Definition of Subsidy. Subsidy shall be taken to mean:
Definition of Subsidy. XXXX 1994 talks about subsidies without developing a comprehensive definition of a subsidy. Article 1.1 of the ASCM defines a subsidy and spells out the elements that the concept covers. A subsidy is deemed to exist if there is a financial contribution by a government or any public body, or there is any form of income or price support and a benefit is thereby conferred. An important point to note is that there has to be both a financial contribution from government and the conferral of a benefit in order for a practice to be treated as a subsidy. The ASCM lists the actions and practices that constitute a transfer of economic resources by government and then gives some examples of these. A financial contribution may occur by means of a direct transfer of funds (e.g. grants, loans, and equity infusion), a potential transfer of funds or liabilities (e.g. loan guarantees), foregoing of government revenue that is otherwise due (e.g. fiscal incentives such as tax credits), or the provision of goods and services other than general infrastructure, or purchase of goods. A financial contribution by the government may also take the form of government making payments to a funding mechanism, or entrusting or directing a private body to carry out the type of functions listed above. To understand the notion of conferral of benefit one needs to refer to Article 14 of the ASCM, which provides guidelines for the calculation of the benefit conferred to the recipient pursuant to Article 1.1 in an investigation for the imposition of countervailing measures. Government provision of equity capital is not to be considered as conferring a benefit unless the investment decision can be regarded as inconsistent with the usual investment practice of private investors in the country. The provision of goods or services or purchase of goods by a government is not to be considered as conferring a benefit unless the provision is made for less than adequate remuneration, or the purchase is made for more than adequate remuneration. Similar guidelines apply to loans and loan guarantee provided by government. As the WTO panels have noted, Article 14 clearly establishes a commercial benchmark for determining whether there is a conferral of benefit. In US–Export Restraints, the panel observed: ‘In our view, the only logical basis for determining the position the recipient would have been in absent the financial contribution is the market. Accordingly, a financial contribution will only confer a ...
