Tóm tắt english

Therefore, comprehensive studying of WTO subsidy law to fulfill obligations and to take full advantage of all the entitlements from the largest free trade body to develop an effective na

MINISTRY OF EDUCATION AND TRAINING MINISTRY OF JUSTICE

HANOI LAW UNIVERSITY

NGUYEN QUYNH TRANG

SUBSIDY LAW FOR DEVELOPING COUNTRIES UNDER WTO

REGULATIONS – LESSONS FOR VIET NAM

Speciality: International Law Ref Cod No.: 9 380108

SUMMARY OF DOCTOR DISSERTATION

HÀ NỘI – 2018

INTRODUCTION

1 Urgency of study of the topic

In the context of free trade, WTO members must gradually reduce and eliminate government interventions towards trade restriction and equity Accordingly, government subsidies for domestic production must be reduced and eliminated This concept is embodied in various WTO Agreements and is binding on all members of the organization For developing countries, however, free trade may pose enormous challenges and difficulties that could cause serious damages to the domestic production and national economy Where subsidies are eliminated, products and enterprises in developing countries will encounter difficulties in competing with those from developed ones It is also recognized by WTO members that countries with economies that are just capable of ensuring a low standard of living and are in the early stages of development may need protectionist measures or instruments to affect imports, and, as long as the implementation of economic development goals to create more favorable conditions, the application of such measures is still true Subsidy is also recognized by WTO members as playing an important role in the development of developing countries

For Viet Nam, Resolution No.08/NQ-TW issued on February 5th, 2007 by the 10th

Party Central Committee on “A number of major policies and guidelines for quick and sustainable development of the economy when Vietnam becomes a member of the World

Trade Organization", in addition to recognizing opportunities "to expand export

markets", "to promote economic development", and "enhance national status", also

pointed out several challenges that "Vietnam's products and enterprises will have to

compete with foreign products and enterprises not only in the world market but also in the domestic arena" while "a number of enterprise my go bankrupt, and unemployment can rise" Facing the challenges and difficulties that a developing and vulnerable

economy may encounter, Resolution 22/NQ-TW issued on April 10th, 2013 by the 11th

Party Central Committee on "International integration" set out the orientation: "to

actively develop and implement measures to protect legitimate interests of the State, enterprises, and consumers in the country" The Government may protect the interests of

the enterprises by combining various measures such as application of tariff measures, non-tariff measures, and subsidies Protecting corporate interests through subsidy programs, however, is the most effective measure to achieve both short-term and long-term goals The policies "to eliminate subsidies under the commitment schedule and to supplement appropriate forms of subsidies in line with World Trade Organization regulations" also specified in Resolution No.08/NQ-TW

Nevertheless, the reality of international economic integration in Vietnam is

considered as "not closely linked to the need to improve the quality, efficiency, and

sustainability of economic development" Vietnam's subsidy law has not been effective

and failed to generate momentum for the development of the domestic production Even many enterprises cannot access the Government’s subsidies On the other hand, the practice of WTO anti-subsidy disputes shows that subsidies are applied in all members, from developing countries to developed ones In the context of increasingly complicated and fierce competition, the demand for subsidies from domestic producers is very high Formulation of appropriate national subsidy legislation policies for the purpose of protecting and enhancing the competitiveness of newly-formed industries and strategic industries while ensuring the goal of free trade is a challenge for the Government of Vietnam

Joining the WTO on January 11th, 2007, Vietnam officially became the 150th

member and had full rights and obligations of a developing member Vietnam is obliged

to comply with WTO rules on subsidy cuts and is also has entitled to receive special and differential treatment in subsidy provisions for developing countries Therefore, comprehensive studying of WTO subsidy law to fulfill obligations and to take full advantage of all the entitlements from the largest free trade body to develop an effective national legal system on subsidies and to create driving force for economic development

is an indispensable requirement of all developing countries in general and Vietnam in particular

On the basis of argument, implementation of the Party's guidelines, actual demand for subsidies of the domestic production, current status of subsidy policies of Vietnam,

the study of the topic on "Subsidy law for Developing Countries under WTO Regulations

- Lessons for Viet Nam" is of paramount importance both in theory and practice

2 Subjects of study and scope of study of the thesis

The subjects of the thesis include: WTO’s views on subsidies and the application

of subsidy legislation to developing members; views on the nature and impact of subsidies on international trade; WTO’s current regulations on subsidies for developing members; subsidy laws of China, Brazil, and the United States; and commitment and actual status of subsidy law in Vietnam

