To Regulate, or Not to Regulate? Subsidies for Foreign Enterprises, Climate Change, and Currency Undervaluation

Abstract

In response to today’s rapidly changing global trade environment, countries have continued to make changes to their policy objectives and instruments to address new and emerging issues such as supply chain restructuring and reshoring, climate change, and currency undervaluation. To this end subsidies have been playing a particularly important role, and are expected to be used more broadly across different sectors in the coming years. While controversies over government subsidization are likely to continue at the international level, the United States and the European Union have proposed at the domestic level to expand the scope of subsidy regulation and to tighten regulation on newly emerging subsidy types beyond the traditional boundaries set by international trade rules. Among a number of the latest developments on subsidy regulation, this Brief intends to primarily focus on (i) transnational subsidies granted by a government to enterprises active in other foreign countries (hereinafter “foreign subsidies”); (ii) green subsidies for climate change mitigation; and (iii) subsidies related to currency undervaluation.

Keywords: foreign subsidies, climate change, currency undervaluation, countervailing duties, CVDs