Turmoil at WTO Over Subsidy Notifications and Environmental Policy Investigations

At Tuesday's meeting of the Committee on Subsidies and Countervailing Measures (SCM), tensions were palpable.

Key issues of contention included compliance failures with subsidy notifications and various national policies affecting international trade dynamics.

Committee Chair James Lester of New Zealand highlighted compliance issues, stating that 90 WTO members have not met their subsidy notification requirements for 2023.

This lack of transparency has hampered the effectiveness of the WTO's Agreement on Subsidies and Countervailing Measures (ASCM).

Heated Exchanges

The meeting witnessed heated exchanges, notably involving the United States, the European Union, and China, each defending their domestic policies while criticizing others'.

The European Union took issue with a recent U.S. investigation into the EU's Emissions Trading System (ETS), perceived as a critical tool in the EU's strategy to combat climate change. This investigation, which also targets the chemical melamine from Germany among others, has been condemned by the EU as a move that could undermine international cooperation on environmental objectives.

China Overcapacity Cited

On the other side, the U.S. and other developed nations criticized China's handling of industrial overcapacity, accusing it of fostering unfair competition through state subsidies, particularly in the semiconductor and other industries. The U.S. highlighted ongoing concerns with China's lack of transparency, specifically regarding its distant water fishing tax exemptions and fishery subsidies.

China defended its practices, asserting its commitment to transparency and criticizing the EU for blocking consultations and access to documents in a recent countervailing duty investigation on Chinese electric vehicles. This move by the EU was portrayed by China as contrary to WTO rules, hinting at protectionist tendencies under the guise of regulatory actions.

The discussions also addressed the "green bonus" system in France, which Korea and Japan argued discriminates against their auto producers by favoring certain electric vehicles through subsidies based on environmental criteria that they deemed arbitrary.

57% Members Non Compliant

The U.K. and other nations expressed concern over the low compliance rate with subsidy notifications. Only 71 members, or 43% of the membership, have submitted their 2023 notifications.

Further complicating matters, the U.S. initiated a countervailing duty investigation on imports of melamine from Germany, India, Qatar, and Trinidad and Tobago, with the EU criticizing this action as an attack on its ETS. The preliminary findings from this investigation are expected by July 16.

China Blasts Chips Act

Amid these disputes, China reiterated its accusation of discriminatory practices by the U.S., specifically pointing to the subsidies under the U.S. CHIPS Act, which it claims violate WTO rules by favoring domestic over foreign producers. The U.S. refuted this, citing the necessity of its measures under national security grounds and global competitiveness.

The next meeting is scheduled for the week of October 28, 2024.