27 Export subsidies

The proliferation of export subsidies in the years leading to the Uruguay Round was one of the key issues that were addressed in the agricultural negotiations.

While under the GATT 1947 export subsidies for industrial products have been prohibited all along, in the case of agricultural primary products such subsidies were only subject to limited disciplines (Article XVI of GATT) which moreover did not prove to be operational.

The right to use export subsidies is now limited to four situations:

1. export subsidies subject to product-specific reduction commitments within the limits specified in the schedule of the WTO Member concerned;

2. any excess of budgetary outlays for export subsidies or subsidized export volume over the limits specified in the schedule which is covered by the “downstream flexibility” provision of Article 8.2(b) of the Agreement on Agriculture;

3. export subsidies consistent with the special and differential treatment provision for developing country Members (Article 9.4 of the Agreement); and

4. export subsidies other than those subject to reduction commitments provided that they are in conformity with the anti-circumvention disciplines of Article 10 of the Agreement on Agriculture.

Under the Agreement on Agriculture export subsidies are defined as referring to “subsidies contingent on export performance, including the export subsidies listed in detail in Article 9 of the Agreement”. This list covers most of the export subsidy practices which are prevalent in the agricultural sector

direct export subsidies contingent on export performance; sales of non-commercial stocks of agricultural products for export at prices lower than comparable prices for such goods on the domestic market; producer financed subsidies such as government programmes which require a levy on all production which is then used to subsidise the export of a certain portion of that production; cost reduction measures such as subsidies to reduce the cost of marketing goods for export: this can include upgrading and handling costs and the costs of international freight, for example; internal transport subsidies applying to exports only, such as those designed to bring exportable produce to one central point for shipping; and

subsidies on incorporated products, i.e. subsidies on agricultural products such as wheat contingent on their incorporation in export products such as biscuits.

All such export subsidies are subject to reduction commitments, expressed in terms of both the volume of subsidized exports and the budgetary outlays for these subsidies.

28. Discuss the nature of International investment agreements (iiAs) and the main types of iiAs

The definition of International Investment Agreement (IIA): a treaty between countries that addresses issues relevant to cross-border investments, usually for the purpose of protection, promotion and liberalization of such investments.

Most IIAs cover foreign direct investments (FDI) and portfolio investments.

Aims of conclusion of IIAs:

• protection of foreign investment;

• indirectly, for promotion of foreign investment;

• increasingly, for the purpose of liberalization of such investment.

IIAs offer companies and individuals from contracting parties increased security and certainty under international law when they invest or set up a business in other countries party to the agreement. The reduction of the investment risk flowing from an IIA is meant to encourage companies and individuals to invest in the country that concluded the IIA. Allowing foreign investors to settle disputes with the host country through international arbitration, rather than only the host country’s domestic courts, is an important aspect in this context.

Typical provisions found in BITs and PTIAs are clauses on the standards of protection and treatment of foreign investments, usually addressing issues such as fair and equitable treatment, full protection and security, national treatment, and most-favoured nation treatment. Provisions on compensation for losses incurred by foreign investors as a result of exploration or due to war and strife usually also form a core part of such agreements. Most IIAs additionally regulate the cross-border transfer of funds in connection with foreign investments.

Contrary to investment protection, provisions on investment promotion are rarely formally included in IIAs, and if so such provisions usually remain non-binding.

BITs and some PTIAs also include a provision on investor-State dispute settlement.

International taxation agreements deal primarily with the elimination of double taxation, but may in parallel address related issues such as the prevention of tax evasion.

The most common types of IIAs:

1. Bilateral Investment Treaties (BITs);

2. Preferential Trade and Investment Agreements (PTIAs);

3. International Taxation Agreements and Double Taxation Treaties (DTTs) are also considered as IIAs, as taxation commonly has an important impact on foreign investment.