When studying "subsidy law," the study content will cover two issues, including the law on government subsidies for the domestic production and anti-subsidy law on subsidized import goods This is quite a large content The thesis focuses on studying low

on government subsidies for domestic production with a view to proposing the development and improvement of Vietnam’s subsidy law in the context that the Government accompanies with enterprises with subsidies targeted to cutting-edge industries as well as start-ups and small and medium enterprises vulnerable to international trade competition Studying anti-subsidy law is also important, but in the context of a thesis, doctoral candidates conduct study of anti-subsidy law on subsidized imports in order to clarify how can unfair subsidy can be countered in the WTO More details of anti-subsidy law will be included in the post-thesis studies

Within the scope of the thesis, the author has mentioned various types of WTO legal sources, but only current WTO regulations on subsidies embodied in agreements and conventions among members have been focused on It is the first and most important source of WTO subsidy law applied to govern when a subsidy measure is brought to a WTO dispute settlement body The thesis also uses case laws to clarify current WTO regulations without investigating any individual one Other WTO legal sources will not

be studied in the thesis

The thesis also focuses on analyzing the subsidy law of from China, Brazil, and the United States The reason for choosing these three members is that China and Brazil

are developing countries in Asia and Latin America China represents the members that have transition economies studying the commitments and legal policies for subsidies of China gives us lessons on the elimination or use of subsidies in a country where enterprises used to rely heavily on the state Meanwhile, Brazil represents the developing countries that joined WTO from the very beginning and have attained strong development achievements At the same time, the United States represents the developed economies and importing countries where several anti-subsidy measures have been applied All three chosen countries have relatively diverse disputes on subsidy in WTO Therefore, the selection of China, Brazil, and the United States will help the thesis focus

on the specific analysis of valuable experience in developing and finalizing Vietnam's subsidy policies towards economic development

3 Study methodology

To clarify the studying issues, the thesis uses a combination of various scientific study methods such as: (1) Synthesis and analysis, mainly used in many study contents of the thesis and applied in assessment of studies on subsidies, and examination of practical disputes on subsidies within WTO and in a number of member countries, Viet Nam's commitment on subsidy, and other contents; (2) Statistics, applied in studying subsidy disputes among selected members and practical data on subsidies, and; (3) Comparison and contrast, applied in studying subsidy law in member countries in relation to WTO regulations on subsidy The study methods are based on the dialectical materialist and historical materialist methodology of Marxism-Leninism, the Communist Party of Vietnam’s views and guidelines on politics and economics, culture, and society In particular, the approach to combining theory and practice is used throughout the thesis, especially in studying WTO regulations on subsidy concept, benefit concept, subsidy margin, anti-subsidy taxes, and special and differential preferences for developing

countries The thesis also uses the case study method to study the subsidy disputes

4 Purpose and task of study

The purpose of the thesis is to clarify the rationale and content of WTO regulations on subsidy applicable to developing countries in a systematic and

comprehensive manner The thesis also aims at clarifying the subsidy law of China, Brazil, and the United States under the coverage of WTO regulations on subsidy On that basis, the thesis targets to drawing lessons and making recommendations for development

and finalization of the subsidy law of Vietnam

To achieve such goals, the thesis sets out the tasks of study as follows:

- Analyze and clarify the theoretical issues and contents of WTO regulations on subsidy applicable to developing countries

- Analyze and clarify views and trends on application and maintenance of subsidy

in developing countries

- Analyze and clarify policy commitments and law of China, Brazil, and the United States and, at the same time, analyze the practicality of a number of subsidy disputes related to these members to further clarify the compatibility of national subsidy

law and WTO regulations on subsidy

- Analyze and assessment the current status of the legal policy on subsidy in

Vietnam from time to time with focus on the current legal policies

- Analyze the lessons learned from the aforementioned studies in development and

finalization of the subsidy law in Vietnam

- Make specific proposals on finalization of the subsidy law in Vietnam in order to enhance the competitiveness of Vietnamese products and enterprises, thereby boosting

the economy

New study results of the thesis

The thesis has new theoretical and practical contributions as follows:

- Contribute to clarifying WTO subsidy argumentation problems, of which the thesis analyzes and assesses each component of subsidy, and perspectives and ideologies

on application and maintenance of subsidy in different schools of thought

- Contribute to clarifying WTO regulations on subsidy special treatment for

developing countries as well as the development process and trends of such regulations

- Analyze and draw in-depth lessons and make recommendations in finalizing the national subsidy law towards enhancing the competitiveness of Vietnamese products and

enterprises;

