Subsidies And Countervailing Measures Research Articles

Regulating SOEs Through the SCM Agreement: Utilizing the ‘Public Body’ Jurisprudence to Cover SOEs

In January 2020, trade ministers from the EU, the US, and Japan proposed several amendments to the WTO Subsidies and Countervailing Measures (SCM) Agreement. One of the proposals was to examine whether to incorporate state-owned enterprises (SOEs) into the definition of the public body in the SCM Agreement. A similar approach was adopted in the EU’s white paper of June 2020. These proposals present that the current WTO jurisprudence is not adequate to regulate financial contributions by SOEs. On the other hand, recent international trade agreements suggest another type of SOE regulation by providing a set of independent norms on SOEs. As such, there are two options for regulating subsidization by SOEs in the current international trade regime: a combined scheme and a separate scheme. This article argues that a combined scheme that regulates SOEs through public body concept in the WTO SCM Agreement is a more adequate formula than a separate one. Considering aggravating trade disputes among major trading partners surrounding the SOEs a better method to regulate SOEs in a single and coherent WTO SCM Agreement is suggested. state-owned enterprises, SCM Agreement, subsidization, public body, governmental authority, combined scheme, separate scheme

Analysis Of The Foreign Subsidies Regulation From An International Trade Law Perspective On Trade In Goods

The Foreign Subsidies Regulation contains provisions enabling the Commission to launch ex officio investigations into foreign subsidies distorting the internal market. The legislation is designed to be complementary to existing anti-subsiding rules and follows a logic that is reminiscent of the European competition law. This article discusses its applicability in the field of trade in goods and the risks of inconsistency with the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM). Foreign Subsidies Regulation, Foreign subsidies, Industrial subsidies, Basic anti-subsidy regulation, World Trade Organization, Agreement on Subsidies and Countervailing Measures, Multilateralism, Trade

Playing the Game: The EU’s Proposed Regulation on Foreign Subsidies

The objective of ‘level playing field’ has become increasingly more present in international trade affairs. The European Union (EU) has recently embarked on a quest to promote and protect the level playing field within and outside the borders of the internal market. The most recent manifestation of this objective is the regulation of foreign subsidies, i.e., subsidies provided by non-EU countries to undertakings operating within the EU. The European Commission issued its proposal for a new Regulation with the goal of tackling distortions to the level playing field caused by foreign subsidies. The present article introduces the major concepts of the Proposal and provides a comparative analysis with EU State Aid law and the WTO Subsidies and Countervailing Measures (SCM) Agreement. Further, it pursues an economic analysis of the anticipated impact of the Proposal with a view of examining whether the Proposal is capable of addressing global distortions caused by foreign subsidies and ensure a level playing field. Lastly, the article examines the compatibility of the Proposal with Article 32.1 of the SCM Agreement. Trade Remedies, WTO Law, Subsidies, Treaty Interpretation, EU Law, International Trade Law

Is Currency Undervaluation a Subsidy: US Law and Practice and the WTO Compatibility

On 4 February 2020, the Department of Commerce (Commerce) adopted revised Regulations Regarding Benefit and Specificity in Countervailing Duties Proceedings after reviewing solicited comments. Soon after, the Commerce initiated countervailing investigations against Vietnamese passenger vehicle tires and Chinese twist ties, and for the first time imposed preliminary countervailing duties (CVDs) against these two countries based on currency undervaluation. This article considers the revised regulations, two CVD investigations and their WTOcompatibility. We argue that views on whether or not currency undervaluation constitutes a subsidy reflect divergences between the US and other negotiating parties during the Uruguay Round on the definition of a subsidy. Whereas currency undervaluation does confer benefits to producers and exporters, it does not fulfill the criteria of ‘financial contribution’ and specificity as laid down in the Subsidies and Countervailing Measures (SCM) Agreement; thus the CVD decisions of the Commerce are WTO-incompatible. Currency undervaluation, Countervailing duties, subsidy, specificity, financial contribution

Inadequacy of SCM Rules of Benefit Determination in the Context of Non-market Economies

