From EU-Japan-US trilateral to a plurilateral initiative on subsidies

Abstract

Geo-economic tensions, notably associated with the rise of China, and global collective action problems – climate change; the COVID-19 pandemic – call for international cooperation to revise and develop rules to guide both the use of domestic subsidies and responses by governments to cross-border competition spillover effects. Current WTO rules dividing all subsidies into prohibited or actionable categories are no longer fit for purpose. Piecemeal efforts in preferential trade agreements configurations offer a basis on which to build but are too narrow in scope. Addressing spillover effects of subsidies could start with G20 countries launching a work program to mobilize an epistemic community concerned with subsidy policies, tasked with building a more solid evidence base on the magnitude, purpose and effects of subsidy policies. The aim of such an effort should be to extend trilateral deliberations on industrial subsidies held by the EU, Japan and US in 2018-2019 into a negotiation with China and a broader group of WTO members to establish a plurilateral agreement on new rules of the game.