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Preserving
Policy Space for Sustainable Development:
The Subsidies Agreement at the WTO
By Francisco Aguayo Ayala and Kevin
P. Gallagher
This report argues that nations should reserve the
right to use subsidies to correct distortions in the
world trading system that act against the goal of sustainable
development. Such subsidies are justified in economic
theory, and can be essential tools for creating economic
growth that is socially and environmentally sustainable.
The Article 8 “green light” subsidies of
the SCM provided interesting cover for such subsidies.
However, their potential could not be fully realized
before the subsidies expired in 2000. Nonetheless, numerous
countries recognized their potential, and have since
called for their reinstatement and expansion. Rather
than letting green light subsidies expire, they should
be expanded so that a larger range of countries can
take advantage of them. Indeed, the Doha round leaves
ample room to not only reinstate Article 8 subsidies,
but to expand on them.
In the Doha declaration, space has been created for
the negotiation of subsidies that support “legitimate
development goals.” The documents state clearly
that such subsidies could include support for regional
growth, technology research and development, product
diversification, and the development and implementation
of environmentally sound methods of production. These
categories evoke the green light subsidies, but provide
room for them to be expanded in ways that will be even
more beneficial for sustainable development.
However, given the vast controversy concerning such
issues as agricultural support in the North, services
liberalization, and manufacturing tariffs, the SCM has
received relatively little attention during the current
round of negotiations. This is a mistake. Adjusting
the SCM is a relatively easy task, and some of the major
players who were against reinstatement have now come
around. Both Northern and Southern nations use these
subsidies, and more are needed as global economic integration
accentuates the many distortions that plague today’s
economies and impede progress toward sustainable development.
Policy brief, “Preserving Policy Space in the
Subsidies Agreement,” published by the International
Institute for Sustainable Development, see: http://www.ase.tufts.edu/gdae/Pubs/rp/TKNSubsidiesCommentDec05.pdf
Full report, “Preserving Policy Space for Sustainable
Development: The Subsidies Agreement at the WTO,"
published by the Trade Knowledge Network see: http://www.ase.tufts.edu/gdae/Pubs/rp/TKNSubsidiesDec05.pdf
For more on GDAE’s Globalization and Sustainable
Development Program:
http://www.ase.tufts.edu/gdae/policy_research/globalization.html
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