- Analyze and make appropriate recommendations for Vietnamese enterprises in

accessing to and taking advantage of Vietnam's subsidy law

- Analyze and make appropriate recommendations for Vietnam to integrate more

actively and effectively in term of subsidy issue

5 Structure of the thesis

The thesis includes the introduction, contents, conclusions, and list of references and annexes The contents of the thesis is divided into four chapters attached with sub-

conclusion of each chapter, specifically as follows:

Chapter 1: Overview on study situation related to the thesis;

Chapter 2: WTO fundamental legal theories on subsidy for developing countries;

Chapter 3: Practices of WTO subsidy law for developing countries and practices

of subsidy law in member countries; and

Chapter 4: Experience lessons and solutions for finalization of Subsidy Law in

Vietnam

BASIC CONTENTs OF THE THESIS

CHAPTER 1 OVERVIEW ON STUDY SITUATION RELATED TO THE THESIS

1.1 Study situation

1.1.1 Study situation aboard

Most notable is the Doctoral Candidate Bui Ngoc Anh’s Ph.D thesis of Law (2007) at Georgetown University Law Center "WTO laws on subsidies and the accession and participation of transition economies: Vietnam’s case study" However, in other countries, there are various studies on WTO subsidy law in general, of which the regulations applicable to developing member countries form part of the studies A number of typical monographs and textbooks include (i) George A Berman, Petros C

Mavroisid (2007), “WTO Law and Developing Countries”, Cambridge University Press,

New York; (ii) Marc Benitah (2001), “The law of subsidies under the GATT/WTO system”, The Hague Kluwell Law International, Hague; (iii) Melaku Geboye Desta (2002),“The law of international trade in agricultural products : from GATT 1947 to the

WTO agreement on agriculture”, Kluwer Law International …, Additionally, electronic

materials and articles related to WTO subsidy law applicable to member countries in general and developing members in particle Specifically, the materials include “Dispute Settlement – World Trade Organization – 3.7 Subsidies and Countervailing Measures” used by the United Nations (2003) in the training course “Dispute Settlement in International Trade, Investment and Intellectual Property”; “Export Promotion and The WTO: A brief guide” by International Trade Center (2009); Current Developments under the WTO Agreement on Subsidies and Countervailing Measures
as an Example for the Functional Unity
of Domestic and International Trade Law” by Christian Tietje/Gerhard Kraft/Rolf Sethe (2004); “A Commitment Theory of Subsidy Agreements” by Daniel Brou, Michele Ruta (2012) The electronic materials and articles on the subsidy law in member countries include China’s steel industry: Dealing with growth, consolidation and

rationalization” by China Chamber of Commerce of metals, minerals, chemicals

importers and exporters (5/2007); “China's Pure Exporter Subsidies” by Fabrice Defever and Alejandro Riano (2012); “Estimates of energy subsidies in China and Impact of

Energy reform” by Lin, B., and Z.Jiang (2011); and “Dumping and subsidies: The law

and procedures governing the imposition of anti-dumping and countervailing duties in the

European Community” by Clive Standbrook, Philip Bentley (1996)

1.1.2 Study situation at home

The most typical example is Doctoral Candidate Quang Minh's Ph.D thesis (2012)

"Developing Vietnamese agricultural subsidy law in accordance with World Trade Organization (WTO) regulations." In addition, several theses of Master of Laws have studied this issue, including: "The subsidy law of Vietnam when becoming a member of the World Trade Organization” by Do Hong Quyen (2009); "Law on anti-subsidy in commercial activities in Vietnam - Theoretical and practical issues" by La Van Thai (2013); " Law on anti-subsidy in commodity trade when Vietnam becomes a member of the World Trade Organization" by Nguyen Quang Huong Tra (2007); "Law on competition management, anti-dumping, anti-subsidy, and trade safeguards in Vietnam - Current situation and solutions" by Vu Thu Trang (2012); and International Trade Law textbooks at Hanoi Law University, Faculty of Law of National University Hanoi, and other training institutions Monographs include Faculty of Law, Can Tho University (2010), Summary of typical WTO disputes - Jury and Appellate Body Reports, 1995-

2010

Research articles related to WTO subsidy law applicable to developing members include: "Export Tax and Import Tax Law 2016: Important innovations in line with integration requirements" by Hoang Thi Thu Hien (2016); "Agricultural subsidies in WTO and the application of agricultural subsidy policies in the United States and the European Union" by Pham Quang Minh (9/2012); "Vietnam's Accession to WTO: Analysis of Tariff, Industry, and Subsidy - Book 2: Subsidy and WTO Accession: Compliance of WTO regulations and Impact on policy for Vietnam" by Montague Lord and Nguyen Truong Son (September 2005); "Vietnam Industry - Some Recommendations for Development Policies to 2025 and Vision to 2035" by Duong Dinh

