WTO: Managing impact of subsidies could help revitalize global trade

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The World Trade Organization and other international bodies have discussed the importance of addressing the impact of government subsidies on cross-border commerce.


An emphasis on transparency is crucial to understanding and managing the various effects of government subsidies on international trade relations, according to a new report co-published by four influential global bodies.

The World Trade Organization (WTO), International Monetary Fund, Organisation for Economic Cooperation and Development (OECD) and World Bank Group jointly authored the study, the key findings of which were discussed at an online event earlier this month.

Central to the report was a focus on subsidies that could have harmful effects, which could come in the form of direct government spending, tax incentives, equity infusions, concessional loans, price support policies and the provision of goods and services on favorable terms.

The increasing use of subsidies has also fuelled growth in reactive actions to offset their effects, such as countervailing duty measures, which have become more common in recent years.

In her opening comments at the recent online event, WTO deputy director-general Anabel Gonzalez pointed out that subsidies can have various consequences for trade and related policy, including distorted investment flows and reduced public support for open trade.

It was also noted that new debates around the significance of subsidies have emerged in the wake of key trends and issues such as:

  • The growth of global value chains
  • The development of digital markets
  • The global influence of international state-owned enterprises and economies in which the state plays a central role
  • Climate change

"There are many pressing reasons why subsidies need to be addressed, and why they need to be addressed now," Ms Gonzalez said. "Dealing constructively with subsidies could go a long way to ease the pressures weighing on the WTO and revitalize global trade."

Another key message conveyed by the authors of the report is that the information currently available about subsidies is lacking, and more extensive international cooperation is required to promote transparency and predictability in global trade.

"Improving transparency is a fundamental first step in addressing subsidies," said Julia Nielson, deputy director of the OECD's Trade and Agriculture Directorate. "Subsidies are notoriously hard to reform; it's easier when others are doing it as well."

Subsidies have reportedly been the most frequently used form of government intervention since the 2008 financial crisis, overtaking other measures such as tariffs.