International rule-making on subsidies and countervailing measures in GATT and WTO has not proceeded on the basis of a common vision as to the purpose of those rules. On the contrary, the
5 D. Deese, World Trade Politics: Power, Principles and Leadership (London and New York: Routledge 2008).
6 E. Adler, Communitarian International Relations: The Epistemic Foundations of International Relations (London and
New York: Routledge 2005), p. 15; J. Brunnée and S. J. Toope, Legitimacy and Legality in International Law: An
Interactional Account (Cambridge: Cambridge University Press 2010), p. 69; P. M. Haas (Ed.), Knowledge, Power, and International Policy Coordination (Columbia: University of South Carolina Press 1992), pp. 2-3.
7 Above n 2 above, at 182.
8 Including subsidiary bodies, notably the Group of Experts on the Calculation of the Amount of a Subsidy.
9 See, for example, G. N. Horlick, ‘An Annotated Explanation of Articles 1 and 2 of the WTO Agreement on Subsidies and
Countervailing Measures’ Global Trade and Customs Journal 8/9 (2013), 297-299.
10 Thus, instead of a community of practice, it may be better to speak of a plurality of communities of practice.
11 R. Wolfe, “Endogenous Learning and Consensual Understanding in Multilateral Negotiations: Arguing and Bargaining in
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development of GATT-WTO rules on subsidies and countervailing measures has witnessed fundamental, philosophical differences regarding the role of subsidies and the rationale and architecture of international rules in this area.12 For instance, with respect to the Uruguay Round SCM Agreement, Cartland et al. contend that “the SCMA does not contain any preamble or explicit/implicit indication of its object and purpose because the drafters specifically decided that it would be impossible to agree on these matters...”13 Notwithstanding the absence of an explicit statement of object and purpose of the SCM Agreement, panels and the Appellate Body have sometimes expressed views on what they consider to be the object and purpose of the SCM Agreement.
Several WTO panels have characterised the object and purpose of the SCM Agreement in terms of the imposition of multilateral disciplines on subsidies that distort international trade. For example, the panel in Brazil – Aircraft considered that the object and purpose of the SCM Agreement “is to impose multilateral disciplines on subsidies which distort international trade”,14 "to reduce economic distortions caused by subsidies”15, and “to impose multilateral disciplines on trade-distorting subsidization”.16 The Appellate Body has adopted a somewhat different approach in characterising the object and purpose of the SCM Agreement. In US – Carbon Steel, the Appellate Body while noting that the SCM Agreement “contains no preamble to guide us in the task of ascertaining its object and purpose” considered that “taken as a whole, the main object and purpose of the SCM Agreement is to increase and improve GATT disciplines relating to the use of both subsidies and countervailing measures”.17
Thus, insofar as panels and the Appellate Body have attempted to identify object and purpose of the SCM Agreement, they have done so in very general terms. The absence of a clear statement on the purpose of the SCM Agreement and the fairly general characterisations of object and purpose offered by panels and the Appellate Body would appear to support the argument recently advanced by Andrew Lang that “the regime of global subsidies regulation is organised so as to remove space for the collective definition or redefinition of its underlying purposes”.18
12 See, e.g. G. C. Hufbauer and J. Shelton Erb, Subsidies in International Trade (Washington, DC: Institute for International
Economics 1984); G. Depayre, “Subsidies and Countervailing Measures after the Uruguay Round: An Overview”, in J.H.J Bourgeois, F. Berrod and E. Gippini Fournier (Eds.), The Uruguay Round Results. A European Lawyers'Perspective (Brussels: European University Press 1995), pp. 247-254; J.H. Jackson, The World Trading System: Law and Policy of
International Economic Relations (Cambridge, Massachusetts and London, England: The MIT Press 1997).
13 M. Cartland, G. Depayre and J. Woznowski, “Is Something Going Wrong in the WTO Dispute Settlement?”, Journal of
World Trade 46/5 (2012), 979-1016, at 992.
14 Panel Report, Brazil – Aircraft, para. 7.26. 15 Ibid., para. 7.66.
16 Ibid., para. 7.80. See also Panel Report, Canada – Civil Aircraft, para. 9.119 (“the object and purpose of the SCM
Agreement could more appropriately be summarized as the establishment of multilateral disciplines on the premise that some forms of government intervention distort international trade, [or] have the potential to distort [international trade]”); Panel Report, US – FSC (Article 21.5 – EC), para. 8.39 (the object and purpose of the SCM Agreement might be viewed “in terms of disciplining trade-distorting subsidies in a way that provides legally binding security of expectations to Members”); Panel Report, EC – Commercial Vessels, para. 7.162 (referring to “the object and purpose of providing strengthened disciplines on the use of trade-distorting subsidies”); Panel Report, EC – Countervailing Measures on
DRAM Chips, para. 7.58 (noting that “the object and purpose of the SCM Agreement [is] to discipline certain – but not
all – forms of government action which distort international trade”).