Tram (2017); and "Identifying Prioritized Industries in the national industrial policies" by

Vu Thanh Tu An (2017)

1.2 Assessment of study situation related to the thesis

Despite of many studies on WTO subsidy law applicable to developed countries or national law on subsidy, there has not been a comprehensive study of the law in practice

to conclude the theoretical and practical issues of WTO subsidy law applicable to developing countries in general and Vietnam in particular for recommendations and proposals for construction and finalization the subsidy law of Vietnam towards enhancing the competitiveness of enterprises, developing key industries, accompanying with the

start-up enterprises and medium and small enterprises

1.3 Suggested study direction of the thesis

In theory:

- Analyze and identify trends in movement and development of WTO subsidy law and analyze and identify the position and role of the WTO legal source for subsidies, thereby affirm its leading and important position of the provisions of WTO Agreements

on Subsidies as well as the complementary role of the GATT/WTO case law in explaining these provisions to clearly demonstrate the legacy movement of WTO

regulations on subsidy

- Analyze and clarify the current viewpoints of WTO on subsidy in general and on specific types of subsidies, including agricultural subsidy and industrial subsidy In addition, the thesis also analyzes and assesses the impact and nature of subsidy through

an approach of comparison of the views of various scholars and correlates the effects and

nature of subsidy to the case of developing countries

- Clarify the WTO's current position on anti-subsidy measures with a view to providing a basis for screening subsidy programs that are allowed to be maintained in the

member countries

- Clarify the interaction between WTO subsidy law and provisions on subsidy in FTAs as well as law of WTO member countries to present the purpose of WTO subsidy law studies in the current large international and internal legal system of subsidy

In practice:

- Clarify WTO regulations on subsidy, thereby clearly identify a subsidy measure

that could be subject to countervailing measures

- Clarify WTO's regulations on special and differential (S& D) treatment applicable to developing countries by studying the development of S&D and the current practice of S&D Through the study, the thesis points out the shortcomings in application

and maintenance of S&D regulations in WTO on subsidy

- Comprehensively analyze the practice of subsidy law in a number of developing members of WTO In this study, the thesis approaches the subsidy law of China, Brazil,

and the United States

- Analyze and clarify the current situation of subsidy law of Vietnam and subsidy programs that Vietnam applies or maintains Pointing out the inadequacies in the subsidy law of Vietnam as well as the subsidy programs under application or maintenance is the

basis for the application of experience lessons to finalize the subsidy law

In drawing lessons and proposing solutions:

- Clarify practical experience drawn from the study of the current situation of subsidy law in China, Brazil, and the United States Based on the current situation of the subsidy law of Vietnam to provide lessons for the development and finalization of

subsidy law to meet WTO regulations

- Propose specific groups of solutions and recommendations in development and finalization of the subsidy law of Vietnam towards enhancing the competitiveness of products and enterprises, thereby stimulating economic development; Propose recommendations for the Government’s participation in other free trade agreements

negotiated on subsidies

SUBCONCLUSION OF CHAPTER 1

Studies on WTO and Vietnamese subsidy law have also been approached in a number of foreign and domestic projects In each study, the authors have different approaches and scope of study and have achieved certain results Still, much of the content of WTO subsidy law applicable developing countries has not been fully studied

On the basis of inheriting study results of domestic and foreign authors on WTO subsidy law, the thesis continues to study both theoretical and practical aspects of legal issues on subsidies for developing countries in accordance with the WTO regulations, thereby drawing lessons, orientations, and proposals to finalize the subsidy law of Vietnam to protect the interests and enhance competitiveness for domestic products and enterprises

in the event that Vietnam has to implement international commitments on free trade

CHAPTER 2

WTO FUNDERMENTAL LEGAL THEORIES ON SUBSIDY FOR

DEVELOPING COUNTRIES 2.1 Overview on WTO subsidy law

2.1.1 Formation and development of WTO subsidy law

In GATT 1947 period, the subsidy issues provided for in Article XVI and Article

VI were incomplete To improve GATT regulations on subsidy and countervailing duties and to ensure consistent and uniform implementation, in the Tokyo GATT Negotiation Round, parties negotiated and issued the Agreement on Implementation of Articles VI, XVI, and XVIII of GATT, called the Tokyo Round Subsidy Act However, the Subsidy Act was incomplete and failed to clarify the rules on subsidy and countervailing duties applied by one party WTO regulations on subsidy issued at Uruguay Negotiation Round, particularly the provisions of Article VI and Article XVI of GATT 1994, the SCM Agreement and the AOA Agreement , were relatively comprehensive and compulsory

