Making international trade work for sustainable development: toward a new WTO framework for subsidies

Abstract

Abstract Government subsidies for fossil fuels, agricultural production, and fisheries amount to trillions of dollars per year. This funding harms economic efficiency, disrupts trade, and actively exacerbates the global environmental and climate crises. Moreover, the scale of these subsidies far exceeds the support provided to industries and activities that contribute to the transition towards a low-carbon and sustainable future economy. In seeking to discipline such subsidies, trade law has traditionally focused on whether the funding distorts trade without regard to the rationale or purpose of the subsidies. In this article, we argue that this approach to subsidies is at once incompatible with (i) the original vision of multilateral trade law, (ii) what is needed to manage international economic interdependence in today’s world, and (iii) the present moment’s urgent need to take seriously sustainable development as the ultimate objective of the trading system. The reform package we present in this article calls for a reframing of WTO subsidies rules on a foundation that gauges alignment with sustainable development alongside trade distortions, with sustainability becoming the first and foremost test of whether subsidies should be permitted—consistent with the sustainable development mandate in the Marrakesh Agreement that established the WTO.