As WTO Talks Continue on Subsidy Reform Initiatives, Concerns Persist over Poor Notification Records (IISD)

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WTO members are debating why it remains so difficult to meet existing requirements to notify government support to their economic sectors – and what more can be done.

These notifications are more than an exercise in transparency: they have practical implications for members’ ability to negotiate new rules and monitor the implementation of existing commitments.

Subsidy notifications can also be a significant factor in legal disputes – yet they can be difficult for countries with limited resources to keep up with.

The subsidy notifications issue is also part of a bigger discussion over the health and functioning of the WTO.

The need to reform the World Trade Organization’s (WTO) agriculture subsidy rules and to clinch a deal that disciplines harmful fisheries subsidies are well known, and the latter agreement is now nearly within striking distance. These are important advances, which can be a boon to addressing long-standing hurdles in the field of sustainable development. As this work continues, WTO members are also debating why it remains so difficult to meet existing requirements to notify government support to their economic sectors – and what more can be done.

Most recently, the poor record in WTO subsidy notifications came to the fore during the 27 October meeting of the WTO’s Committee on Subsidies and Countervailing Measures. According to a meeting summary, over half of the WTO’s 164 members have yet to provide last year’s notifications, and dozens of members are behind on notifications for prior years, even as far back as 2015.

The US proposed setting timeframes for responding to written requests for subsidy information. According to the proposal, such requests would be dealt with in writing within 60 days, with responses to further questions limited to 30 days. Any outstanding requests would stay on the committee’s meeting agenda until resolved. It is not yet clear if that proposal will advance further.

The problems that WTO members face in complying with their existing notification obligations are familiar in trade circles, but can often fly under the radar as political debates and processes steal the limelight. However, these notifications are more than an exercise in transparency: they have practical implications for members’ ability to negotiate new rules and monitor implementation of existing commitments. Subsidy notifications can also be a significant factor in legal disputes – yet they can be difficult for countries with limited resources to keep up with.

Trade Disputes, Notification Challenges

Resolving this issue is not as simple as it might appear. Many governments have noted that the timelines and level of information needed for subsidy notifications can be cumbersome to implement in practice as the process often requires consolidating information from multiple federal government agencies as well as sub-central governments.

Meanwhile, some of the WTO’s best-known legal cases involve subsidy disputes, which have in turn fueled an in-depth discussion over what qualifies as a subsidy under WTO rules and how to track this spending. Among these are the “dueling disputes” between the US and the EU over subsidies to their respective aircraft sectors, which date back well over a decade and are still ongoing. Just last month, a WTO arbitrator gave the EU the green light to impose nearly USD 4 billion worth of countermeasures against the US, after the Appellate Body found the year prior that US subsidies to Boeing have yet to be brought in line with WTO rules.

The agriculture sector is also known for major trade disputes, including the ongoing case between China and the US over China’s subsidies for wheat and corn. Trade disputes have also covered renewable energy subsidies linked to local content requirements, among various other issues.

These cases are so sensitive – and high-profile – partly because government subsidies, while often crucial to building an economic sector domestically, can make it difficult for other countries with limited public budgets to do the same. This is especially apparent in the case of cotton, where Benin, Burkina Faso, Chad, and Mali, known collectively as the Cotton-4, or C-4 countries, have long been pushing for wholescale reform of  marketing and export subsidies for cotton. Related negotiations have seen little progress despite a mandate for WTO members to find a solution “ambitiously, expeditiously and specifically.”

The US and Brazil also famously sparred at the WTO over the legality of Washington’s subsidies to its cotton sector. Brazil came within days of imposing WTO-authorized countermeasures that covered goods trade, as well as intellectual property rights protections and services trade.

Concerns Across WTO Bodies

The problem with subsidy notifications is also a regular concern across multiple WTO bodies that deal with goods trade. It has been a recurring complaint in the WTO’s Committee on Agriculture, given that the organization’s Agreement on Agriculture sets out a series of disciplines on agricultural domestic support, under which cases like the US-Brazil cotton dispute and the US-China agricultural subsidy dispute have been adjudicated.

Many WTO members are overdue on several years’ worth of farm subsidy notifications, and what these contain can vary significantly, according to recent analysis from the International Institute for Sustainable Development (IISD) and the International Food Policy Research Institute (IFPRI). Several WTO members have complained that efforts to negotiate new disciplines on domestic farm subsidies will be moot if they have no sense of existing subsidy levels and types. These subsidies also help inform the picture of WTO members’ overall macroeconomic landscape, which is assessed on a regular basis during the organization’s trade policy review process.

The overall debate over subsidy notifications came to a head last year at the WTO’s Goods Council. In early 2019, the US and several co-sponsors put forward a proposal that would impose stiff “administrative measures” on WTO members who had fallen behind on their notification obligations, including on subsidies, which was later updated in July of that year. The proposal included language encouraging developing country members “to request assistance and support for capacity building from the Secretariat, either in the form of WTO trade-related technical assistance or as ad hoc-assistance for a particular notification,” if needed, along with notifying the relevant WTO bodies of the challenge they are facing.

The African Group, Cuba, and India criticized the move, noting the severe capacity challenges many countries face in meeting these obligations. They further noted that many developed countries must also do more to fulfil their own transparency obligations, from goods trade to services trade and intellectual property rights. Neither proposal led to a consensus outcome.

Ultimately, the subsidy notifications issue extends beyond the challenges faced by the WTO’s high-profile dispute settlement and negotiating pillars. It is part of a bigger discussion over the health and functioning of the WTO. Many WTO members and experts alike have flagged the need to consider how to support the work of the regular bodies further, how to address the transparency challenges without imposing onerous requirements on those that can least afford it, and why the implementation of many existing WTO decisions, including those with a crucial development dimension, has been slow. These issues may not be as prominent in news headlines and Geneva discussions as WTO negotiations and dispute settlement; however, if left unresolved for much longer, their impacts will be felt deeply across the multilateral trading system.

This policy brief was written by Sofía Baliño, Communications and Editorial Manager, Economic Law and Policy, IISD. 

Note: This policy brief is a re-post of the original posted on the IISD Website.