Saturday, January 23, 2010

2010 Predictions, Ctd. (Subsidy Edition)

Looks like one of my 2010 predictions is shaping up quite, ahem, nicely.  As you may recall, I predicted that 2010 would see a significant increase in anti-subsidy cases because of, among other things, "the massive proliferation of government subsidies in 2009 and increased tradeflows in 2010."  Well, according to Reuters, conflict appears to be brewing between developed and developing countries over this very issue:
Rich-country members of the World Trade Organisation blocked calls on Friday by developing countries to examine the possible protectionist impact of bailouts and financial stimulus packages.

Developing countries believe bailouts can have an unfair protectionist effect by helping industries in states that can afford them; typically high-income countries and some major emerging countries like China.

At a meeting of the WTO's trade policy review body, the United States and Japan blocked proposals for future WTO analyses of trade measures to cover fiscal measures such as bailouts, according to an official who attended the meeting.

The European Union did not reject the proposal completely but said it required further study so it could be conducted in a realistic and pragmatic manner.

The chairman of the WTO, Hungary's ambassador to the body Istvan Major, said he would continue discussions on this issue, but did not set a timeframe for further moves.

The WTO's regular protectionism reports, introduced in response to the financial crisis, have focused on conventional trade measures such as tariff increases and anti-dumping duties.

The call to include bailouts and stimulus packages was led by Argentina, backed by Ecuador, Cuba, Brazil, India and China.
Adding such measures to the WTO's "protectionism list" is a very good idea - subsidies can distort domestic and foreign markets just as much as tariffs can.  So it's surprising that the United States would block such a move, isn't it?  (Note: not actually surprising at all.)  Regardless, it's clear that a lot of countries are focusing on the potential economic disruption caused by all of the subsidies, bailouts, "stimuli" and rescue packages unleashed in 2009.  And if tradeflows do indeed continue to increase in 2010, domestic countervailing duty cases, or WTO subsidy challenges, might not be far behind.

Don't say I didn't warn you.

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