Abstract

Government subsidization has historically started to be frequently and systematically adopted during the mercantilist period from the XVI and the XVII century, although in some countries it goes back even longer. This period was characterized by the introduction of new production and commercialization methods. The merchant class was vested with great power, and often used such power to provide political institutions with suggestions and requests. Indeed, political support was a fundamental element of companies’ survival and growth because states had the power to affect the market and promote the competitiveness of national companies. A broad array of strategies and measures could lead to this result — including the adoption of discriminatory tax regulations and quotas against foreign products and companies in favor of domestic industries. In Europe, mercantilism developed at a time when the economy was in transition, after centralized nation-states successfully replaced the previous feudal system. Moreover, technological innovation in the transportation sector — and in particular in shipping — together with increasing urbanization, led to a rapid and exponential growth in international trade. The function of mercantilism was twofold: on the one hand, it focused on how international trade could bend to serve the interests of nation-states, while on the other it explored ways for national governments to contribute to domestic companies’ trade and business development. Those were the years that saw the adoption of modern accounting. The latter allowed precise and constant monitoring of trade inflows and outflows, creating the necessity of maintaining a positive trade balance, which could be achieved by ensuring that exports were higher than imports. This was possible thanks to the introduction of new domestic products that could effectively replace traditionally imported ones. During the liberalist period — characterized by a laissez-faire economic policy — public subsidies were set aside, while they revived at the end of the XIX century when protectionism enjoyed a new vogue. Since then, subsidies have been used by governments both to promote national economic, social, and political policy as well as to correct market distortions. It is generally recognized that subsidies often produce harmful effects on free trade and production rather than equitable results, and international trade law has taken into account all these concerns in drafting specific rules on subsidies. In this contribution, we are going to draw the attention on the effects of subsidies, distinguishing subsidies which are necessary for desirable and acceptable purposes from those that are nothing but disguised protectionist measures and that might trigger international trade remedies. In particular, this evaluation will be applied to renewable energy subsidies. Governmental support to alternative and renewable energy industry represents a fairly common choice for governments in need to comply with the commitments that bind them within the international framework for climate change. Besides being a common choice, renewable energy subsidies represent an effective one: according to the Intergovernmental Panel on Climate Change (IPCC), “one of the most effective incentives for fostering greenhouse gas (GHG) reductions are the price supports associated with the production of renewable energy, which tend to be set at attractive levels. These price supports have resulted in the significant expansion of the renewable energy sector in countries belonging to the Organization of Economic Cooperation and Development (OECD) due to the requirement that electric power producers purchase such electricity at favorable prices.” This contribution is divided in four sections. The first one (section 2), offers a brief description of the evolution of the World Trade Organization (WTO) regulation of subsidies, while in the second one (section 3) we analyze the approach of the WTO towards renewable energy subsidies, focusing on specific issues, such as the case of feed-in tariffs and local content requirement. Section 4 provides an overview of WTO disputes involving subsidies in the renewable energy sector, and Section 5 focuses on the recent decisions in the Canada — Renewable Energy and Canada — Feed-in Tariff Program disputes. Finally, we draw some conclusions.
Full Paper
Paolo Davide Farah
Founder, President and Director

