Policy Options Paper

Rethinking Subsidy Disciplines For the Future

January 2016
Subsidies are a critical instrument in the toolbox that governments use to achieve a variety of policy goals. In an increasingly interdependent world, addressing the negative externalities of subsidies while maintaining their market-correcting correcting function and the policy space for development is an imperative from a sustainable development perspective. In light of the changes in the global economy and emerging social and environmental concerns, the present paper seeks to assess the adequacy of existing international subsidy disciplines and suggest possible areas for improvement and reform. Three groups of policy options are identified. First, revisit international disciplines by creating, under the WTO Agreement on Subsidies and Countervailing Measures, a narrowly defined category of non-actionable subsidies with clear boundaries, as well as a category of subsidies subject to absolute prohibition or a presumption of prohibition. Second, the procedures for establishing, monitoring and resolving disputes for the various types of subsidies should be adjusted by strengthening the role of a neutral decision-maker while restricting the option for unilateral action. Finally, a key consideration in the field of subsidies is that of obtaining better data and measuring impacts. The establishment of an independent platform for data collection using common standards and definitions is recommended. Where appropriate, the paper seeks to identify gaps in priorities and concerns over subsidy disciplines between advanced and developing economies.
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