On Monday, July 27 GMF hosted an event with James Bacchus and Gary Hufbauer to discuss transatlantic collaboration on stronger WTO disciplines for subsidies in a period of bailouts and stimulus packages. The discussion took place in the Rayburn House Office Building on Capitol Hill and was moderated by Bruce Stokes, a senior transatlantic fellow with GMF and an international economics columnist for the National Journal.

James Bacchus who currently chairs the Global Trade & Investment Practice Group of Greenberg Traurig, LLP, served for eight years at the WTO as the chairman of the seven-member Appellate Body. In his presentation Bacchus underlined the historical leadership of the United States within the GATT/WTO system in building up multilateral disciplines for subsidies. The United States has also advocated strengthening those disciplines, as exemplified by an official proposal it tabled two years ago in the Doha negotiations.

Nevertheless, Bacchus compared the subsidies regime to a ‘glass house' that is under increasing pressure of ongoing and new disputes. He contended that the EU and the United States will mutually benefit if they resolve the ongoing Boeing vs. Airbus disputes bilaterally. 

The large funds transferred to the financial institutions through stimulus and bailout packages may fuel a chain of new controversies in the WTO. Bacchus indicated that the WTO agreement for trade in services does not contain clear rules for subsidies in service industries, including the financial sector, which needs to be addressed by the member countries sooner rather than later. In addition, U.S. lawmakers must be careful with the new climate change bill, in order to ensure that it will not violate the WTO agreement on subsidies, Bacchus added.

The former WTO judge called for consistency in interpreting and implementing the WTO rules, especially in a period where the USTR is putting emphasis on ‘enforcement' while reminding its trade partners, such as China, to comply with the WTO obligations on various areas. Bacchus underlined the fact that no one can ignore WTO laws, as WTO disciplines and litigation have the status of ‘hard law' backed by compulsory jurisdiction and possible economic sanctions.

Confirming and further complementing these points, Gary Hufbauer, a Reginald Jones senior fellow with the Peterson Institute for International Economics, argued that given the recent period of intense subsidization, the United States has much to lose as a result of inevitable WTO challenges and retaliatory responses from other countries.  

Hufbauer underscored the fact that since the ‘Great Crisis' struck in 2008, the EU and its member states have allocated substantial amounts to emergency financial measures while the money committed by the U.S. government to the recovery effort has amounted to $12 trillion. According to Hufbauer, almost $4 trillion of subsidies, bailouts and guarantees in the United States and EU have a distinctly national flavor and could raise the specter of WTO-illegal subsidies.

Hufbauer cited the Boeing vs. Airbus dispute as a prime example of high-profile state subsidies that have been challenged at the WTO. However, alleged Airbus and Boeing subsidies over the past two decades shrank in comparison to U.S. and EU stimulus and bailout spending in the past year alone. Consequently, Gary Hufbauer cautioned against a prolonged trade war among the United States, Europe and others due to new cases that can be brought into the WTO litigation in the absence of a ‘grand bargain' between the United States and the European Union.

Under these unusual circumstances, Hufbauer called for a time-limited ‘cease fire' on outstanding subsidy cases along with a pledge not to launch fresh cases predicated on recent subsidies. In addition, a successful resolution of the Boeing-Airbus dispute could contribute to a ‘fresh start' agreement between Washington and Brussels in the industrial sector.  

You can listen to the presentations of James Bacchus and Gary Hufbauer by clicking here.