Summary

Government subsidization has historically started to be frequently and systematically adopted during the mercantilist period from the XVI and the XVII century, although in some countries it goes back even longer. This period was characterized by the introduction of new production and commercialization methods. The merchant class was vested with great power, and often used such power to provide political institutions with suggestions and requests. Indeed, political support was a fundamental element of companies’ survival and growth because states had the power to affect the market and promote the competitiveness of national companies. A broad array of strategies and measures could lead to this result — including the adoption of discriminatory tax regulations and quotas against foreign products and companies in favor of domestic industries. In Europe, mercantilism developed at a time when the economy was in transition, after centralized nation-states successfully replaced the previous feudal system. Moreover, technological innovation in the transportation sector — and in particular in shipping — together with increasing urbanization, led to a rapid and exponential growth in international trade. The function of mercantilism was twofold: on the one hand, it focused on how international trade could bend to serve the interests of nation-states, while on the other it explored ways for national governments to contribute to domestic companies’ trade and business development. Those were the years that saw the adoption of modern accounting. The latter allowed precise and constant monitoring of trade inflows and outflows, creating the necessity of maintaining a positive trade balance, which could be achieved by ensuring that exports were higher than imports. This was possible thanks to the introduction of new domestic products that could effectively replace traditionally imported ones. During the liberalist period — characterized by a laissez-faire economic policy — public subsidies were set aside, while they revived at the end of the XIX century when protectionism enjoyed a new vogue. Since then, subsidies have been used by governments both to promote national economic, social, and political policy as well as to correct market distortions. It is generally recognized that subsidies often produce harmful effects on free trade and production rather than equitable results, and international trade law has taken into account all these concerns in drafting specific rules on subsidies. In this contribution, we are going to draw the attention on the effects of subsidies, distinguishing subsidies which are necessary for desirable and acceptable purposes from those that are nothing but disguised protectionist measures and that might trigger international trade remedies. In particular, this evaluation will be applied to renewable energy subsidies. Governmental support to alternative and renewable energy industry represents a fairly common choice for governments in need to comply with the commitments that bind them within the international framework for climate change. Besides being a common choice, renewable energy subsidies represent an effective one: according to the Intergovernmental Panel on Climate Change (IPCC), “one of the most effective incentives for fostering greenhouse gas (GHG) reductions are the price supports associated with the production of renewable energy, which tend to be set at attractive levels. These price supports have resulted in the significant expansion of the renewable energy sector in countries belonging to the Organization of Economic Cooperation and Development (OECD) due to the requirement that electric power producers purchase such electricity at favorable prices.” This contribution is divided in four sections. The first one (section 2), offers a brief description of the evolution of the World Trade Organization (WTO) regulation of subsidies, while in the second one (section 3) we analyze the approach of the WTO towards renewable energy subsidies, focusing on specific issues, such as the case of feed-in tariffs and local content requirement. Section 4 provides an overview of WTO disputes involving subsidies in the renewable energy sector, and Section 5 focuses on the recent decisions in the Canada — Renewable Energy and Canada — Feed-in Tariff Program disputes. Finally, we draw some conclusions.

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The growth in green energy investments worldwide is an important reality and rising trends are to be expected in the future. When designing the proper policy agenda for renewable energy investments, we must take into consideration the legal, regulatory and political frameworks in both developing and developed countries. gLAWcal aims at analyzing national approaches on the matter, combining scientific, social and economic considerations. At the same time, it wishes to develop partnerships among European and non-European institutions, so as to deliver an integrated approach on sustainable energy investments, combining global and local perspectives.
The need to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology are topical issues that affects international relations. It is crucial for developing countries to achieve a substantive degree of IPR protection, not only for the promotion of creativity and innovation, but also for the maximization of technology transfer from developed countries. gLAWcal examines IPR regimes and their impact on competition with the objective of providing a better understanding of the competition-dimension of IP rights. Intellectual property rights are also extremely crucial to sustainable development in manifold ways, from the protection of traditional knowledge and cultural products, to access to essential medicines. Our organization focuses on the policy frameworks and institutions shaping debate and policy development in this sector.
In the last fifteen years, all around the world there has been a tendency to put much hope in the rise of civil society, its emergence being welcomed as a sign of progress towards a more democratic system. Many places in the world are today laboratories for change thanks to bottom-up movements supported by civil society organizations. By looking at contentious politics and how they converge and interact with institutional politics, we can better understand what directions a country’s political system and its governance is taking. gLAWcal supports collective forms of actions aimed at the creation of better societies, on many social issues, and in various geographical areas.
Improvements in people’s economic wellbeing have increased citizen demands for a cleaner environment. As societies undergo the transition to industrial development and modernity, their citizens begin to concern themselves with needs and wants beyond the material, including the protection of the environment. However, growing levels of environmental consciousness and awareness are often not matched by proper environmental legislation enforcement at the local level. gLAWcal looks at environmental rights developments in developing countries, and aims at delivering policy advices and capacity building support in areas where law implementation is lacking. With this purpose, our organization seeks to improve environmental protection not only for the benefit of the populations directly affected, but also for the sake of the entire planet.
Globalization, and the consequent international exchange of goods, services, cultures, ideas, has brought increased wealth for many on the one hand, while exerting pressure on core societal values both in developed and developing countries on the other hand. Public opinion and policy makers have warned against the threat posed by international trade and liberalization to policies and measures meant to protect the so-called non-trade concerns (NTC), such as environmental protection, sustainable development, good governance, cultural rights, labour rights, public health, social welfare, national security, food safety, access to knowledge, consumer interests and animal welfare.When trying to protect these issues, developed countries have put into place trade measures that have encountered resistance or dissent in developing countries, being perceived as protectionist actions or as an attempt by the importing countries to impose their social, ethical and cultural values on exporting countries.The challenge of integrating Non-Trade Concerns embodies the willingness to overcome national egoisms and embrace universally a number of fundamental values, creating an ethical and juridical platform to win over cultural differences and issues of national sovereignty. gLAWcal’s research aims at identifying ways to protect NTC within international economic law. By shedding new light on developing countries’ trends towards inclusion of NTC in the domestic and international arena, gLAWcal provides a comprehensive perspective on law enforcement, creating a bridge between the international and the domestic realities.

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