Subsidies Code

Summary of Subsidies Code

A multilateral agreement arising out of the Tokyo Round of trade negotiations sponsored by the General Agreement on Tariffs and Trade (read about the GATT for further details), or GATT. The code, also known as the Agreement on Subsidies and Countervailing Measures, seeks to reduce the distortive effects of export subsidies on world trade. Under the Subsidies Code bounties are given to stimulate exports, and subsidies are given, without regard to export activity, to advance purely domestic objectives; export subsidies on nonprimary products and primary mineral products are prohibited. Purely domestic subsidies are permitted, so long as they do not adversely affect the industries of other countries. Limited exemptions are permitted for developing countries.

The code established an enforcement mechanism whereby an aggrieved nation may impose countervailing measures to protect its injured industries; this vehicle may be employed after a finding by GATT that domestic industries are being materially injured by subsidized exports. The code also authorizes the use of GATT facilities for mediation of disputes by a committee of signatories, which may impose multilateral retaliation against a subsidizing nation to enforce compliance.

The code was adopted by the United States under the Trade Agreements Act of 1979.

(Main Author: William J. Miller)

Subsidies Code and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Subsidies Code: Formally known as the Agreement on the Interpretation and Application of Articles VI, XVI, and XXIII of the GATT. A Tokyo Round agreement designed to strengthen GATT rules relating to export subsidies and countervailing duties, and to reduce the distortive effects of subsidies on world trade (see GA1T Codes). The Code prohibits industrial-country signatories from using export subsidies for t manufactured and semi-manufactured goods, and attempts to regulate signatories’ use of domestic subsidies that have adverse effects on the economies of trading partners. In addition, signatory countries are required to provide details of their countervailing duty legislation, and of actions taken pursuant to that legislation, to the GATT Committee on Subsidies and Countervailing Measures. Signatories include Australia, Austria, Brazil, Canada, Chile, Colombia, Egypt, the European Community, Finland, Hong Kong, India, Indonesia, Israel, Japan, Korea, New Zealand, Norway, Pakistan, Philippines, Poland, Sweden, Switzerland, Turkey, the United States, and Uruguay.