The Subsidies and Countervailing Measures Agreement: Ahead of its Time or Time for Reform?

Abstract

Developing and administering disciplines on the use of subsidies is one of the most difficult areas of international economic policy and rule making. It is also one of the most pervasive problems in international trade. Subsidization has taken on new prominence in the economic policy toolkit as governments around the globe have responded to the recent financial crisis with massive stimulus packages, including equity infusions into failing financial institutions as well as sectoral assistance programs for industries such as the auto industry. Subsidy programs for biofuels and other alternative energy industries are also a popular policy choice for governments in their rush to respond to the exigencies of climate change. The WTO Subsidies and Countervailing Measures Agreement that resulted from the Uruguay Round of multilateral trade negotiations was a masterful achievement, a balanced approach providing disciplines on the use of subsidies by governments that was appropriate for its time. However, times have changed, experience has gained from several WTO disputes, and the WTO rules on subsidies are in need of a major review by Members.

Keywords: WTO, subsidies, international trade, global economy, financial crisis, international finance, climate change, developing countries, world trade, world economy

JEL Classification: A12, A13, E00, E10, F00, F10, F12, F13, F14, H23, L16, L22, L50, L51, L52, O10, O11, O31, O32, Q32