WTO recognizes the right of the Governments to grant subsidies to reach strategic economic goals. However it establishes certain rules in the field of subsiding in order to prevent violations of international trade. Provisions of WTO on the subsidies granting issues are defined in the Agreement on subsidies and compensational measures. In compliance with the present Agreement subsidy has been identified as financial assistance of the state or state body which results in privilege grating. The Agreement contains the list of measures types which are considered to be financial assistance, for instance, grants, loans, contribution of means into the shareholder's equity, loan recovery security, tax privileges, delivery of goods and services and purchase of goods.
Agreement on subsidies and compensational measures regulates only “specific” subsidies, i.e., subsidies granted by definite enterprises, groups of enterprises or groups of economy branches. Non-specific subsidies are not regulated with the present Agreement as non-specificity means that subsidies are granted in the neutral order, do not cause discrimination regarding the enterprises and do not create preferences to nay branches.
Agreement stipulates three main categories of subsidies: (а) forbidden, (б) affording ground for judicial investigation (i.e., giving rise to occurrence of disputes within WTO or to exercising compensational measures) and (в) not affording ground for such measures (i.e., not giving rise to occurrence of disputes within WTO or to exercising compensational measures) and (в) not affording ground for such measures).
Forbidden subsidies are divided into two categories:
1) Export subsidies – subsidies granting of which are connected with goods exportatation;
2) Import-substituting subsidies – subsidies granting of which are connected with use of deomestic goods instead of imported ones.
Subsidies affording ground for judicial investigation are permitted but can be (1) disputed in the frame of WTO mechanism on disputes settlement or (2) applied compensational measures provided they have negative consequences or cause damage to the industry of foreign state.
Subsidies not affording ground for judicial investigation have a legal base and can’t afford ground for compensational measures application. All specific subsidies belong to this category.
It is necessary to note that in respect of agricultural subsidies in the frame of WTO there established special rules which are fixed in a separate WTO Agreement, on agriculture. Agreement on subsidies and compensational measures is in force regarding agricultural subsidies to the extent it was established in WTO Agreement on Agriculture. Namely, present Agreement allows applying certain types of export agricultural subsidies to the countries which have reserved such right in the frame of WTO membership. WTO member-countries can exercise compensational; measures in respect of agricultural subsidies in compliance with the norms of the Agreement on Subsidies and Compensational measures.