The Agreement on Subsidies and Countervailing Measures, commonly referred to as the SCM Agreement, is a key component of the World Trade Organization (WTO) framework. The SCM Agreement sets out the rules and procedures that govern how WTO members can respond to subsidies and other forms of government assistance that may be deemed harmful to international trade.

One of the primary objectives of the SCM Agreement is to prevent unfair trade practices that might distort international trade. This is achieved by establishing a framework for the investigation and resolution of disputes related to subsidies and other forms of government assistance. The text of the Agreement provides clear guidelines for how WTO members must respond to complaints brought by other member countries.

The SCM Agreement defines subsidies as financial contributions made by governments or public entities that confer a benefit on specific industries or companies. Subsidies come in many forms, including direct grants, loans, tax incentives, and price supports. The Agreement prohibits certain types of subsidies, including those that are contingent on export performance and those that cause injury to the domestic industries of other WTO members.

Countervailing measures are actions that WTO members can take in response to a perceived harm caused by a subsidy. These measures can include the imposition of import tariffs or the limitation of imports from the country providing the subsidy. The SCM Agreement sets out strict procedural requirements for the imposition of countervailing measures to ensure that they are applied fairly and consistently.

A key aspect of the SCM Agreement is its emphasis on transparency and notification. WTO members must report on all subsidies they provide to their domestic industries to ensure that they are not in violation of the Agreement. Members must also provide notification of any proposed changes to their subsidy programs to allow other members to assess their potential impact on international trade.

In summary, the SCM Agreement plays a critical role in regulating international trade by preventing unfair trade practices related to government subsidies. The text of the Agreement provides clear guidelines for how WTO members must respond to complaints related to subsidies and sets out procedures for the imposition of countervailing measures when necessary. By promoting transparency and notification, the Agreement helps to ensure that international trade remains fair and free from harm caused by subsidies.