China’s decision to withdraw from the dispute pertaining to its Non-Market Economy (NME) status has bolstered the Member States’ intentions of resorting to stronger disciplinary actions against China and other NMEs. While anti-dumping measures have traditionally been pursued against NMEs, in recent years Member States have resorted to anti-subsidization measures as well. Even though the Appellate Body has warned against double counting, Member States continue to undertake Countervailing Duties (CVD) investigations against NMEs in addition to Anti-Dumping Duties (ADD) investigations. This article moves beyond the conventional discussions around double counting and attempts to determine whether the emphasis on antisubsidization measures against NMEs is justified. The paper focusses on the specifics of the Subsidies and Countervailing Measures (SCM) Agreement, particularly the rules on benefit determination. There have been instances where the Appellate Body has adopted innovative methods of benefit determination to deal with situations where governments’ actions have distorted the markets. Can these same rules be applied against NMEs? And if so, are they effective and do they factor in all aspects of market distortions in NMEs? This article attempts to answer these questions by relying on China as an example. SCM Agreement, Benefit Determination, NME, NME Methodology, Alternative Benchmarks

Assessing transparency in fisheries subsidies: A notification-driven analysis

The availability of fisheries subsidies data has been a challenge since the beginning of WTO negotiations, with government disclosure being historically low. No multilateral agency is currently mandated to systematically collect, assemble and disseminate fisheries subsidies data and the knowledge base remains weak. While anecdotal evidence is abundant, subsidy notifications have not been systematically explored as a source of policy intelligence. By proposing a novel approach to extract and analyze information from WTO notifications, this paper aims to fill this gap and shed new light upon the ultimate determinants of government transparency in relation to fisheries subsidies. By screening texts of notifications by China and the United States under the Agreement on Subsidies and Countervailing Measures (SCM) (1995–2016), this paper identifies a unique set of 61 fisheries and aquaculture policies. For each, budget allocations or expenditures are extracted, and qualitative policy information categorized. This is then used to measure the degree of compliance with notification requirements (SCM Agreement, Art. 25.3). This paper argues that, while government transparency plays a role in determining the level and quality of notified information, intrinsic characteristics of the notification framework may also work as hindrances to sound reporting. A comprehensive effort that simultaneously involves the content, institutional and technological dimensions is needed in order to modernize the WTO notification framework in a way that creates new and better incentives for disclosure.

United States – Countervailing Measures on Supercalendered Paper from Canada, DS505

The dispute concerns a challenge by Canada of certain countervailing duty measures imposed by the United States on supercalendered paper from Canada. Canada brought multiple claims under the WTO Subsidies and Countervailing Measures (SCM) Agreement, including a challenge of an alleged unwritten measure, pursuant to which the US Department of Commerce (USDOC) applies adverse facts available (AFA) to find countervailable subsidies in relation to unreported programs that were discovered during an investigation. In USDOC subsidy investigations, exporters are asked to report information on the use of specifically identified subsidy programs as well as whether they obtained any ‘other forms of assistance’ (OFA). It is the USDOC's conduct in applying AFA in relation to programs not reported under the OFA question that Canada challenged as an ongoing conduct (the OFA-AFA measure).

Reopening Pandora's Box in Search of a WTO-Compatible Industrial Policy? TheBrazil–TaxationDispute

AbstractWe critically assess the Appellate Body (AB) report on theBrazil–Taxationdispute, taken to the World Trade Organisation by the European Union and Japan, and encompassing seven different Brazilian industrial programmes granting tax benefits to different firms and products. The trigger of the dispute was most likely the automotive sector programme, instituted under pressure from the local industry and without much attention to effects on consumers or imports. The resulting WTO case underscores some salient issues related to the WTO compatibility of subsidy programmes, in particular the application of the National Treatment rules to subsidies provided exclusively to domestic producers, and the identification of local content requirements, prohibited under the Agreement on Subsidies and Countervailing Measures (SCM). The AB diverged from the Panel report and its jurisprudence on those issues. The AB tried to reconcile the existence of legitimate eligibility criteria in subsidy programmes and their discriminatory features with WTO rules under the General Agreement on Tariffs and Trade and the SCM. However, the legal test, developed by the AB in this dispute to distinguish prohibited local content requirements from legitimate eligibility criteria, may facilitate circumvention of the SCM prohibition of local content requirements and have important impacts on trade flows.

