
868e2ae08dad9a02e80c82f37b1b75cd.ppt
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What does trade law say, or should say, on subsidies for RE (technologies)? Dr Luca Rubini Birmingham Law School WTO, 13 October 2011 2
Roadmap • • Assumption Analysis of current subsidy rules Law reform? Conclusions 3
Assumption: certain RE subsidies may be good • (RE) subsidies are criticized • Question of industrial policy – Obstacles to RE – Various justifications (environment, socio-economic, security) – Subsidies as second-best but politically more acceptable – Design and synergy with other policies • Assuming certain forms of public support desirable, what do rules say? 4
Current rules (ASCM) • Is it a subsidy? • Is it objectionable? • Is it justifiable? 5
Uncertainty • Form of governmental action – classification of tax incentives and regulatory measures deeply problematic • When is public money ‘otherwise due’? Is this tax measure an exception? • Can regulatory action (minimum quantitative and pricing requirements) be ‘financial contribution’ or ‘income/price support’? • benefit – benchmarking difficult, esp. when market is heavily regulated and distorted – gov. intervention as mere correction or compensation? 6
Paradox • Specificity: – Although de facto specificity is easy, no specificity if measure is objective, neutral and non-discriminatory • Adverse effects: – Although assessment is case-specific, subsidies that do not discriminate as to the origin of RE and are technology-neutral less likely to cause adverse effects • Assuming this is correct, a paradox emerges: to comply with trade law guidelines, you have to renounce to the distinct policy preference for support measures that target, differentiate - even discriminate. What is good for policy may not be good for the law. 7
Inconsistencies • Discriminatory subsidies as broad and important category of RE subsidies • Various inconsistencies – local content subsidies are prohibited but production subsidies - which have the same effects - are permitted. Just a matter of form? – FIT purchase obligations - which require to source locally produced electricity - are also equivalent to local content requirements but no criticism is generally levelled to this differentiation. Just a matter of trade flows? • Are these inconsistencies, some of which are embodied in the law, justified? 8
‘No policy space problem in real world’ • Tacit acquiescence • ‘Glass-house’ effect • Few cases, only on local content subsidies, to re-establish ‘rules of engagement’ • Shall we expect more litigation? What can break equilibrium and render deficiency of the system more evident? 9
GATT XX • Issue is applicability of Art XX beyond GATT – Technically possible but politically troublesome for alleged systemic implications – Case-law unclear. Will it happen? • Can GATT XX justify discriminatory subsidies? • Can a discriminatory measure be necessary? • What circumstances would exclude unjustifiable and arbitrary discrimination? • GATT XX as ‘general clause’. – Although there are clearly boundaries, there is no measure that, in principle, cannot be justified. What ultimately matters is the overall assessment and balancing of the circumstances. 10
A new discipline • First-best is law reform: introduction of specifically negotiated and tailored legal shelter • Guidelines for new discipline: – Transparency – Hard and soft governance -> prescriptiveness and knowledgeenhancement/community-building – Rule and regime design: EU as model? 11
Conclusions • We may have some policy space under current rules but this may not be enough • The scenario is one of serious legal uncertainty or even inconsistency between legal requirements and policy prescription • Dispute Settlement may provide some policy space, through friendly interpretation of current rules and justifications, but piece-meal approach and put undue burden on judiciary • Reform of justifications is necessary • EU system of State aid justification can represent a model 12