The Developing and Least Developed Countries' Challenges on Countering Subsidies at the WTO

Abstract

The WTO system to counter specific subsidies has been an issue for developing and least developed countries, which ineffectiveness leads to losses that go beyond the strictly economic area. To prevent damage caused by subsidies, the WTO provides its members two mechanisms: the countervailing measures and the retaliation authorized by the DSB. Although the first one is the most rapid, it cannot be imposed when the competition occurs in a third market. In this case, governments may only counter subsidies by the dispute settlement where, at the end, countries may force the elimination of the subsidy by the threat of retaliation, but only after innumerous discussions over implementation, compensation, request for cross-retaliation and its calculus. This procedure has gaps that contribute to governments' political and economic strategies in order to gain time and trade until, the effective withdraw of their subsidy programs, further expanding the differences between developing and developed countries. Whereas the social harm caused by subsidies are irreparable, it is necessary to include in the multilateral trading system an instrument able to prevent opportunistic behavior by rich countries and avoid the perpetuation of the damage over time. From the premises of the Economic Analysis of Law perspective, in particular, the principle of social and economic efficiency, the social costs of the subsidies must be considered and in this case, there is no efficient breach. The propose of the article is to find a mechanism able to give these countries more power to counter subsidies or at least to provide them more bargaining power. In this sense, it was examined the possibility of imposing cross countervailing measures when specific subsidies cause the shift from exports that were supposed to be sent to third market.