Reopening Pandora’s Box in Search of a WTO-Compatible Industrial Policy? The Brazil – Taxation Dispute

The Brazil-Taxation dispute concerns the complaints taken to the World Trade Organisation by the European Union and Japan against seven different Brazilian industrial subsidy programmes. One concerned the automotive sector and represents a clear case of policies dictated by strong domestic political-economy forces, with little attention to impacts on consumers or imports. The ensuing WTO dispute raises important issues concerning the WTO-compatibility of subsidy measures. In particular, the Appellate Body (AB) reversed the panel findings with respect to two issues: the extent to which subsidy measures can be exempted from complying with National Treatment rules under the General Agreement on Tariffs and Trade, and the identification of local content requirements (LCRs), which are prohibited under the Agreement on Subsidies and Countervailing Measures (SCM). In particular, the AB considered that subsidies, if not based on discriminatory taxation, could be justified under the GATT and could have some discriminatory elements without violating the National Treatment disciplines. Furthermore, it concluded that legitimate eligibility criteria under a subsidy programme should not be construed as prohibited LCRs under the SCM. However, the test devised by the AB to distinguish legitimate eligibility criteria from prohibited LCRs could facilitate circumvention of the LCRs prohibition under the SCM.

Reopening Pandora's Box in Search of a WTO-Compatible Industrial Policy? The Brazil-Taxation Dispute

The Brazil-Taxation dispute concerns the complaints taken to the World Trade Organisation by the European Union and Japan against seven different Brazilian industrial subsidy programmes. One concerned the automotive sector and represents a clear case of policies dictated by strong domestic political-economy forces, with little attention to impacts on consumers or imports. The ensuing WTO dispute raises important issues concerning the WTO-compatibility of subsidy measures. In particular, the Appellate Body (AB) reversed the panel findings with respect to two issues: the extent to which subsidy measures can be exempted from complying with National Treatment rules under the General Agreement on Tariffs and Trade, and the identification of local content requirements (LCRs), which are prohibited under the Agreement on Subsidies and Countervailing Measures (SCM). In particular, the AB considered that subsidies, if not based on discriminatory taxation, could be justified under the GATT and could have some discriminatory elements without violating the National Treatment disciplines. Furthermore, it concluded that legitimate eligibility criteria under a subsidy programme should not be construed as prohibited LCRs under the SCM. However, the test devised by the AB to distinguish legitimate eligibility criteria from prohibited LCRs could facilitate circumvention of the LCRs prohibition under the SCM.

SHELTERING GOVERNMENT SUPPORT TO ‘GREEN’ ELECTRICITY: THE EUROPEAN UNION AND THE WORLD TRADE ORGANIZATION

AbstractSince theCanada – Renewable Energy (2013)dispute at the World Trade Organization (WTO), the WTO Agreement on Subsidies and Countervailing Measures (SCM) has been the focal point of academic debate on the trade-environment interface, with a growing consensus that WTO subsidy rules need to be revisited with a view to securing ‘policy space’ for government support for renewable energy. This article explores whether, as suggested by some scholars, the European Union (EU)’s system of justifications for renewable energy aid could serve as a source of inspiration for the WTO. While this proposition may appear attractive at first sight, it is hardly conceivable, or even desirable, that the EU's approach to sheltering government support for renewable energy could be transposed to the WTO. This is because the two systems of subsidy control are fundamentally different in both substantive and procedural terms and, importantly, these differences reflect distinct objectives and political/institutional contexts. Nonetheless, this comparative analysis sheds light on where the key challenges lie for the WTO in ensuring that international trade rules and climate change mitigation objectives are mutually supportive. It is argued that the case for reviewing the SCM Agreement cannot be made by simply forging parallels with the EU's regulatory model, but needs to be carefully construed on the basis of a proper understanding of whether and how green policy space is actually constrained under the current WTO subsidy and trade remedy rules. However, this requires better information on existing WTO members’ practice in relation to renewable energy subsidies, as well as on their environmental effectiveness and possible trade-distortive impact. In this sense, the most valuable lesson that the WTO can draw from the EU's regulatory experience is the imperative of improving the transparency and knowledge-enhancing elements of its subsidy control system.

