The Agreement on SCM disciplines the use of subsidies, and it regulates the actions countries can take to counter the effects of subsidies.
Article 3 of the Agreement prohibits the use of local content and export subsidies for non-agricultural products. LDCs (and other countries with GNI per capita below $1,000 in constant 1990 dollars) are exempted from the prohibition of export subsidies (article 27.2 and Annex VII of the Agreement and paragraph 10.1 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns (WT/MIN(01)/17).
Earlier transition periods for local content subsidies have expired. LDCs (and other developing country members that benefit from exemptions under the SCM) need to gradually phase out export subsidies to products that have reached export competitiveness (assumed when a country’s global market share in that product is beyond 3.25%) (WTO/EIF, 2020).
After graduation, countries are no longer permitted to provide export subsidies for non-agricultural products. As of mid-2020, a proposal submitted by the LDC Group is under consideration that would allow graduated LDCs to continue to provide non-agricultural export subsidies while their GNI per capita remains below US$ 1,000. According to the most recent information available in mid-2020, Bangladesh, Lao PDR, Nepal and Solomon Islands remained under that threshold. In the absence of a decision or clarification on this issue, graduated LDCs would no longer benefit from the exemption. Few LDCs provide this kind of subsidy. According to recent analysis by the WTO, among the countries approaching graduation in 2020, Bangladesh and Nepal would be affected by the loss of this flexibility (WTO/EIF, 2020).