Defining subsidies

At the origins of the GATT , little attention was given to the trade impact of subsidies. However, contracting parties soon appreciated the need to deal with subsidies in order to secure the value of their agreed tariff concessions. A country can undermine its market access commitments by providing subsidies to import-competing industries. In addition, subsidies given to competing exporters in third countries can divert trade away from a country that had relied on negotiated market access to another market. These concerns led to the development of more stringent disciplines on subsidies than those initially provided for under the GATT (1947). A major step was the negotiation of the plurilateral “Subsidies Code” during the Tokyo Round and, thereafter, of the WTO Agreement on Subsidies and Countervailing Measures (SCM) and the Agreement on Agriculture (AoA).