Prospects on the Relationship between Chinese Direct Tax Incentives and Subsidy Rules of the World Trade Organization

After the accession to the World Trade Organization (WTO), China encountered an increasing number of international trade disputes with other Members with respect to Subsidies and Countervailing Measures (SCM). Among all the countervailing investigations towards China, the main complaints were Chinese tax incentives such as specific tax reductions and exemptions, or tax preferences related to export or import. This article introduces the general situation of Chinese direct tax incentives, and their compatibility with subsidy rules in the WTO. Further, it attempts to find out tensions between the Chinese direct tax incentives and the WTO’s subsidy rules, and the main reasons behind the tensions. Consequently, it provides recommendations for China to alleviate the tensions. On the other hand, it offers further prospect for the WTO with respect to its subsidy rules and its role in regulating taxation. This article finds out that there are tensions between the Chinese tax incentives and the WTO’s system. China has a state-oriented attitude towards tax incentives, and there is a lack of internal legal control over the granting of them. Therefore, Chinese tax incentives can easily cause tensions with the WTO’s subsidy rules. Moreover, the tensions can be explained by the differences of the relationship between the government and the market, and the differences on the rule of law in China and the WTO system. Consequently, this article suggests a common platform based on the common objects and purposes of Chinese tax systems and the WTO to alleviate tensions.

Tied Aid: Immunization for Export Subsidies against the Law of the WTO?

The article analyses the practice of tied aid and draws a comparison to export subsidies both in an economic as well as in a legal sense. Tied aid is a form of development aid granted upon the condition that it is spent according to donor preferences. The legal review concentrates on the consistency of tied aid with the Agreement on Subsidies and Countervailing Measures (SCMA) and Article XVII of the General Agreement on Tariffs and Trade (GATT). Here, many potential breaches of the SCMA are revealed, while a violation of the GATT is less apparent due to the unclear concept of State Trading Enterprises. Many variants of tied aid are found to constitute prohibited or at least actionable export subsidies and no regular development aid. Despite the breaches, no trade dispute involving tied aid has been brought before the WTO's dispute settlement system. The final section analyses the practical obstacles to a precedent and argues that the freedom from regulation of development aid cannot be extended to tied aid, which is guided by protectionist motives.

WTO (Analysis of WTO Subsidy Disputes Involving Major Basic Industries)

