The World Trade Organization`s (WTO) Subsidies and Countervailing Measures (SCM) Agreement is one of the most important agreements for international trade. It regulates how countries can provide subsidies to their industries and what measures other countries can take if they believe these subsidies cause harm.

The SCM agreement defines a subsidy as any financial contribution by a government or public body that confers a benefit on a specific industry or enterprise. Subsidies can take many forms, such as loans, grants, tax breaks, or government guarantees. The agreement aims to prevent subsidies that distort international trade and create unfair advantages for certain industries or countries.

The SCM agreement sets out several rules for how countries can provide subsidies. For example, a subsidy must be “specific” to a particular industry or enterprise, meaning it cannot be available to all industries or all companies in a sector. A subsidy cannot be contingent on export performance, meaning it cannot be tied to the recipient`s ability to export goods. And a subsidy must not cause “serious prejudice” to the interests of other WTO members, meaning it cannot significantly harm the trade interests of other countries.

If a country believes that another country`s subsidies are causing harm to its industries, it can take “countervailing measures” to level the playing field. These measures can include imposing tariffs on imported goods from the subsidizing country or imposing quotas on how much of a particular product can be imported. However, a country must first prove to the WTO that the subsidies are causing harm before it can take countervailing measures, and it must follow certain procedural and evidentiary requirements.

In recent years, the SCM agreement has been a contentious issue in many trade disputes. Some countries argue that certain subsidies, such as those for renewable energy or small businesses, should be exempt from the agreement`s rules. Others argue that the agreement does not go far enough in addressing the problem of subsidies, particularly from China.

Overall, the SCM agreement is a crucial tool for ensuring fair and open trade among WTO members. It helps prevent distortions in the global economy caused by unfair subsidies, while also providing a framework for resolving disputes when they arise. As international trade continues to evolve, the rules of the SCM agreement will likely continue to be refined and updated to address new challenges and opportunities.