The Questionable Case for Subsidies Regulation: A Comparative Perspective

42 Pages Posted: 5 Aug 2009

See all articles by Alan Sykes

Alan Sykes

Stanford University - Law School


“Subsidization” by member governments occurs in the U.S. Federal system, the WTO, and the European Union. These three legal systems have responded very differently to the issues raised by subsidies, from the largely laissez-faire approach of the United States to the elaborate “state aid” rules of the EU to the intricate but weakly enforced rules of the WTO. This paper examines the three approaches asking which, if any, makes the most sense. It argues that the detailed rules of the WTO and EU are largely indefensible from an economic perspective. They fail to identify subsidization in any meaningful sense, and lack the capacity to distinguish socially constructive subsidies from those that are “protectionist” or are otherwise objectionable. The problems are likely irremediable, hinting that a laissez-faire attitude toward subsidies may be the best option.

Suggested Citation

Sykes, Alan, The Questionable Case for Subsidies Regulation: A Comparative Perspective. Stanford Law and Economics Olin Working Paper No. 380, Available at SSRN: or

Alan Sykes (Contact Author)

Stanford University - Law School ( email )

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Stanford, CA 94305-8610
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