Monday, December 24, 2012

Rethink on subsidies required?

The Airbus-Boeing dispute is one of the longest trade disputes that has dominated the WTO dispute settlement mechanism for years now. I have blogged about the issue here, here and here. Both the aircraft manufacturing giants allege, through their respective governments, that the other is a recipient of illegal subsidies that need to be scrapped. The WTO Appellate Body in both the cases has come to the conclusion that there have been illegal subsidies in both the cases. The dispute has reached the final stages of compliance and counter measures.

A recent piece in the Chicago Tribune tracing the history of the dispute called for a stop to the "launch aid" given by Europe to Airbus.
"In a surprising move that puts a welcome spotlight on launch aid, Germany reportedly held back the final 600 million euros of loans that it had promised. Alas, the decision has nothing to do with restoring fair trade practices. Germany is withholding its contribution to ensure that it gets a fair share of the jobs from the aircraft manufacturing it subsidizes.
 Nevertheless, even an internal European dispute over launch aid is a step in the right direction.Launch aid has got to go. The trade dispute between the world's leading markers of commercial aircraft has gone on too long. It must be resolved before it erupts into an all-out trade war — which could happen in relatively short order, by WTO standards."

While launch aid remains on the Airbus side, large subsidies on the Boeing side too needs to be addressed against which the WTO Appellate panel has found incompatible with WTO law. While China is normally in the dock for "subsidizing" its industry, the Airbus-Boeing dispute highlights the "all-pervasive" nature of subsidies in both the developed and developing worlds. Renewable energy is the next big area where the battle over subsidies is going to be fought. What should the international legal framework be in the context of renewable energy subsidies? Should it be different from aircraft subsidies as suggested by Gulzar here? Should we move towards a new phase of differentiation between different types of subsidies? Does the ASCM allow such a distinction? Do we need a rethink obout subsidies under WTO law?

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