Regulation of Subsidies and State Aids in WTO and EC Law: Conflicts in International Trade Law

Regulating subsidies in international trade is crucial to the efficient and equitable allocation of resources and ultimately to global welfare. Much of the serious instability that persists in today's interdependent world may be traced to government interventions that dilute or defy such regulation. In this in-depth analysis of subsidies and State aids, Gustavo Luengo details the regulatory elements that reveal how governments undertake the granting of support to their national industries. Although in theory such support is aimed at two overriding economic objectives - the elimination of harmful distortions, and the correction of market failures - he shows that in practice it is political contexts that determine the principles and objectives of the regulation of subsidies. The analysis focuses on two mature regulatory systems, those of the World Trade Organization (WTO) and the European Communities (EC). The author describes both legal frameworks, and then proceeds to examine the differences and conflicts between the two systems, along with their reasons, consequences, and possible solutions. Significant aspects of the regulation of subsidies that emerge from the analysis include the following: # the role of 'countervailing measures' # the EC notion of 'State aid' as developed by the European Commission and the European Court of Justice # procedures for controlling subsidies under both systems and the consequences of granting subsidies in violation of applicable rules # the elements of 'financial contribution' and 'benefit' under the Agreement on Subsidies and Countervailing Measures (ASCM) # actionable and non-actionable subsidies # agricultural subsidies in both systems # the role of WTO dispute settlement procedures Both for its clear and comprehensive overview of the regulation of subsidies and State aids and for its insightful recommendations, this book will be welcomed as a major contribution to the field of international economic law. Practitioners, policymakers, officials, and academics will all find it enormously valuable for its analytic depth and its direct applicability to the need to develop fair and enforceable regulation of subsidies and State aids.

Preface, Acknowledgements, About the Author, Abbreviations, Part I: Introduction Chapter 1: Preliminary Remarks I. Subsidies in the International Context II. Scope of this Work: Subsidies in the WTO and the EC Chapter 2: Economic Analysis of Subsidies I. Introduction II. Analysis of International Trade III. Effects of Subsidies on International Trade IV. Effects of the Adoption of Countervailing Duties V. Concluding Remarks Part II: The Regulation of Subsidies in the WTO Chapter 3: Evolution of the Regulation of Subsidies in International Trade: From the GATT to the WTO I. Introduction II. Subsidies in the Havana Charter III. Subsidies in the GATT (1947–1979) IV. The Subsidies Code from the Tokyo Round of 1979 V. Negotiations in the Uruguay Round (1986–1994) VI. The Final Result: Agreements on Subsidies in the WTO VII. Concluding Remarks Chapter 4: The Regulation of Subsidies in the Agreement on Subsidies and Countervailing Measures I. Introduction II. Definition of ‘Subsidy’: Article 1 ASCM III. Specificity of the Measure: Article 2 of the ASCM IV. Prohibited Subsidies: Article 3 of the ASCM V. Non-Actionable Subsidies: Article 8 of the ASCM VI. Actionable Subsidies: Articles 5 and 6 of the ASCM VII. Remedies: Disputes and Countervailing Duties VIII. Notification and Monitoring of Subsidies: The Role of the SCM Committee IX. Exceptions for Developing Countries: Article 27 of the ASCM X. Concluding Remarks Chapter 5: The Regulation of Subsidies in the Agreement on Agriculture I. Introduction II. The Agreement on Agriculture III. The Application of the ASCM to Basic Agricultural Products: The Relationship Between the ASCM and the AoA IV. Trade Remedies: The Expiration of the Peace Clause V. Concluding Remarks Chapter 6: Subsidies in the WTO: The ‘Foreign Sales Corporations’ Case I. Introduction II. The DISC Case III. The US–FSC Case IV. Conclusions from the FSC Case Part III: EC Rules on State Aids Chapter 7: Evolution of the State Aid Rules in the EC I. Introduction II. State Aids in the History of the EC III. State Aids Nowadays: Statistics IV. Concluding Remarks Chapter 8: The Notion of ‘State Aid’: Article 87.1 of the EC Treaty I. Introduction II. The Notion of ‘Aid in Any Form’ III. Granted by a Member State or through State Resources IV. Distortion in Competition: Selectivity V. Effect on Trade between Member States VI. Concluding Remarks Chapter 9: State Aids Compatible with the Common Market I. Introduction II. State Aids per se Compatible with the Common Market III. State Aids Which May be Compatible with the Common Market IV. Conclusions Chapter 10: Procedural Issues: Control of State Aids in the EC and Recovery of State Aids I. Introduction II. Procedures to Control State Aids in the EC III. Remedies—Recovery of State Aids IV. Concluding Remarks Chapter 11: Agricultural Subsidies in the EC I. Introduction II . State Aids to Agricultural Products III. The CAP: Agricultural Subsidies in the EC IV. Concluding Remarks Part IV: Comparative Analysis of the Regulation of Subsidies in the WTO and the EC: Consequences Chapter 12: Comparison of the WTO and EC Rules on Subsidies and State Aids I. Introduction II. Systemic Approach to Disciplining Subsidies III. Definition of ‘Subsidy’ versus Notion of ‘State Aid’ IV. Specificity versus Selectivity V. Prohibitions and Exceptions in the WTO and the EC VI. Remedies: Withdrawal of the Subsidy versus Recovery of the Aid VII. Reasons for the Differences between the WTO and the EC VIII. Concluding Remarks Chapter 13: Conformity of the EC State Aid Rules With the WTO: Suggestions I. Introduction II. Conformity of State Aids With the WTO Rules on Subsidies: Conflicts III. A Different Case: Conformity of Agricultural Subsidies in the EC with the AoA IV. Consequences of the Lack of Conformity V. Suggestions: Ways to Improve the Conformity of the EC Rules on State Aids with the WTO VI. Concluding Remarks Chapter 14: Final Remarks I. Introduction II. Main Conclusions of This Work III. Subsidies in an International Context: Reflections and Room for Improvement IV. Conclusion: A Look into the Future Table of Cases I. GATT/WTO II. EC, Bibliography, Index