Measuring the International Effect of Subsidies

Several contributors to this volume have pointed to the difficulties in finding methods which might provide generally agreed upon estimates of the extent and effects of government subsidies. This chapter discusses some of the methods which have been developed in recent years to provide empirical estimates of both the ex ante and ex post effects of subsidies. The former involves prior evaluation of the potential implications of national legislation, and the latter is concerned with the actual effects of specific instances where a subsidy has been granted. While there is a growing flow of information on the extent to which governments subsidize the private sector, the national reporting systems need an oversight mechanism capable of identifying potential sources of conflict. Two such present sources of conflict are the inadequacies of the GATT Articles VI and XVI and the disparities between the GATT and the national legislation of contracting parties shielded by the grandfather clause.