The WTO Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) regulates the provisions of subsidies and provides rules for countervailing measures to offset the injury caused by subsidised imports. A Member of the WTO can impose countervailing measures provided it can show that there are subsidised imports, an injury to a domestic industry and a link between the subsidised import and the injury.
The EU works on improving WTO rules including the SCM Agreement to address negative effects of state intervention. In particular, the EU works on countering the negative effect of industrial subsidies on international trade. In early 2020, the Commission agreed with the US and Japan on ways to improve the WTO rules against harmful subsidies. The Commission’s new communication on the Trade Policy Review from February 2021 sets out further areas for improvement of WTO rules, i.e., potential new rules on market-distorting practices of state-owned enterprises.
The EU has also been at the forefront of discussions on a possible multilateral agreement on competition in the WTO. It sees competition policy as important for any well-functioning market economy, a tool to help development and an important potential lever promoting economic governance in the global trading system.
In 1996, the WTO created a working group on trade and competition. In 2001, when the “Doha round” of trade negotiations was launched (known as the Doha Development Agenda), it was decided that competition would be included.
However, no agreement on launching competition negotiations was reached at the WTO ministerial meeting at Cancun in 2003 and a subsequent WTO meeting in August 2004 decided not to pursue work on it in the Doha round. As things stand, therefore, all discussions on trade and competition within the WTO are currently suspended.