At the same time that we are about to have a ruling on the legality of various subsidies to the aircraft industry, subsidies are proliferating in many other industries, in large part due to the impact of the financial crisis. The question then arises, if everyone is subsidizing, will any new WTO complaints be brought in this area? Perhaps only if there is an imbalance in the subsidies, with certain governments giving more to particular industries than other governments are. Otherwise, everyone is equally guilty, and a kind of subsidy equilibrium has been reached.
Here's a recent example, with a twist:
Ford Motor Co will receive nearly $5.9 billion in U.S. government loans to build fuel-efficient vehicles as the Obama administration deepened its commitment to reshaping the cash-strapped auto industry.
Japan's Nissan Motor Co Ltd will receive $1.6 billion and start-up Tesla Motors Inc will receive $465 million in low-cost loans to build all-electric cars in the first wave of financing from an Energy Department program intended to offset the cost meeting sharply higher new fuel economy standards.
So here we have the U.S. government subsidizing the efforts of several companies (including a foreign one, although only for its U.S. factory) to produce cars that use less gasoline, which, at long last, brings me to the question I was trying to get to: Do WTO rules need to be modified so that subsidies to promote a cleaner environment are explicitly permitted? I don't mean to make the Doha negotiations any more difficult than they already are, but it's possible that without some clarification, we could see some disputes in this area. (As noted, if everyone is doing it, perhaps there will be no challenges. But if one country does more of it than others, there is a chance of a complaint being filed.)
Speaking of the environment, the FT has the following story on a report to be issued tommorrow:
Countries implementing cap-and-trade systems for greenhouse gases may be able to use border taxes to protect domestic industries, after the World Trade Organisation gave a cautious nod to such measures.
In a report to be published on Friday, written jointly with the United Nations Environment Programme, the WTO said it was possible to implement border measures for environmental reasons under its rules.
“Rules permit, under certain conditions, the use of border tax adjustments on imported and exported products,” said the WTO. “The objective of a border tax adjustment is to level the playing field between taxed domestic industries and untaxed foreign competition by ensuring that internal taxes on products are trade neutral.”
