Uzbekistan officials now familiar with WTO rules on subsidies
Uzbekistan’s officials received training on administering the rules on subsidization that are construed in two agreements of the World Trade Organization.
Earlier in 2022, the Government of Uzbekistan commenced the review of several pieces of legislation to align with the World Trade Organization’s (WTO) law as part of the country’s accession process to the organization. This work relates to the country’s domestic support and export promotion measures, with the assistance of the International Trade Centre (ITC).
The Ministry of Investments and Foreign Trade (MIFT) subsequently requested ITC to provide training for officials on the WTO rules on export subsidies in the context of these revisions. The training was organized with funding from the European Union, under ITC’s project ‘Facilitating the process of Uzbekistan's accession to the WTO’.
The subject area concerns the WTO rules on measures to support domestic production (or subsidies) as encompassed in its Subsidies and Countervailing Measures (SCM) Agreement and the Agreement on Agriculture. The former law contains rules about subsidies in the area of goods, while the latter regulates subsidies on agricultural products. The WTO has no rules on subsidies in the area of services trade.
Domestic support measures are generally considered to distort production and trade and are not favoured by most economists. However, subsidies as such are not prohibited by WTO rules, and WTO Members are permitted to use incentives, such as tax breaks or low-cost loans, to boost their economies.
Subsidies contingent to exports are banned
It is only when the subsidies are contingent upon export performance (so-called ‘export subsidies’), or when they encourage the use of domestic goods over imported ones (‘import substitution subsidies’), that they are prohibited by WTO law. This is because the WTO tries to level the playing field for economic operators in the area of trade. But even so, subsidies are only liable to attract a challenge if they cause actual harm to the interests of another WTO Member.
The injury could be construed either when there is prejudice against another WTO Member in the export market, or when the domestic industry of another WTO Member suffers harm because of the import of subsidized products.
With agricultural products, the rules are somewhat more complicated because agriculture is deemed a sensitive sector, because it deals with essential products (food), in which most countries aim to be self-sufficient, and second, because these goods are often expirable. There are therefore some exceptions from WTO law in the areas of agricultural support measures.
Support measures outside WTO ambit
Some support measures fall outside of the ambit of WTO rules, even though they may be deemed to advantage some countries’ produce in the export market. These include, for instance, public investment in infrastructure, such as roads and railways, or widely available advisory sales and marketing services provided by a government to boost exports.
When a country is challenged and its subsidies are found to have breached WTO law, it is obliged to withdraw the prohibited subsidy or remove the adverse effects. In the absence of relief, the WTO Member that had brought the case may impose countermeasures on the subsidized imports.
The ITC-organized training was held over two days – on 21 and 22 April 2022 – in Tashkent for representatives of the Ministry of Investments and Foreign Trade, as well as the Ministry of Economic Development and Poverty Reduction, the Ministry of Finance, the Export Promotion Agency, and the State Tax Committee.
The first day was dedicated to defining subsidies and types of subsidies and framing them in the context of the WTO’s SCM Agreement and the Agreement on Agriculture. The training also covered the terrain of export restrictions and import tariffs.
The second day was dedicated to the discussion of the 15 decrees of Uzbekistan on support measures and their compliance with WTO rules. Possible amendments that may be required to align these laws with WTO requirements were enumerated. Examples were also given of export support measures that clear the hurdles of WTO rules and that have been successfully implemented by some WTO Members.