Article: Are There ‘Exceptions’ to the SCM Agreement? Applicability of the GATT Exceptions Vis-à-Vis the International Rules on Subsidies

The Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) regulates the use of subsidies by Members of the World Trade Organization (‘WTO’) to prevent distortions of international trade. With the rise of new types of subsidies, however, the subsidies disciplines in the SCM Agreement are considered to be insufficient. More and more WTO Members invoke exceptions as demanded by the geopolitical imperatives to justify their measures, but the SCM Agreement itself does not contain any exceptions that remain effective as of today. The WTO’s general rules on subsidy can be found not only in the SCM Agreement but also in the General Agreement on Tariffs and Trade (‘GATT’). The exceptions set forth in Articles XX and XXI of the GATT (collectively, ‘GATT Exceptions’) can justify any breach of the GATT. The question would thus be: whether and to what extent the GATT Exceptions can justify a breach of the SCM Agreement. After briefly introducing debates over the applicability of the GATT Exceptions to the SCM Agreement, this paper observes the interpretative relationship between the GATT and the SCM Agreement. Thereafter, this paper proposes certain interpretative rules on the application of the GATT Exceptions vis-à-vis the SCM Agreement.