Natural Resource Subsidies [eg Softwood Lumber]

(WTO – Matthew S. Yeo, Steptoe & Johnson LLP)

One important point of intersection between natural resources and the multilateral trading system concerns the treatment of natural resource subsidies under the WTO Agreement on Subsidies and Countervailing Measures. Many countries retain sovereign ownership of natural resources and allow commercial enterprises to exploit these resources under different types of compensation arrangements. The commodities that are thereby produced, or downstream products that are manufactured from those commodities, may become the target of anti-subsidy disciplines (such as countervailing duties) if there is an allegation that the government provided the natural resources on subsidized terms. What, then, does it mean for a government to provide a natural resource subsidy?

The resolution of this question has important implications for international trade in natural resources and products that are produced with natural resource inputs. Countries that pursue economic development and diversification through the exploitation of sovereign natural resources may find that their exports become subject to countervailing duties in other countries or to an action under Part III of the SCM Agreement. One of the longest-running trade disputes in history, the softwood lumber dispute between the United States and Canada, is fundamentally a dispute about natural resource pricing. In addition, the question of how countries should price natural resources to avoid anti-subsidy disciplines is closely related to how a country should price natural resources to promote conservation and sustainable yields. Read more here.