WTO'ing a Resolution to the China Subsidy Problem

22 Pages Posted: 31 Oct 2019

See all articles by Chad P. Bown

Chad P. Bown

Peterson Institute for International Economics

Jennifer Hillman

Georgetown University Law Center

Multiple version iconThere are 2 versions of this paper

Date Written: October 22, 2019

Abstract

The United States, European Union, and Japan have begun a trilateral process to confront the Chinese economic model, including its use of industrial subsidies and deployment of state-owned enterprises. This paper seeks to identify the main areas of tension and to assess the legal-economic challenges to constructing new rules to address the underlying conflict. It begins by providing a brief history of subsidy disciplines in the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) predating any concerns introduced by China. It then describes contemporary economic problems with China's approach to subsidies, their impact, and the apparent ineffectiveness of the WTO's Agreement on Subsidies and Countervailing Measures (ASCM) to address them. Finally, it calls for increased efforts to measure and pinpoint the source of the problems – in a manner analogous to how the Organization for Economic Cooperation and Development (OECD) took on agricultural subsidies in the 1980s – before providing a legal-economic assessment of proposals for reforms to notifications, evidence, remedies, enforcement, and the definition of a subsidy.

Keywords: WTO, subsidy, state-owned enterprise, dispute settlement

JEL Classification: F13

Suggested Citation

Bown, Chad P. and Hillman, Jennifer, WTO'ing a Resolution to the China Subsidy Problem (October 22, 2019). Peterson Institute for International Economics Working Paper No. 19-17. Available at SSRN: https://ssrn.com/abstract=3473890

Chad P. Bown (Contact Author)

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Jennifer Hillman

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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