The Problem of Subsidies as a Means of Protectionism: Lessons from the WTO EC — Aircraft Case

Abstract

In this article, I examine the problem of subsidies in international trade. In this regard, I consider that a possible purpose of international regulation of subsidies is to fight protectionist subsidies, as opposed to subsidies used for other goals. With this purpose in mind, I then consider whether the SCM Agreement can be said to reflect this purpose. I also discuss whether the interpretations of the SCM Agreement in the EC — Aircraft dispute provide any insights on this issue. The dispute involved alleged subsidies to the aircraft maker Airbus by the European Union and certain member state governments, and has been one of the highest profile and most commercially significant disputes in the history of the WTO. The issues in the case were extensively argued by two of the leading WTO members, and thus its findings on these issues are particularly significant. Reviewing the EC — Aircraft Panel and Appellate Body findings on a number of specific legal issues, I conclude that a case can be made that the SCM Agreement and the EC — Aircraft dispute reflect an underlying purpose of the SCM Agreement of fighting protectionism.

Keywords: WTO, Subsidies