[My note, our involvement with the WTO has only been slitting our throats. Other countries, while members, have continued to practice overt protectionism to guard their industries and jobs for their citizens, even while lecturing us.]

After The Bailout, Tariffs?
James Bacchus, 12.19.08, 01:30 PM EST
America's trade chickens come home to roost.

We call it a "bailout."

International trade law calls it a "subsidy."

There are rules against manufacturing subsidies in international trade law if they take certain forms or have certain effects in the marketplace. The U.S. and the 152 other countries that are members of the World Trade Organization have agreed to be bound by these rules in the WTO treaty--and can suffer economic sanctions from other countries if they do not comply with them.

We have heard virtually nothing about these WTO rules on subsidies during the debate about the proposed bailout of the American automobile industry by American taxpayers--and all too little about the broader consequences that a bailout might have for the automobile industry and other American industries, both domestically and worldwide.

Desperate times do sometimes require desperate measures. U.S. auto sales are down 37% from a year ago. A principal American industry is on the precipice. As President-elect Barack Obama has said, "We simply cannot stand by and watch this industry collapse." We must shape an effective response that will save the automobile industry and prevent more widespread economic misery throughout America.

President George W. Bush has announced a rescue plan for General Motors (nyse: GM - news - people ) and Chrysler that will make $13.4 billion in federal loans available almost immediately. The money will come from the $700 billion fund set aside to bail out Wall Street firms and banks in October.

This is probably only the first check we taxpayers will write to Detroit. Before we write another, we should pause and ask: Does the auto bailout fall within the legal definition of a "subsidy" in the WTO treaty? A subsidy under WTO rules is a financial contribution that provides a benefit to a specific producer or producers in the marketplace. If so, will our trading partners be able to apply countervailing duties to U.S. auto exports to their countries? And will they have a legal case against us in the WTO?

European Commission President José Barroso has warned already that the European Union will closely examine a bailout of the American automobile industry to determine if it violates WTO rules.

Could we ensure that the U.S. would prevail in a WTO dispute if we were careful not to discriminate against foreign auto producers in the United States in the bailout package, and if we conditioned the bailout on an agreement by automakers to produce cleaner, more fuel-efficient cars?

More broadly, have we thought about whether bailing out the U.S. auto industry would have the international consequence of discouraging foreign direct investment in the U.S., or of closing off market access to U.S. autos and other U.S. products in other countries? And have we considered whether one subsidy would lead to another, at home and abroad?

The U.S. is not the only country contemplating auto and other subsidies as a way of confronting the global recession. The Europeans are drafting an auto subsidies plan now. Canada and China are considering assisting their automakers. If the U.S. leads the way, others may soon follow with more subsidies--for autos and other distressed industries.

During the Great Depression, a tariff war led to a suppression of demand, a contraction of world trade and prolonged and deepened global economic agony. World trade is already shrinking. Will it shrink more if we start a subsidy war?

It was the U.S. that urged other members of the WTO to agree to the global rules restricting subsidies. Indeed, it wasn't very long ago when the U.S. proposed tightening those restrictions.

As it is, only two kinds of subsidies are automatically illegal under WTO rules--export subsidies and import substitution subsidies. In June 2007, the U.S. proposed to other WTO members in the ongoing Doha Development Round of global trade negotiations that five additional kinds of subsidies be added to the prohibited list if they are specific to a particular country or industry:

--coverage of operating losses.

--forgiveness of government-held debt.

--lending to "uncreditworthy" companies.

--equity investments in "unequityworthy" companies.

--and other financing, such as "royalty-based" financing, that is not commercially available.

U.S. Trade Representative Susan Schwab said back then: "It's time to take the next step in the development of stronger WTO rules that will rein in the use of industrial subsidies. In an increasingly global economy, foreign government subsidies provide a distinctly unfair competitive advantage. The subsidies we want to prohibit maintain inefficient production capacity in industries ranging from steel to semiconductors. Stronger rules for these types of subsidies would address significant trade-distorting practices of many of our trading partners that often lead to unfair trade."

America's trading partners just might see the auto bailout as unfair trade.



http://www.forbes.com/opinions/2008/12/ ... cchus.html

[My second note, this objection has been raised AFTER the fatcat banks cashed and stashed their checks, with no benefit to working people.]