Upstream Subsidy Rules And Its Implications For China

On August14,2009, despite the fact that there was no provision about upstream subsidies in Countervailing Regulation of the People’s Republic of China and its supporting regulations, the Ministry of Commerce of China firstly applied upstream subsidy rules to the countervailing investigation about chicken products from America, set a precedent for our government’s reference to foreign legal rules in trade adjustment practices.An upstream subsidy is a domestic subsidy provided to the producer of an input used in manufacturing the "downstream" merchandise which becomes the subject of a countervailing duty investigation. The concept of upstream subsidy broadens the definition and criteria of subsidy, and widens the value of countervailing subsidy to factors of production, which expands the scope of application of counter-subsidy investigation. Objectively, an upstream subsidy can reduce the cost of producing or manufacturing the merchandise, bestow a competitive benefit on merchandise, and result in an injury to the like industry of the importing country. As a result, it is an unavoidable trend to regulate upstream subsidies in the international countervailing rules and countervailing systems of all countries.In this paper, the author uses a combination of research methods, especially historical analysis, case study and logical analysis. Firstly the author reviews and combs the development of US legislation and practice about upstream subsidy rules, and then analyzes and concludes the points of upstream subsidy rules. Then, combining relevant cases about upstream subsidy in GATT/WTO, the author makes specific analysis on the judicial gist to capture DSB’s view on the upstream subsidy rules. Thirdly, the author learns from the subjects about upstream subsidy in the Doha Round negotiation to master the trend to regulate upstream subsidies. Finally, the author offers some suggestions on both international and domestic practice, to provide a frame of reference to form a clear strategy to protect our interests in the countervailing practice.