This letter to the FT makes a good point:
Sir, A colleague wondered whether a Detroit bail-out would run afoul of the World Trade Organisation rules prohibiting government subsidies that grant unfair export/import advantage to domestic manufacturers. A quick Google search revealed that in June 2007 the US Commerce Department proposed changes to the WTO subsidy rules to specifically bar five types of subsidies, including government payments to companies to cover operating losses, government lending to "uncreditworthy" companies, and government equity investments in "unequityworthy" companies. GM, Ford and Chrysler surely must be thanking their lucky stars that the Doha Round was never concluded.
Michael J. Bond,
Gardner Bond Trabolsi,
Seattle, WA, US
An old blog post of mine on the U.S. proposal is here. The text of the proposal is here. Some of the key language (footnotes omitted):
3.2 Except as provided in the Agreement on Agriculture, and provided that such subsidies are specific, and the subsidized product is exported or competes with imports, the following subsidies within the meaning of Article 1 above, shall be prohibited:
(a) the direct transfer of funds to cover operating losses sustained by an enterprise or industry;
...(c) loans and other instruments of indebtedness provided directly to enterprises that are uncreditworthy;
(d) provision of equity capital where the investment decision is inconsistent with the
usual investment practice (including for the provision of risk capital) of private
investors in the territory of that Member;
