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Recent stimulus packages and WTO subsidies law PICARD 2009 – COSTA RICA

Recent stimulus packages and WTO subsidies law PICARD 2009 – COSTA RICA. Prof. Santiago Ibáñez Marsilla Universidad de Valencia (SPAIN). Economic environment. Financial and economic crisis State intervention vindicated as necessary to avert market disruptions

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Recent stimulus packages and WTO subsidies law PICARD 2009 – COSTA RICA

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  1. Recent stimulus packages and WTO subsidies lawPICARD 2009 – COSTA RICA Prof. Santiago Ibáñez Marsilla Universidad de Valencia (SPAIN)

  2. Economic environment • Financial and economic crisis • State intervention vindicated as necessary to avert market disruptions • Fiscal stimulus > including subsidies to some troubled companies Prof. Santiago Ibáñez Marsilla

  3. WTO definition of subsidy Agreement on Subsidies and Countervailing Measures (ASCM) Subsidy is: • a financial contribution by a government • by which a benefit is conferred • a measure which is specific • and causes adverse effects Prof. Santiago Ibáñez Marsilla

  4. Specific categories of subsidy Actionable subsidies - Prohibited subsidies: • Subsidies contingent upon export performance • Subsidies contingent upon the use of domestic over imported goods > Prohibited subsidies are automatically deeemed specific Agricultural goods: Agreement on Agriculture Services: GATS Prof. Santiago Ibáñez Marsilla

  5. Fiscal stimulus andWTO law on subsidies Two salient measures: 1.- Export credit support. 2.- Subsidies to the automobile industry. Prof. Santiago Ibáñez Marsilla

  6. Export credit support (1) Export Credit Agency (ECA): • A government sponsored agency that promotes exports by facilitating export credit • Two forms: “official financing support” and “pure cover”. Export credit support by an ECA could be deemed a “subsidy” even when there is no cost to the government, because market conditions are the only benchmark to decide whether there is a “benefit”. • Market failures and State intervention > Prohibited subsidies: contingent upon export performance Prof. Santiago Ibáñez Marsilla

  7. Export credit support (2) Item (k) in Annex I ASCM excludes from prohibited subsidies credit that complies with the interest rate provisions of the OECD Arrangement on guidelines for officially supported export credits. • Relevant for “official financing support”, but not for “pure cover”. • An “a contrario” interpretation of items in Annex I is not allowed. Prof. Santiago Ibáñez Marsilla

  8. The automobile industry Different measures to confront the crisis in this sector: - Full or partial nationalization • Credit support • Cash for clunkers Even if some of these measures fall under the definition of “subsidy”, it is very unlikely that a case be brought to the WTO or even that CVD be applied. Prof. Santiago Ibáñez Marsilla

  9. The ASCM in the Doha Round The US pressed for the inclusion of five new categories of prohibited subsidies. Three relevant elements to reconsider: - Retroactive effect of remedies. • Proper consideration of market failures as a basis for permitted subsidies. • Maybe not in the definition of subsidy but in the remedy provided against it (“liability rule”). • Subsidies in the service sector. Prof. Santiago Ibáñez Marsilla

  10. Recent stimulus packages and WTO subsidies law Thanksforyourattention! Prof. Santiago Ibáñez Marsilla Universidad de Valencia (SPAIN) Prof. Santiago Ibáñez Marsilla

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