Defensive Mechanisms and Trade Remedies: The Countervailing Code Under the WTO

Abstract

Abstract: In the globalized order of development, the economic and legal systems are heavily influenced by interpretative (and enforcement) trends in the leading international organizations. With the establishment of the World Trade Organization (WTO) in 1995, intetnationallaw and enforcement mechanisms have taken a finn direction based on principles of 'rule of law'. The WTO stands for not only 'free trade', but also, more importantly for 'fair trade'. The legitimate and successful working of the wro rules and procedures is imperative for ensuring there is fairness in international trade, and thereby, enable increased cooperation among nations. Else, the current trends towards greater levels of 'protectionism' would divert the goals of development away from the objectives of achieving equitable growth across especially the least-developed nations, with full employment and better standards of living. In this regard, there is a gap in the understanding of the international legal regime that governs the working of the identified defensive measures and their implications. The General Agreement on Tariffs and Trade (GA Tl) 1947, incorporated defensive measures which gradually evolved to become stronger so as to preclude distortions in the conduct of free and fair global trade. However, presently, the very same provisions are being challenged for misuse towards achieving self-centered ends by different Member States. Even divorced from the possible political and economic compulsions for the abuse of these measures, the apparent lack of legal certainty in the application of these measures has compounded the situation further. One of the fundamental economic principles upon which the trading system is based is that trade flows should be determined by comparative advantage and market forces, not governmental interventions, such as subsidies. In recognition of this principle, Members have over time conunitted to increasingly stringent and mutually beneficial rules on the provision of subsidies. Historically too,a pragmatic approach has been taken by Members over the course of successive negotiating rounds to improving subsidies disciplines by prioritizing the elimination of the most explicit categories of subsidies, such as export subsidies and import-substitution subsidies, while further clarifying and strengthening the disciplines for countering the adverse trade effects that other subsidies could cause. In pursuance of the concerned problem and the objectives identified, this research study has sought to explain the discipline of trade remedies and the working of defensive mechanisms through a thorough analysis of the Agreement on Subsidies and Countervailing Measures and the relevant decisions of the Dispute Setdement Body of the wro with a special emphasis on the interests of the emerging economies, including India. Given that the legal regime of agricultural subsidies is not fully agreed and accepted under the wro, this study is based on the use of 'industrial subsidies' and their legal implications under the framework of\VTO. TIlls study is seeking to put forth the per.spective of an emerging economy like India, which is seeking to re-balance the global economy and enable the equitable growth across nations. This study concludes that the wro framework of rules indeed provide a democratic, equitable and enforceable mechanism to achieve 'fair trade' across nations.