Korean Abstract: 각국 정부의 고유한 정책수단으로 받아들여지던 보조금에 대한 규제가 1995년 WTO 체제 출범으로 강화되면서 WTO 회원국 사이에 보조금 분쟁이 증가하고 있다. 특히 국가의 수출증대 및 경제발전과 긴밀한 관계가 있는 철강, 선박, 항공기, 에너지 등 주요 기간산업에 대한 정부의 자금 및 세제 지원을 비롯한 다양한 형태의 보조금 정책은 불공정 무역조치로 간주되어 분쟁 당사국간 맞제소로 이어지는 치열한 공방이 전개되고 있다. 본 연구는 2005년 이후 2014년 6월 말까지 WTO 분쟁해결기구에 제소된 항공기, 선박, 재생에너지 관련 보조금 분쟁 판례를 분석하여 주요 기간산업에 대해 정부가 지원하는 보조금에 관한 WTO 규범의 해석과 적용을 분석하였다. 이를 바탕으로 주요 기간산업에 대한 보조금 지원정책 현황에 대한 쟁점을 파악하고 WTO 보조금협정상 기간산업 보조금 정책에 대한 정책적 및 법률적 시사점을 모색하였다. 이를 통해 우리나라의 경제기반을 구성하는 주력 산업의 육성 및 지원을 위한 보조금 정책의 기획 및 이행 단계에서 활용할 수 있는 참고자료를 제공하고 향후 보조금 규정 관련 학술 연구를 위한 기초 자료를 마련하고자 하였다. 먼저 각 주요 기간산업 관련 WTO 보조금 분쟁에서의 주요 판정 내용을 요약하면 다음과 같다. 한국 선박 보조금 분쟁은 한국의 구조조정 정책에 대한 WTO 규범의 합치성 여부를 재검토할 수 있는 계기를 마련하였으며 한국이 조선업체를 대상으로 시행한 워크아웃 프로그램 등이 WTO 보조금협정에 합치하는 조치였음이 밝혀졌다. 특히 정부의 위임 및 지시에 의한 간접 형태의 재정적 기여가 보조금으로 인정되기 위해서는 정황 증거만으로는 부족하며 ‘명백하고 적극적인’ 위임 및 지시가 있었음이 입증되어야 한다. 또한 판정 결과 한국수출입은행(KEXIM) 관련 법규를 비롯한 KEXIM의 선수금 환급보증(APRG) 및 인도전 금융(PSL) 조치는 모두 보조금에 해당하지 않는다고 판정하였다. 반면, 선박업체별 지급된 APRG 및 PSL 조치는 대부분 시장에서 제공하는 금리보다 유리한 조건으로 제공되어 수출보조금으로 판정되었다. EC 선박 보조금 분쟁에서는 교역상대국의 보조금 조치에 대응하여 일방적 구제방식을 추구하는 행위에 대하여 WTO 규범과의 합치성 문제가 제기되었는데, 패널은 보조금의 지급으로 ‘자금의 이전’이 이루어졌는지, 즉 보조금을 통한 재정적 기여의 존재 여부를 중요한 판단기준으로 고려하였다. 이 분쟁에서 EC의 반보조금 조치가 한국의 선박산업을 겨냥한 ‘특정적 조치’임은 밝혀졌지만, 재정적 기여의 제공에 대한 입증자료의 부족으로 WTO 규범상 ‘보조금에 대한 특정조치’로서의 요건은 충족시키지 못하였다. 반면, WTO 분쟁해결절차 규범상 ‘일방적 구제조치’로 판정되어 불법성은 인정되었지만 이미 만료된 보조금 조치로서 판정 결과가 보조금의 실질적인 철회로 이어지지는 못하였다. EU 대형항공기 보조금 분쟁에서는 산업단지 조성이 보조금으로 판정될 수 있다는 점이 명확해졌으며, 판단기준이 구체화되었다. 독일과 프랑스 정부는 산업단지가 ‘일반적’ 기반시설이라고 항변하였지만 패널과 상소기구는 사안에서는 공중의 이용에 대한 ‘접근 제한’이 있었음을 이유로 받아들이지 않았다. 또한 지역적 특정성 요건을 충족시키기 위해서 지역적 특정성 이외에 기업이나 산업의 특정성도 중복적으로 필요한지가 명확하지 않았는데, 이 사건에서 패널이 보조금협정에서 해당 조항의 체계를 고려한 해석을 통해 지역적 특정성만으로 충분하다는 점을 명확히 하였다. English Abstract: Subsidy disputes under the WTO system have continuously increased in number as a result of the strengthened WTO discipline on governments’ subsidization policies which were previously viewed as intrinsic economic policy measures. In particular, as subsidization policies to support such major basic industries as steel, vessels, aircraft and energy are closely related to countries’ export growth and economic development, and thus considered to be unfair trade-related measures, there have been a number of counter -subsidy disputes to directly counteract the WTO-inconsistent activities of other Members under the WTO dispute settlement system. This study examines the WTO rules and the practical application of the rules on subsidies related to several major key industries through legal analysis of subsidy disputes involving the aircraft, vessels, and renewable energy industries that were brought to the WTO dispute settlement system since 2005. Based on the analysis, this study has identified several important issues related to subsidy policies in major basic industries, and provided several policy and legal implications regarding the discipline on subsidies in accordance with the WTO Subsidies and Countervailing Measures (SCM) Agreement. As a result of the analysis, we have identified several common characteristics in WTO subsidy disputes involving basic industries. First, as shown in the WTO subsidy disputes involving vessels and large-sized aircraft, a number of disputes seem to take the form of counter-subsidy disputes. This may be proof of the importance of the relevant industry in the country’s economy, and the willingness to resolve disputes in an expeditious and efficient way. Secondly, most of the direct grants and tax incentive programs provided to major key industries were determined to be government acts to provide ‘financial contribution’. This may be due to the fact that significant amounts of initial investment by the government are inevitably required to establish basic industries. On the other hand, there were different rulings regarding whether the subsidy measure provided a ‘benefit’, while the appropriate ‘market benchmark’ and consideration of both the supply and demand aspects in selecting the appropriate ‘market’ were considered to be important elements in the ‘benefit’ analysis of a subsidy. Thirdly, most of the subsidy measures in the basic industries were considered to be ‘specific’, particularly based on the documental evidence that explicitly showed that relevant subsidy programs targeted specific industries.

