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THE QUESTIONABLE CASE FOR SUBSIDIES REGULATION: A COMPARATIVE PERSPECTIVE
ABSTRACT
‘‘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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