- State aid provisions — European Union — Economic activities or development
This chapter focuses on the concepts of subsidy control under World Trade Organization (WTO), prohibiting certain types of subsidies that might have a harmful effect on economic activity in other WTO members. A major innovation of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) was the classification of subsidies into three categories, often referred to as ‘red light’, ‘yellow light’, and ‘green light’. ‘Red light’ subsidies are prohibited per se, with no need to actually prove any adverse effect. The ‘yellow light’ or ‘actionable subsidies’ are not prohibited, but may be challenged only if they cause ‘adverse effects’. Under the ‘green light’ category, certain selected types of subsidies were non-actionable even if they were specific and caused one of the harms listed in Articles 5 and 6 of the SCM Agreement.
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