First WTO Judicial Review of Climate Change Subsidy Issues

On May 6, 2013, in the combined reports Canada—Certain Measures Affecting the Renewable Energy Generation Sector and Canada—Measures Relating to the Feed-in Tariff Program (Canada—Renewable Energy/Feed-in Tariff), the Appellate Body of the World Trade Organization (WTO) upheld some key conclusions of a decision of the WTO’s dispute settlement panel (the panel), finding Ontario’s feed-in tariff (FIT) program in violation of certain of Canada’s WTO obligations. The FIT program permits qualified Ontario-based renewable energy producers to enter into long-term fixed-price electricity purchase contracts at premium rates in exchange for feeding into the grid. Japan and the European Union had challenged the program on two grounds: first, that conditioning FIT program eligibility on the use of locally produced materials discriminates against foreign goods, contrary to “national treatment” obligations; and, second, that it constitutes an unlawful subsidy (the provision of a financial contribution by the government that confers a benefit on a specific recipient), contrary to WTO requirements under the Subsidies and Countervailing Measures (SCM) Agreement. While affirming the panel’s decision on the first ground, the Appellate Body reversed its finding on the second, that the complainants had failed to establish a FIT-based “benefit” for electricity producers within the meaning of WTO law. But the Appellate Body itself could not eventually confirm the fact of illegal subsidization.

A Commitment Theory of Subsidy Agreements

Abstract: This paper examines the rationale for the rules on domestic subsidies in international trade agreements through a framework that emphasizes commitment. We build a model where the policy-maker has a tariff and a production subsidy at its disposal, taxation can be distortionary and the import-competing sector lobbies the government for favorable policies. The model shows that, under political pressures, the government will turn to subsidies when its ability to provide protection is curtailed by a trade agreement that binds tariffs only (policy substitution problem). When the factors of production are mobile in the long-run, but the investments are irreversible in the short-run, the government cannot credibly commit vis-à-vis the domestic lobby unless the trade agreement regulates production subsidies in addition to tariffs (policy credibility problem). We employ the theory to analyze the Subsidies and Countervailing Measures (SCM) Agreement within the WTO system. We show that WTO rules on nullification or impairment solves the policy substitution problem, while serious prejudice rules can address the policy credibility problem in sectors with tariff commitments.

China's Currency Devaluation and WTO Issues

INTRODUCTION The value of China's currency, the renminbi (RMB), and the conduct of China's exchange rate policy have generated intense debate in academic and international policy circles. The RMB was pegged from 1994 until mid-2005 at 8.28 yuan to the US dollar. China shifted in 2005 to a policy of loosely pegging the RMB to a basket of major currencies. Since then, the RMB has appreciated against the dollar, and the current RMB/dollar exchange rate stands at roughly 6:30. Over the same period, RMB generally depreciated against the Euro, falling from 10.06 in June 2005 to 10.79 in June 2008. With the 2007/2008 financial crisis, however, the Euro has depreciated and the RMB/Euro exchange rate presently stands at 8.99. Throughout this period, China has intervened actively in foreign exchange markets to prevent the RMB from appreciating faster by selling RMB and buying other major currencies (mostly US dollars). A number of economic commentators argue that China's policies amount to market-distorting manipulation. For example, C. Fred Bergsten of the Peterson Institute for International Economics recently suggested that the RMB must appreciate by approximately 40 per cent against the dollar to correct current and urged the United States to take multilateral, and if necessary unilateral action, to pressure China to change its ways. (1) Michael Mussa and Arvind Subramanian have expressed similar views. (2) Politicians have become involved. Trade officials from both the US and Europe have argued that Chinese practices unfairly distort trade, amounting to the equivalent of a subsidy to exports and a tariff on imports that would violate World Trade Organization (WTO) rules if imposed directly. US President Barack Obama stated in November 2009, for example, that China's current trade surplus is directly related to its manipulation of its currency's value. He concurrently promised to use all diplomatic means at his disposal to achieve change in China's manipulation of the value of its currency, a practice that contributes to massive global imbalances and provides Chinese companies with an unfair competitive advantage. (3) During the 2012 US elections season, Mr. Mitt Romney, one of the two presidential candidates, promised--while bashing President Obama, his opponent, of failing to act against China's currency manipulation--that if he was to be elected, he would label China a currency manipulator from day one. (4) Over the past few years, various proposals for action against China have been put forward in the US Congress. These range from insisting that the Treasury Department refer the matter to the International Monetary Fund (IMF), to requiring that the US Trade Representative bring a formal complaint to the WTO, treating China's alleged manipulation as a source of dumping or countervailable subsidies that would permit the imposition of antidumping or countervailing duties on Chinese imports. IMF case studies have shown that the IMF has never identified a certain member engaging in exchange manipulation, or indicated that the acts of any of its members amount to foreign exchange manipulation. Theoretically, the RMB exchange rate issue can become the subject matter of WTO dispute settlement proceedings only when China's trade partner(s) (e.g., the US and/or the European Union) lodge a complaint against China in the WTO dispute settlement body. Before moving to an action in the WTO, the governments of China's trade partners must take into consideration the translation of China's exchange rate policies (and specifically the magnitude of its exchange rate misalignment) into equivalent real trade policies that could then be more readily evaluated under the rules of the WTO, e.g., under Article XV of the General Agreement on Tariffs and Trade (GATT) 1994, Article XXIII of the GATT or Article 3 of the Agreement on Subsidies and Countervailing Measures (SCM). …

