What is WTO nullification or impairment?
Complaints in «violation» cases at the World Trade Organization (WTO) are by far the most common type of complaint, and involve the nullification or impairment of an advantage.
Or they involve an impediment to the achievement of an objective, as a result of another WTO Member’s failure to comply with its obligations under the covered agreements.
Such a «breach of obligations» is just another way of describing a failure to comply with, or a violation of, the provisions of the covered agreements.
In the WTO, these terms are used to refer to the nullification or impairment of the benefits that a country enjoys or expects to enjoy as a result of its WTO membership, caused by a change in another country’s trade regime or a breach of its WTO obligations.
Specifically, at all stages of the determination of the causes of a dispute or dispute settlement proceedings involving a least-developed country Member, particular consideration shall be given to the special situation of least-developed country Members.
In this regard, Members shall exercise due restraint in bringing cases involving a least-developed country Member under these procedures.
If nullification or impairment is found to exist as a result of a measure taken by a least-developed country Member, complaining parties shall exercise due restraint in seeking compensation or seeking authorization to suspend the application of concessions or the performance of other obligations in accordance with these procedures.
Nullification or impairment
Most subsidies, such as production subsidies, fall into the «actionable» category.
Actionable subsidies are not prohibited.
However, if they have adverse effects on the interests of another Member, they may be challenged in multilateral dispute settlement or be subject to countervailing action.
There are three types of adverse effects. First, injury to a domestic industry caused by subsidized imports into the territory of the complaining Member. This is the only basis for the adoption of countervailing measures.
Second, serious injury. Serious injury normally results from adverse effects (e.g., displacement of exports) in the market of the subsidizing Member or in that of a third country.
Thus, unlike injury, injury to a Member’s export interests may serve as a basis for a claim.
Finally, the nullification or impairment of benefits resulting from GATT 1994.
Nullification or impairment almost always arises when the subsidy undermines the improved market access that is supposed to arise from a reduction in the bound tariff.
