The immunity of countries listed in Annex VII to the WTO export subsidy ban ceases as soon as the export competitiveness of a subsidised product in world trade in that product has reached 3.25 per cent for two consecutive calendar years; in this case, the associated export subsidy must be phased out over an eight-year period.111 Although the definition of a “subsidy” under the WTO regime is broadly similar to that of “state aid” under EU law, EU rules are much stricter than WTO rules on subsidies. The main differences are that SEZs must avoid prohibited subsidies. However, if such subsidies already exist, they should be removed or converted into actionable subsidies by removing related export or local content requirements. For example, prior to joining the WTO, Kazakhstan removed the eligibility criteria for export orientation and import substitution from its SEZ rules.90 When Vietnam joined the WTO, it assured that companies in its export zones were no longer obliged to export their production and “would only be entitled to incentives in the form of, including the facilitation of procedures related to the investment and leasing of land and premises, as well as the Facilitating the supply and training of workers and the supply of water, electricity and other public services”.91 Specificity. However, assuming that a measure constitutes a subsidy within the meaning of the SCM Agreement, it is subject to the subsidy agreement only if it has been expressly granted to an undertaking or industry or to a group of undertakings or sectors. The basic principle is that a subsidy that distorts the allocation of resources within an economy must be disciplined. If a subsidy is prevalent in an economy, it is assumed that such a distortion does not occur in the allocation of resources. Therefore, only specific grants are subject to the disciplines of the SCM Agreement. There are four types of specificities within the meaning of the grant agreement: Table 1 provides some examples of research on SEA measures taken by Iran, India, China, Korea, Turkey, the United Arab Emirates (UAE), Vietnam, Pakistan and Oman.

There, the incentives examined took the form of preferential levies, financial support and the supply of goods, the majority of which were considered countervailable subsidies. Since national authorities are subject to judicial review by the WTO,32 the findings on subsidies under the SCM Agreement are not necessarily legally correct. However, these and other relevant domestic cases – which exceed the number of WTO subsidy disputes with SEZs – deserve special attention as they complement WTO disputes by providing a more complete picture of global anti-subsidy practice with the resulting impact on SEZ policy. While WTO disputes generally aim to prohibit controversial subsidies, countervailing duty investigations aim to offset the injury suffered by the domestic industry by subsidised imports, rather than to end foreign subsidies per se. However, such multilateral and national pathways can often lead targeted governments to reconsider controversial parts of their SEZ policies in order to resolve and/or avoid trade conflicts.33 SN6775 EU state aid and WTO rules on subsidies (705 KB, PDF) In this context, and given the enormous diversity of SEZs and associated national systems, this article looked at various options. instead of a “one-size-fits-all” solution to maintain the benefits of the SEZ in a WTO-consistent manner. As a general conclusion to this end, host members should use multilateral legal flexibilities for subsidies, avoid (or reform) prohibited subsidies, and support enterprises in the area through non-subsidizing measures or maximum subsidies that can be implemented. The Agreement on Subsidies and Countervailing Measures (SCM Agreement) deals with two distinct but closely related issues: multilateral disciplines governing the granting of subsidies and the application of countervailing measures to compensate for injury caused by subsidised imports. . . .