In a recent post, I quoted a speech by Congressman Ro Khanna, in which he said:
The US needs to work with our allies to pursue a broad WTO dispute case against the PRC. One hurdle is that the current Dispute Settlement process cannot litigate in key China-related areas that are not adequately covered by WTO rules. New rules must be negotiated.
For starters, the WTO must reconsider its “specificity” policy.
Under the current rules, the WTO allows countries like China, to support state-owned enterprises and provide wide-spread subsidies to its economy. The WTO should stop letting its members do this.
I interpreted his statements here to be about WTO rulings against U.S. CVD practices:
He doesn't spell it out in great detail, but when he mentions "specificity," he is probably thinking here about the use of domestic CVDs against China, and how the rules in the SCM Agreement may limit the use of CVDs, in particular as a result of certain Appellate Body rulings.
Upon hearing him mention this issue again at a recent event, however, I think I may have misunderstood. Here's what he said subsequently on the issue:
I think that the World Trade Organization's policy where you can have general subsidies but not specific subsidies needs to be revisited.
With this clear contrast between "general" and "specific" subsidies, my sense now is that he may be saying the SCM Agreement should not have a specificity requirement at all, which would mean deleting Article 1.2 ("A subsidy as defined in paragraph 1 shall be subject to the provisions of Part II or shall be subject to the provisions of Part III or V only if such a subsidy is specific in accordance with the provisions of Article 2"). The result would be that non-specific subsidies could be challenged directly in a WTO complaint under the "adverse effects" provisions, and could be countervailed as well.
The implications of this are potentially quite broad, as any measure falling under the Article 1 definition of a subsidy could now be challenged. At the same time, it might be hard to prove adverse effects / injury for non-specific subsidies, so perhaps the practical implications are not as great as they sound.
What's interesting here is that most left wing critics of the trading system complain that it restricts policy space too much. If I understand Khanna correctly, he is saying that it should restrict policy space more, by significantly expanding its constraints on subsidies. His focus here is China, but I suspect other people on his side of the political spectrum might point him to the various non-specific subsidies provided by the U.S. federal and state governments, which could now be subject to challenge through WTO complaints and also countervailed.
That leads me to the following question: Which subsidies exactly are the target? Presumably someone thinks there is a particular type of general subsidy that China provides but the U.S. does not, and therefore they can tweak the rules to catch the Chinese subsidies but not the U.S. ones. But it's not clear to me which Chinese subsidies these are and how they would be distinguished from U.S. subsidies.