17 Appellate Body Report, US – Carbon Steel, para. 73. See also Appellate Body Report, US – Softwood Lumber IV, para.
64 (noting that the object and purpose of the SCM Agreement “is to strengthen and improve GATT disciplines relating to the use of both subsidies and countervailing measures, while recognizing at the same time, the right of Members to impose such measures under certain conditions”); Appellate Body Report, US – DRAMS, para 115 (the SCM Agreement “reflects a delicate balance between the Members that sought to impose more disciplines on the use of subsidies and those that sought to impose more disciplines on the application of countervailing measures”).
18 A. Lang, “Governing ‘As If’: Global Subsidies Regulation and the Benchmark Problem”, LSE Law, Society and
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Similarly, there is a long history of academic discussion on the economic rationale of GATT-WTO rules on subsidies and countervailing measures. Most commentators have questioned whether these rules can be justified on economic grounds.19 Some have argued in favour of a more rational economic approach to interpretation of the SCM agreement by emphasising a particular policy rationale. For instance, Grossmann and Mavroidis argue that an analysis of the structure of the SCM Agreement shows that the main objective of the SCM Agreement is not to discourage Members from using subsidies that cause an aggregate welfare loss in the importing country but from using subsidies that cause harm to competing producer interests importing countries.20 This approach is similar to the theory advanced by Richard Diamond in the late 1980s that United States countervailing duty law should be understood as aimed not at promoting global efficiency but at protecting an entitlement of domestic producers to protection from the harmful effects of foreign subsidies.21 Other authors have questioned whether the SCM Agreement reflects such an entitlement rationale.22 Zheng observes more generally that “…the current subsidy regulation regime could be described as a paradoxical amalgam of the efficiency rationale and the entitlement rationale”.23
In sum, current WTO rules on subsidies and countervailing measures exist in a context of lack of clarity and controversy regarding their purpose and economic rationale.24 Against this background, I am somewhat skeptical that it will be possible to identify “the purpose or rationale of the rules that the law creators had in mind” and to analyse whether this purpose is “duly reflected in administrative and judicial decisions” and whether "an evolution of the initial purpose [can] be identified”.25 Rather the more pertinent question may be how the indeterminacy of the rules with regard to their purpose and economic rationale has played out in practice, for example, in the type of methods of interpretation and modes of legal reasoning employed by WTO dispute panels and the Appellate Body. An interesting theme is that while the literature often laments the lack of rationale of the SCM Agreement, the indeterminacy of the agreement with respect to its underlying purpose and economic rationale may actually be a source of its strength. Andrew Lang has recently argued, in this respect, that “[g]lobal subsidies regulation, in other words, is made stable precisely because, and to the extent that, it offers a
19 See, e.g. K. Bagwell and R.W. Staiger, “Will International Rules on Subsidies Disrupt the World Trading System?”, The American Economic Review 96/3 (2006), 877-895; R. Diamond, “Economic Foundations of Countervailing Duty Law”, Virginia Journal of International Law 29 (1989),767-812; R. Diamond, “Privatization and the Definition of Subsidy: A
Critical Study of Appellate Body Texturalism”, Journal of International Economic Law 11/3 (2008), 649-678;W.F. Schwartz and E.W. Harper, Jr., “The Regulation of Subsidies Affecting International Trade”, Michigan Law Review 70 (1972), 831-858; A.O. Sykes, “The Questionable Case for Subsidies Regulation: A Comparative Perspective”, Journal of
Legal Analysis 2/2 (2010), 473-523; A.O. Sykes, “Second-Best Countervailing Duty Policy: A Critique of the
Entitlement Approach”, Law & Policy in International Business 21 (1989), 699-721; W. Zheng, “The Pitfalls of the (Perfect) Market Benchmark: The Case of Countervailing Duty Law”, Minnesota Journal of International Law 19/1 (2010), 1-54; W. Zheng, “Counting Once, Counting Twice: The Precarious State of Subsidy Regulation”, Stanford Journal of International Law 49 (2013), 427-76.
20 G.M. Grossman and P.C. Mavroidis, “ 1043-1070.Hot-Rolled lead and be. e, the publishers and place of publication have
been included.e good at the end. US-Lead and Bismuth II - United States-Imposition of Countervailing Duties on certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom: Here Today, Gone Tomorrow? Privatization and the Injury Caused by Non-Recurring Subsidies”, in H. Horn and P.C. Mavroidis (eds.) The WTO Case
Law of 2001 (The American Law Institute Reporters' Studies 2004), 170-200, at 185-186. 21 Diamond (1989), above n 19.
22 Sykes (1989), above n 19.
23 Zheng (2012), above n 19, at 65-66.
24 The debate on normative rationales WTO rules on subsidies and countervailing measures has been dominated by
economists and trade lawyers. It would be interesting to explore whether insights from recent academic work in international legal theory and philosophy on the concept of distributive justice as applied to the trading system could be applied to the subsidies rules. See, for an important recent contribution, O. Suttle, “Equality in Global Commerce: Towards a Political Theory of International Economic Law”, European Journal of International Law 25/4 (2015), 1043- 1070.
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set of techniques which can be used by China as much as the US, by West African cotton producers as much as European farmers. It is made stronger, rather than weaker, by the fact that many of us disagree about its underlying purposes – precisely because of its ability flexibly to adapt itself to a variety of different interests and goals, both individual and shared, as the context requires.”26
26 Lang, above n 18, at 28.
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