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Subsidies and PTAs Luca Rubini University of Birmingham, Law School 24th February 2017 Roadmap • Speculating on subsidy control • Overview (general and EU PTAs) • Teachings for the future UK-EU trade relationship Speculating on subsidy control • Subsidies and their spillovers: ambiguity is the word • Subsidies and trade: economics 101 tells us that subsidies may act as obstacles to trade > hence need to regulate them and arbitrate their effects • Type of control: ‘disciplines’ (can/cannot do) and ‘unilateral remedies’ (defense) • Degree of control • • • • Loose: transparency and/or consultation Deeper: prohibitions and unilateral remedies Even more: Independent control with prior authorization Ultimate level: Direct effect: domestic law! • What is best locus of governance? Multilateral or plurilateral or bilateral? • ‘Real’ subsidy ‘disciplines’ make sense only with big pool of parties • The smaller is the pool, the looser are disciplines (and unilateral remedies become center-piece) Overview • Subsidy rules are relatively common (see economics 101) • WTO rules? Mixed feelings • Multilateral rules and procedures are not very effective: essentially you can subsidize, and, if not, remedies are weak and late • Transparency does not really work • Trade remedies as only meaningful discipline (but risk of trade wars) • Increasingly PTAs (especially EU ones) include subsidy or State aid disciplines, also going beyond WTO law (i.e. ‘WTO +’) Overview: the EU • EU State aid control – key and unique feature of EU integration; strictly linked to Internal market • EU-style State aid provisions present in broad network of PTAs with ‘non-EU European’ countries • Europe Agreements and Accession Treaties • Stabilization and Association Agreements (e.g. Macedonia, Croatia, Albania, Montenegro, Serbia, Bosnia & Herzegovina, Kosovo) • European Neighborhood Policy (e.g. Ukraine; Morocco; Jordan; but see Georgia) • EFTA and EEA (EFTA Surveillance Authority) • Switzerland – pressure and de facto alignment? • (Looser) State aid disciplines are present also in PTAs with non-European countries • See, e.g., EU – South Africa (EU-law based) • EU- South Korea (WTO-law based) Teachings for EU-UK negotiations • Highly likely • EU will consider State aid control as inherently linked to the internal market • EU will demand WTO + commitments • What’s the problem? • UK traditionally not a big subsidizer • Increasingly EU State aid policy is about ‘good public spending governance’ (pursuing horizontal objectives and fiscal discipline) • But public support is ambivalent and can raise frictions (note de facto close integration of UK and EU markets) • WTO-only-scenario (unlikely)? • Multilateral disciplines and procedures don’t bite • But resurrection of trade remedies: might hurt! • Note a ‘paradox’ • Stronger disciplines are usually accompanied with lessening of unilateral ones • What’s best? • Towards a domestic (subsidy/trade remedy) authority? Extending powers of Commission and Markets Authority? More soon • In progress … mapping of 281 PTAs on subsidies and State-Owned Enterprises (SOEs) …