The Furniture Sector in Pakistan: Export performance and ... - TRTA i

The agreement deals with the following two types of subsidies:
• Prohibited subsidies: Requiring recipients of subsidies to achieve certain exports
targets, or to use domestic goods instead of imported goods in their manufacture. Such
subsidies (trade distorting) can be challenged in the WTO’s dispute settlement
mechanism. In case, it is found that the prohibited subsidies have been given, the
respondent country will be ordered to withdraw those immediately. In case the
respondent fails to comply, the complaining country can levy countervailing duty on
such subsidized products after following the prescribed procedure.
• Actionable subsidies: This category is less objectionable than “prohibited subsides”.
Here a complaining country has to demonstrate that the subsidy has an adverse effect on
its interests. The agreement defines three types of damage that can be caused by this
class of subsidies (i) Domestic industry of the importing country is being hurt (ii) Rival
exporters from another country may be hurt when the two compete in third markets (iii)
Domestic subsidies in one country can hurt exporters trying to compete in the
subsidizing countries’ domestic market.
• Exception: Subsidies given by LDCs/developing countries with GNPs of less than
US$1000 per capita per year are exempted from subsidy regime.
Relevance of the furniture sector
Imports into Pakistan
In case prohibited and actionable subsidies are given to promote export of the furniture,
affected interests in Pakistan can request the National Tariff Commission to impose
countervailing duties.
Exports from Pakistan
On the other hand if allegations are made by importing country about subsidies (trade
distorting) on the part of Pakistan, this agreement provides the exporter with wherewithal to
show that countervailing duty should not be imposed. Should the matter require reference to
the WTO, the Ministry of Commerce would have to be approached.
(Action: Furniture industry and GOP)
Agreement on safeguards
This agreement disciplines initiation of emergency safeguards measures by laying down
requirements for safeguard investigations. These have to be transparent as well as oblige the
Member countries to follow established rules and practices. The criteria for serious injury
caused or threatened to be caused has been also laid down. The agreement also sets time limit
on all safeguard actions (4 years) and addresses “grey area”, measures by providing that the
members must not seek/take or maintain any voluntary export restraints, orderly marketing
arrangements or any other similar measures. An import “surge” that triggers action under this
agreement is defined it to be a real increase in imports i.e. an absolute increase or an increase
in the import share of a shrinking market (even if the import quantity has not increased).
68 International Trade Centre