Journal Article

The Questionable Case for Subsidies Regulation: A Comparative Perspective

Alan O. Sykes

in Journal of Legal Analysis

Published on behalf of The John M. Olin Center for Law, Economics and Business at Harvard Law School with the support of the Considine Family Foundation

Volume 2, issue 2, pages 473-523
Published in print January 2010 | ISSN: 2161-7201
Published online January 2010 | e-ISSN: 1946-5319 | DOI: https://dx.doi.org/10.1093/jla/2.2.473
The Questionable Case for Subsidies Regulation: A Comparative Perspective

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“Subsidization” by member governments occurs in the U.S. federal system, the WTO, and the European Union. These three legal systems have responded very differently to the issues raised by subsidies, from the largely laissez-faire approach of the United States to the elaborate “state aid” rules of the EU to the intricate but weakly enforced rules of the WTO. This paper examines the three approaches asking which, if any, makes the most sense. It argues that the detailed rules of the WTO and EU are largely indefensible from an economic perspective. They fail to identify subsidization in any meaningful sense, and lack the capacity to distinguish socially constructive subsidies from those that are “protectionist” or are otherwise objectionable. The problems are quite possibly irremediable, hinting that a laissez-faire attitude toward subsidies may be a reasonable option.

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Subjects: Jurisprudence and Philosophy of Law

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