The regulation of legitimate subsidies in the WTO

Virtually every government grants subsidies in various forms in order to sustain companies and industries. Subsidies present an ambivalent nature and may produce various effects. They may distort the working of market forces, by creating unfair advantages to certain undertakings, and hence be viewed as negative. At the same time, however, they may be positive in helping to address failings in the market functioning or pursuing other objectives that a given society consider laudable, such as the protection of the environment or the promotion of innovation.

While this ambivalence is duly recognized in the European regulation of subsidies (called 'State aids') since its inception in 1957, the story has been different in the context of the world trading system. It has taken more than fifty years to have a recognition that certain subsidies may pursue positive objectives and produce (also) positive effects and should therefore be permitted by the relevant rules. This was the original situation when the World Trade Organization (WTO), the international organization dealing with the governance of international trade relations, came into force in 1995. The recognition of 'good' or 'legitimate' subsidies was however only temporary and, after five years, the countries of the WTO could not find an agreement to keep, even in amended form, those rules permitting certain subsidies. As a result, the legal regulation has become unbalanced by considering subsidies mainly from a negative perspective, and ignoring their possible redeeming features.

The research aims to analyse the case for a WTO discipline of 'good' or 'legitimate' subsidies and, on its basis, to design a possible new discipline which would in particular consider six possible objectives (development and regional growth; environmental and climate change; research and development; rescue and restructuring; agriculture; public services) that could be achieved through subsidies.

The idea has been discussed in scholarly and policy circles, particularly and increasingly in recent times. The subject in gaining momentum. It has not however been developed in a systematic way, starting from the conceptual and foundational bases, up to the operational level. The author proposes to do so, moving from theory to practice, by producing a model of rules which could be inserted in the WTO and could provide a good starting point for discussion.

The research will not be approached from a legal perspective only but will necessarily take into account of the findings of other important and relevant disciplines (from philosophy and ethics to sociology, from political science and international relations to economics). Further, when appropriate, reference will be made to the other main system of subsidy control in the world, ie the European one.

The subject of this research is particularly topical and timely for two reasons. One the one hand, it is fully placed within the context of the current changes and challenges of our globalized world and attempts to analyze to what extent subsidies should be used, for instance, to fight environmental degradation and climate change, to promote development and to address economic crises, and should accordingly be permitted by WTO law. On the other hand, the heart of the question is that the question of subsidies and their regulation in the WTO is not a dry and technical issue. Its solution ultimately turns into basic and fundamental questions. What is the WTO about in the 21st century? What are its purposes? Which values does it pursue? What concerns does it address?

The results of the research will be published in 2012 in a monograph entitled The Regulation of Legitimate Subsidies in the WTO by Cambridge University Press.

1. Who are the beneficiaries of the research?

I see various beneficiaries of the research. Think-tanks, which usually provide practice-oriented research, will benefit as well as policy-makers at both national and international level (governmental bodies and officials; international institutions and organizations, in particular the WTO and the EU). I would also suggest that the research may interest a very wide audience because it is not a mere technical discourse but an assessment of fundamental issues and values, economic and non-economic, underpinning various form of public intervention and their governance at international and domestic levels.


2. How will the beneficiaries profit from the research?

There are three distinct benefits: i) enhancing and sustaining the awareness of a topical subject, ii) disclosing the underlying conceptual analysis, and iii) outlining its practical and operational aspects. All these benefits will be continuously pursued.

The comprehensive and full development of ii) and ii) do represent the specific contribution of the research. Further, one of the distinctive features of the research is that it not only lays down the theoretical basis for the case of a discipline of legitimate subsidies in WTO, but also provides a draft text of a possible subsidy discipline which would represent a concrete and immediate reference point for discussion and debate in policy and political circles, thus being conducive to law-reform (the stated objective of my research).

3. What will be done to ensure that the beneficiaries have the opportunity to benefit from the research?

In order to make the findings and results as much available as possible and in the most effective way, an appropriate dissemination strategy is key. In this regard, I will try to make the most of my experience with the first monograph and other policy work I have done.

I will discuss the interim findings with policy makers, government and international organization officials. This will be done with interviews, discussions, seminars and workshops. The final results will be disseminated through one monograph, one article, one policy paper, a launch event of the monograph, and workshops/seminars in key places after the research.
The research will be developed through visits in and dialogue with various institutions: the Institute of International Economic Law, Georgetown University, and the Peterson Institute for International Economics, Washington DC; the World Trade Institute, Berne; the International Institute for Sustainable Development, Geneva. Scholars, policy-makers and governmental officials meet and interact in these academic institutions and think-tanks. The interaction with such influential international centres, which I will visit them during my study leave (Sep 2010-Dec 2010) and during the fellowship period (Jan 2011-Sep 2011), will dramatically increase the transfer of knowledge and its reach into policy and governmental circles.

I am increasingly raising my international profile and making new links thanks to teaching invitations, appointments, and most importantly research outcomes.
I already have some contacts and plan to use them to achieve the results above. In particular, I have significant links with two think-tanks: the prestigious Peterson Institute for International Economics, Washington DC, and the International Institute for Sustainable Development, which run the 'Subsidy Initiative'. The 'Subsidy Initiative' is heavily involved in the G-20 process. I am are currently cooperating with them towards proposals to submit to the G-20 to change the current discipline of subsidies. These links are crucial to ensure a good impact of my research on policy and law makers. These links - and those created during the research - will be used to disseminate the results of the research, mainly embodied in the C