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Time to Redefine 'Good' and 'Bad' Subsidies, New CFR Report Says

The U.S. should push World Trade Organization members to "revisit what constitutes good and bad subsidies," which may help encourage transparency and improve "enforcement through incentives for compliance and penalties for noncompliance," the Council on Foreign Relations said in a new report.

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The report, authored by Jennifer Hillman, a CFR senior fellow and law professor at Georgetown University Law Center, and Inu Manak, a CFR research fellow, said the current moment may serve as an inflection point on how societies view subsidies, given the U.S. embrace of subsidies in the Inflation Reduction Act and the Chips and Science Act. They recommend the U.S. propose limiting overall subsidy levels while crafting exceptions and encouraging transparency via a "safe harbor" from penalty enforcement through properly notified subsidies.

Hillman and Manak said that because the WTO can't charge nations monetary fines, "penalties could take the form of depriving recalcitrant countries of certain privileges of WTO membership -- such as access to meeting documents, oral interventions during formal meetings, the opportunity to chair WTO committees -- or imposing the status of inactive member, an undesirable moniker for countries wishing to remain in good standing."