Privatization-related Subsidies under SCM Agreement:Focusing on Subsidies Countervailed by the United States

There have been growing interests among the WTO member countries in the issue whether it is reasonable under WTO subsidy rules to impose countervailing duties on those goods imported from the privatized company based on the pre-privatization subsidies, even when the company was privatized at arm's length. This paper suggests the proposal for more reasonable interpretations and application of the SCM Agreement to avoid the abuse of the countervailing measures under the current WTO Agreement. For the applicable suggestion, it reviews the problems exposed through the enforcement of the United States subsidy-relating policy and irrational methodology in treating with the privatization-related subsidies, and the WTO's judicial decisions on them. With regard to the privatization-related issues, the United States attempted to impose countervailing measures on products imported from privatized companies, for which the U.S. made amendment to the countervailing duties law and tried to apply various methodologies in the countervailing investigation. Such efforts of the U.S., however, were criticized severely by the trading partner countries and also judged to be in breach of the SCM provisions of the WTO. The United States laws and the Department of Commerce's enforcement would impede the effect of the several salient U.S. trade policies and threaten the credibility in its efforts to pursue a trade policy toward liberalization and open markets. Such an approach would be harmful to the U.S. consumers and industry, foreign industries, and free trade in general. Since the United States has maintained ideological and pragmatic interests in promoting privatization in the word markets, its legislative and administrative approach to the privatization-related subsidies should conceptually be reframed to be well-grounded in economic principles, and compatible with the U.S. trade policy goals and, at the same time, the WTO spirit and principles.