Study On The Issue Of Third-Country Subsidies Under The Reform Of WTO Countervailing Rules

With the transition from the globalization of products to the globalization of production processes and the closer integration of national industrial chains,the discussion on subsidies is no longer limited within domestic subsidies.In recent years,third-country subsidies,in which a government subsidizes a firm outside its territory,have become a new focus.Especially China is prompting the “Belt and Road Initiative”,and its investment and cooperation in building special economic and trade zones in countries along the route have been challenged by western countries.The European Commission made an affirmative final ruling on the countervailing investigation of glass fiber fabrics originating from China and Egypt,which is also the first case issued on third-country subsidy.After the case,the European Commission and the U.S.kept proposing or trying new approaches on regulating third-country subsidies.However,China is not the only country who plays the role of “third-country”,and at a time when the epidemic is impacting the old international economic and trade rules as well as the WTO countervailing rules need to be reformed,third-country subsidy is a global issue with wide implications.Therefore,this article aims at discussing whether the issue of third-country subsidy can be solved under the existing WTO rules and the legitimacy of the solution adopted by the EU,through the study of the fiberglass case,and to give suggestions on the awareness of member states on this new type of subsidies,the short-term policy dialogue and the long-term reform solution to WTO countervailing rules.This article involves three main parts.Chapter one,mainly raises the legal issue of third-country subsidy and shows the trend from domestic subsidy to transnational subsidy.Then it outlines the definition,characteristics of third-country subsidy by analyzing the representative case,the Glass Fabrics Case,and illustrates the relevant legislation in Europe and the U.S.recently.Chapter two,aims at demonstrating whether the SCM Agreement provides any remedy for member countries and whether there is any WTO law basis for the use of unilateral measures of the EU.Firstly,this part concludes the related WTO rules on the third-country subsidy.Then,this part concludes that the third-country subsidies are consistent with the definition of subsidies under the SCM Agreement by analyzing Article 1.1 of the SCM Agreement.However,through analyzing the “specificity” of Article 1.2,Article 2.1 and Article 2.2,it turns out that third-country subsidy do not constitute the actionable subsidy under the SCM Agreement.The requirement of specificity can only be given up when the third-country subsidy meets the prohibited subsidies under Article 3.Combined with Part V and Article 32.1 of the SCM Agreement,it is concluded that member countries cannot take unilateral or multilateral measures against third-country subsidies under the SCM Agreement.Subsequently,analyzes if the unilateral measures taken by the Commission be consistent with National Treatment Obligation and MFN Obligation.Besides,this part also discusses the justifications under the General Exceptions in the GATT and GATs.Finally,it is concluded that there is no WTO law basis for unilateral measures against third-country subsidies which is already taken by EU.Chapter three,aims at underlying causes of the third-country subsidies,and to synthesize the arguments in the whole article to give an understanding of the third-country subsidies and to suggest solutions to the problem in the light of the reform of WTO countervailing rules.Firstly,this part analyzes the different risks that various kinds of countries faced and tries to find the reason,namely,the impact of the new crown epidemic has tightened the trade policies of countries.Then,it is further argued that the divergent understanding of countervailing rules and the different development needs of countries have led to the different options of member countries upon third-country subsidies.Finally,this paper proposes the solution.On the one hand,the purpose of the SCM Agreement is to unify the understanding of member countries on the substance of third-country subsidies,and to clarify that the principle of dealing with third-country subsidies should be to allow and protect development while restraining subsidies.On the other hand,the specific solution measures should be taken in steps,building trust through short-term policy dialogue and completing the reconstruction of rules through long-term reform.Finally,this part tries to present China’s solution in solving the problem and the specific ways to join in the WTO countervailing rules reform,mainly contains clarifying the core definition and the scope of each element in determining the third-country subsidy issue.Then enhance the compliance review of the subsidy and the restoration of non-actionable subsidies.