The [Uruguay Round Agreement on Subsidies and Countervailing Measures] provides a definition of subsidy - as a trade defence measure - that establishes the types of practices covered by WTO obligations. It expanded the illustrative list of prohibited practices, strengthened the disciplines on domestic subsidies, and created a new category of non-actionable subsidies granted for specified purposes that do not cause serious adverse trade effects. The agreement also required most developing country members of the WTO to adhere to the subsidy obligations after a transition period. In essence, the agreement comprised a basic trade-off: stronger disciplines on export and domestic subsides and in return allowance for certain "desirable" subsidies that support R & D, pollution control investment, etc not targeted at specific industries. Although it created the potential for expanding subsidies in these categories, it contained safeguards to prevent this potential abuse.
In the period before and after the [Uruguay Round], many developing countries have acquired and increasingly utilised contingent protection measures themselves. The net economic welfare impact will be negative, and the social impact may be more evident than in developed countries as poor consumers are confronted by higher prices. The imbalance in power and resources needed to make use of the trade defence mechanisms means that developing countries will be more severely affected by developed country measures taken against their exports than would be the case when developing countries initiate measures against develop country import products.
There are potential economic gains to both the EU and developing countries if the trade defence instruments become more effectively circumscribed by WTO rules. Without further strengthening of the rules in the new round, there may be a further growth in the incidence of contingent protection measures, with consequential damaging impact on the growth in global economic welfare.
2. Given that previous attempts to constrain trade defence instruments have not been very effective in preventing the increased use of contingent protection measures by industrial countries and their spread to developing countries, it may be realistic to expect further growth in the use of "unfair"(defensive or offensive) trade measures.
3. The EU is currently one of the major users of anti-dumping (AD) measures.
4. Global economic welfare of trade is reduced as a result of trade defence instruments being used to constraint international trade.