Benefits of International Agreement on Trade-Distorting Subsidies Not Yet Realized

Gao ID: NSIAD-83-10 August 15, 1983

GAO reviewed U.S. efforts to reduce and eliminate the adverse effects of trade-related subsidy practices of foreign governments.

GAO found that the United States wanted stronger rules on the use of subsidies and better procedures for resolving subsidy-related disputes between governments. It appears to have achieved these goals with the Subsidies Agreement; however, the emphasis of the agreement is not on the elimination of subsidies, but rather on dealing with their trade-distorting effects. Since January 1980 the U.S. Government has tried to use the agreement to reduce and eliminate trade-distorting subsidies by: (1) persuading developing countries to make commitments to reduce or eliminate export subsidies that are inconsistent with their development needs; (2) persuading agreement signatories to report the extent, nature, and effect of subsidies; (3) using the agreement's conflict resolution procedures to help eliminate the effects of specific subsidy practices; and (4) negotiating an improved arrangement on the use of officially supported export credits and continuing to negotiate further improvements. Article 7 of the Subsidies Agreement provides for improved disclosure of information about subsidy practices. GAO found that the European Community and the U.S. Government disagreed about what constitutes a reportable subsidy practice under Article 7. GAO concluded that the reporting provisions of the agreement have done little to improve disclosure of subsidies information. Considerable problems exist in reaching an understanding with other signatories as to how some provisions of the agreement should be applied.


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Director: Allan I. Mendelowitz Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 275-4812

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