SUMMARY
Summary: The Agreement on Subsidies and Countervailing Measures (ASCM) classifies subsidies, by analogy with traffic lights, into three categories- "red" or prohibited, "yellow" or actionable, and "green" or non-actionable- mainly on the basis of their propensity to distort trade. As a response to each category of subsidies the Agreement provides different remedies. This paper attempts to provide a better understanding of the ASCM in the interest of developing countries, which are often ill-equipped to make full use of the benefits accorded to them by the Agreement. The issues addressed include the scope and structure of the Agreement, categories of subsidies, the mechanisms for implementing countervailing measures and dispute settlement. In terms of binding disciplines on provision of subsidies, it should be noted that the ASCM applies only to industrial subsidies while agricultural subsidies are subject to provisions of the Agreement on Agriculture (AoA). However, reference is made to the latter, given the importance of agriculture and commodity-based national agricultural policies in developing countries. Reference is made, in addition, to notifications under the ASCM in order to help developing countries have a better understanding of the procedure for, and the nature of, the main types of notifications submitted to the Committee on Subsidies and Countervailing Measures (SCM Committee). Also discussed are suggestions for improvements to the Agreement that would be of interest to developing countries, and the debate on the outcome of the Seattle Ministerial Conference of the World Trade Organization (WTO) with respect to the relationship between subsidy elimination in developed countries and the "multifunctionality" of agriculture. [English only]
