Normative Framework for Subsidies and Countervailing Measures in Addressing Global Challenges: The Renewed Net Subsidy Approach

Abstract This article explores the global regulatory landscape for subsidies and countervailing measures, assessing its capacity to address challenges like climate change. While subsidies can effectively correct market failures and support public welfare, they also risk creating trade distortions and enabling protectionism. The analysis assesses the legacy of the Uruguay Round and the resulting Agreement on Subsidies and Countervailing Measures and finds that it does not sufficiently distinguish between socially beneficial and negative subsidies. Current rules often disregard the intent and actual impact of government support, resulting in inefficient remedies being applied against positive subsidies. Reviewing past reform efforts, the author presents the ‘renewed net subsidy’ approach – a pragmatic proposal that seeks to balance the flexibility needed for legitimate policy goals with safeguards against trade-distorting actions, aiming to foster more nuanced, cooperative governance of subsidies within the international trading system.