regulations on subsidy for all members

2.1.2 Source of WTO subsidy law

The main source of WTO subsidy law is the provisions on subsidy in WTO Establishment Marrakesh Agreement Other sources have a role to clarify WTO regulations but not to replace or supplement to or reduce the obligations of the members Other sources include jury report and appellate report on WTO dispute settlement, WTO agencies’ documents, agreements signed within WTO framework, international practice,

general legal principles, other international treaties, "subsequent practice" of WTO

members, or history of negotiation roads on subsidy, etc

2.2 Economic theories on application and maintenance of subsidy

The nature and economic impact of subsidy from different perspectives will be

differentiated

2.2.1 Nature of the subsidy

Firstly, subsidy is a necessary measures to protect the "young industry"

Secondly, subsidy is an assistance measure and a "lifebuoy" when an enterprise

falls into temporary severe hardship and faces a risk of termination

Finally, subsidy is associated with benefits in environmental protection

2.2.2 Impact of subsidy on developing countries

For developing countries, subsidy has a major impact on socio-economic development, in particular: (1) subsidy helps the domestic industries (including the nascent industry and perennial industry) enhance competitiveness in comparison with foreign industries in domestic and foreign markets, especially in key and strategic industries; (ii) subsidy protects jobs for local workers in specific subsidized sectors and in certain geographic areas; or (iii) subsidy helps protect the environment in the context of industrialization For competition with industries from developed countries, subsidy can shift the consumption of goods from imported goods to domestic goods, or from one

exporting country to another

2.3 WTO views on special and differential treatment for developing countries

2.3.1 Identification and classification of developing countries in WTO

The WTO agreement system does not directly introduce the concept of developing countries and the criteria to distinguish developing countries from developed countries Instead, the identification of a WTO member as a developed or developing country will largely depend on its own declaration when it joins WTO It also partially depends on the judgment of the other members when they decide to deny a statement about the economic status of a member The WTO's position on the concept of "developing country" means that "developing country" is used to refer to two groups of members: Least developed

countries (LDCs) and other developing countries (DCs) For the first group, least

developed countries, WTO accesses to the United Nations List of Least Developed

Countries (Point a, Annex VII, SCM Agreement) For the second group, other

developing countries, per capita national income reaches $ 1,000/year

2.3.2 WTO special treatment principle for subsidy

It is recognized by WTO members that countries with economies that are just capable of ensuring a low standard of living and are in the early stages of development may need economic development programs and policies aimed at improving the standard

of living for the people and protectionist measures or instruments to affect imports, and,

as long as the implementation of economic development goals to create more favorable conditions, the application of such measures is still true (Article XVIII.1 and XVIII.2, GATT Agreement 1994) Subsidy is also recognized by WTO members as playing an important role in the development of developing countries (Article 27.1, SCM

Agreement)

Firstly, special and differential treatment of subsidy are those that allow

developing countries to shoulder lesser obligations to reduce subsidy Secondly, special

and differential treatment of subsidy are provisions on longer transition periods for

developing members in implementation of their subsidy obligations Finally, special and

differential treatment of subsidy are the provisions on the highest exemptions or reductions in obligations and the longest transition periods for the least developed

countries

Theoretically, developing members are entitled to benefits from the S&D provisions that other WTO members have conceded to provide opportunities for development as well as support for the domestic production of the developing countries

In reality, however, many developing countries have not received or refused access to

these privileges

2.4 WTO views on subsidy and countervailing measures for developing

countries

2.4.1 WTO view on subsidy

WTO view on subsidy is first expressed in the basic concepts of subsidy, exclusivity, exportation, and localized subsidy as analyzed from Section 2.4.1.1 to Section 2.4.1.4 In addition, WTO view clearly expressing the extent to which the WTO

allows the application and maintenance of subsidy to be analyzed in Section 2.4.1.5

Under the SCM Agreement, the concept of subsidy can be understood that subsidy

is a financial contribution of a government and public bodies located in the territory of such government, and a benefit is thereby conferred to domestic enterprise The subsidy

concept approached from WTO view is broad and remains unclear

Firstly, the element of "financial contribution" has a broad implication, including

not only donation activities leading to budget deficits but also non-budgetary activities

Secondly, the concept of "government" and "public bodies" are also broad and

heterogeneous

Thirdly, private entities may also become subjects to financial contributions;

Finally, the element of a benefit is thereby conferred " for a subsidized enterprise

is difficult to determine in many cases

The concept of subsidy, therefore, should be interpreted as "a benefits conferred for domestic enterprises through the financial contribution of the government or public

bodies located within the territory of that the government to the subsidized enterprises"