A Commitment Theory of Subsidy Agreements

This paper examines the rationale for the rules on domestic subsidies in international trade agreements through a framework that emphasizes commitment. We build a model where the policy-maker has a tariffs and a production subsidy at its disposal, taxation can be distortionary and the import-competing sector lobbies the government for favourable policies. The model shows that, under political pressures, the government will turn to subsidies when its ability to provide protection is curtailed by a trade agreement that binds tariffs only. We refer to this as the policy substitution problem. When factors of production are mobile in the long-run but investments are irreversible in the short-run, we show that the government cannot credibly commit vis-a-vis the domestic lobby unless the trade agreement also regulates production subsidies, thus addressing the policy substitution problem. Finally, we employ the theory to analyze the Subsidies and Countervailing Measures (SCM) Agreement within the GATT/WTO system.

The Wrong Rules for the Right Energy: The WTO SCM Agreement and Subsidies for Renewable Energy

In the past 18 months, three cases (China – Wind Turbines, Canada – Renewables, and Canada – Feed-In Tariff) challenging the legality of government support for renewable energy came into the Dispute Mechanism System of the World Trade Organisation (WTO), highlighting problems surrounding the ambiguous legality of such objectively desirable measures. Set against a backdrop of increasing anthropocentric climate change and the vast growth of the green economy, the international trade rules that govern subsidies for renewable energy must be re-assessed. This paper examines the relevant provisions of the Agreement on Subsidies and Countervailing Measures (SCM) that create the legal problems manifested in the disputes. Advocating greater flexibility in the disciplines for subsidies, to allow those subsidies for which the positive externalities of climate change mitigation may outweigh the negative trade-distorting effects, the paper continues to explore three potential avenues of change – the clarified application of an exception under article XX of the GATT, the pursuance and conclusion of a comprehensive energy agreement in the WTO, and the creation of a system of subsidy management and exemption delegated to an expert, neutral, international organisation. Taking into account both the pressing need for change and the current impasse within the Doha Round Negotiations, the paper advocates the last option as the most effective and feasible way to ameliorate the current rules.

Chronique commentée des décisions de l'Organe de Règlement des Différends (juin 2010-novembre 2011)

Cette annee de decisions de l’Organe de Reglement des Differends (ORD) nous permet, a la suite des precedentes, d’observer, et aussi de tenter d’evaluer, les rapports entre la liberalisation du commerce international et les valeurs non marchandes. Valeurs non marchandes ou interets economiques ? Les plaignants qui mettent en avant ces valeurs (sante publique, environnement...) sont frequemment suspectes – parfois a juste titre – de ne les utiliser que comme pretexte a des attitudes protectionnistes (voir notamment affaires Chine – Matieres premieres, Etats-Unis – Cigarettes aux clous de girofle). Reussir a convaincre est d’une importance primordiale, d’ou une importance croissante des questions procedurales, ou liees a l’office du juge de l’ORD, qui tiennent une part non negligeable dans la presente chronique. Plusieurs Accords etaient invoques par les plaignants : le GATT de 1994, le plus frequemment, mais aussi l’Accord OTC, l’Accord SMC. Enfin, nous noterons la longueur de certains litiges (l’affaire Pommes – commencee en 2007, qui semble avoir trouve son epilogue – ou l’affaire Aeronefs gros porteurs – la plainte contre Airbus datant de 2004).