Japan – Countervailing Duties on Dynamic Random Access Memories from Korea (DS 336 and Corr.1, adopted 17 December 2007)

This article analyzes the decision of the WTOʹs Appellate Body in the dispute between Japan and Korea over Japanʹs imposition of countervailing duties on DRAMs imported from Korea. The legal analysis comments on the analysis of evidence, the lack of remand authority in the WTO system, and the meaning of a ʹdirect transfer of fundsʹ. The economic analysis discusses several issues related to determining the magnitude of the benefit to a firm of a financial bailout and the appropriate duration of a countervailing duty to offset the injury caused by a non-recurrent subsidy. We offer legal and economic criticisms of the Appellate Bodyʹs conclusion regarding the relationship between subsidies and injury to the domestic import-competing industry. We conclude that the Appellate Bodyʹs decision weakens the requirement of a causal link between subsidies and injury and, consequently, may open the door to protectionist abuse of the Subsidies and Countervailing Measures Agreement.