
and remedies by conducting negotiations under the Agreement on Subsidies and Countervailing
Measures (ASCM).
3. While considerable work remains to be done, the results of the Uruguay Round ASCM
provides us with a good base on which to build.  This Agreement achieved for the first time a
definition of subsidy, and established a framework of prohibited, actionable and non-actionable
subsidies which attempted to balance the need to discipline subsidies that distort trade with the right
of governments to address legitimate economic and environmental objectives. Significant gaps
remain, however, regarding the interpretation of the rights and obligations of members under ASCM.This is evident from dispute settlement cases involving subsidy practices.  We have seen the
divergence in interpretations, and a resulting divergence in practice.  In such circumstances, it is more
appropriate to address these deficiencies multilaterally rather than addressing them via dispute
settlement.  There must be a concerted effort to continue work on this Agreement so that
governments, and the private sector, have a clearer understanding of their international obligations.WT/GC/W/348
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4.  Moreover, despite the pressures resulting from global competition, many countries have
made progress in reducing subsidies as a consequence of their broader efforts to achieve fiscal
stability.  This has occurred to varying degrees in both developed and developing countries. This trend
offers contracting parties an opportunity to reinforce and further this trend through greater
commitment to subsidy disciplines in the context of the ASCM.
5. Negotiations on the ASCM should focus on building on the framework we have developed.
In this regard the renewal of Article 6.1 on deemed serious prejudice and Article 8 respecting non-
actionable subsidies are essential to the structure of the Agreement.  If we begin a negotiation without
first agreeing to the renewal of these provisions, we will impair our ability to make progress.  These
provisions offer a balance that provides for the acceptance of disciplines.
6. Article 6.1 is important in our efforts to give practical effect to the concept of adverse effects.
This provision strengthens the ability of exporting countries to address the adverse effects caused bydomestic subsidies that displace imports or exports to third countries.  This multilateral approach to
remedy the impact of subsidies is a critical provision that must be maintained and further refined.  The
non-actionable categories under Article 8 are also equally important.  It is understandable that
governments are hesitant to agree to international ru les that restrain their ability to react to important
economic and environmental concerns.  Article 8, however, recognizes that certain support practicesare legitimate and unlikely to cause trade distortions.  If this Article were allowed to expire, the ability
to make further progress on the overall issue of disciplines would be seriously impaired.
7. Negotiations should also seek to address a number of sectoral issues in areas such as  aircraft,
shipbuilding and fisheries.  These sectoral issues are best addressed in a comprehensive effort to
improve subsidy disciplines under the ASCM.  Likewise, there is a need to take into account thecrosswalks between generic subsidy disciplines a nd rules for subsidies in mandated negotiations on
agriculture and possibly services.
8. In approaching a negotiation on subsidies, special efforts must be made to ensure a balanced
review.  In this regard, the legitimate needs of developing countries need to be examined.  As well,
there is a need to ensure that subsidy disciplines and remedies apply equitably between countriesregardless of market size and export orientation.
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