Briefing Paper

Subsidies as an Instrument of Industrial Policy: Are they WTO Compliant?

“The economic recession revealed a global trend towards trade protectionism, replicating the fortification of domestic labour and commercial interests that
occurred during previous periods of recession. Although countries employ a wide
range of trade protective measures, the ones that have caught everyone’s attention are the ‘bail-out’ measures in the form of large sums of government revenue handed out to specific industries. In the wake of the recession, South Africa adopted similar measures. While not likely to lead to widespread trade restriction and retaliation, these measures place a strangle-hold on multilateralism and have the potential to hurt economies, including ironically the economies being parachuted to safety. Furthermore, some of these measures, including those adopted by South Africa, may have the potential to violate multilateral trade rules that were adopted to prevent protectionist measures by members of the World Trade Organization (WTO).”