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Earlier this summer the GSI published a 150-page manual, Subsidy Estimation: A survey of current practice. The document is mostly a compilation of verbatim quotations on definitions of subsidies from various inter-governmental organizations, and documentation of estimation methods for particular subsidy elements. It is intended for use primarily by individuals who are interested in preparing estimates of subsidies to particular products or sectors—people who engage in what might be called “subsidy accounting.” But we hope that it will also serve as a catalyst for kick-starting a dialogue on the need for a common, consistent set of international “subsidy accounting standards”.
 
Unlike financial accounting for the business sector, or public-sector accounting for governments, there exists no internationally agreed set of standards for producing such accounts. Of course, that has not prevented people and organizations from producing estimates of subsidy values for all manner of countries, sectors and products. But it has meant that making comparisons across countries, sectors and products can be difficult if not at times nonsensical. Variations in results can occur due to different definitions of what constitutes a subsidy, and consequent coverage, but also due to different valuation methods. Unfortunately, in many cases, the method used by researchers to measure the value of the subsidies is not reported or is only provided to the public in very brief terms. This can lead to confusion and misunderstanding as to the real extent of support being provided, and cloud the debate about the significance and effect of a subsidy program.
 
This surprising state of affairs reflects, in part, the diverse backgrounds and aims of subsidy-accounting practitioners, who include experts working for countervail authorities (those charged with estimating countervailing duties on imports fromforeign countries), competition commissions, producers of national account statistics, intergovernmental organizations undertaking research on the trade or environmental effects of subsidies, international financial institutions, non-governmental organizations and individual academics.
 
An internationally agreed set of standards for estimating subsidy elements, and for preparing and using aggregates and derived indicators, is sorely needed. Interest in subsidies and their effects is growing. As import tariffs, previously the main instruments of trade protection, have been ratcheted down through successive multilateral and bilateral negotiations, the importance (and some would say the use of) subsidies has become more apparent. Similarly, as sub-national units compete more vigorously to attract businesses to locate in their jurisdictions, investment incentives and similar local subsidies have attracted the attention of organized labour and competition authorities. And, as environmental policy-makers and non-governmental organizations consider how to address problems such as climate change and over-fishing more cost-effectively, they are coming to realize that the first order of business is to reform or cease providing those subsidies that are contributing to such problems.
 
International standards relating to methods do not emerge spontaneously, however. One cannot impose such a set of standards on such a diverse set of practitioners. Creating them is a process that requires a dialogue.
 
Reconciling the differences among the various methods used to estimate the same generic types of subsidies, or at least providing guidance on when to use which method, is the urgent task that remains to be done. That would lead, logically, to the promulgation of best-practice recommendations, and ultimately to a set of agreed international standards.

How might that be accomplished institutionally? The logical starting place would be the World Trade Organization (WTO). A number of subsidy elements are defined in the WTO’s Agreement on Subsidies and Countervailing Measures, but many of the details regarding the measurement of particular subsidy elements were left open to interpretation. In 1995, therefore, the Committee on Subsidies and Countervailing Measures created an Informal Group of Experts to examine, develop and recommend to the Committee additional rules for calculating the value of subsidies on the basis of the cost to the subsidizing government. The Experts met on several occasions, and reached consensus on some of the outstanding methodological issues, but not on others, and met for the last time in 1999.
 
Separate from the WTO efforts have been a number of discussions driven by the necessity to develop international estimates for government support provided to specific sectors, namely agriculture, fisheries and energy. These have yielded agreement within the corresponding policy communities on estimation methods pertaining to subsidy elements important for those sectors, but little attempt has been made to ensure consistency of treatment of particular subsidies — e.g., loan guarantees or accelerated-depreciation provisions in the tax code — across the sectors.

What is needed, in our opinion, is the creation of a separate, professional and permanent body to develop and recommend subsidy accounting standards, one that enjoys the trust of governments and non-governmental stakeholders, and of course the practitioners themselves. A model for such an organization already exists in the form of the International Accounting Standards Board (IASB), whose mission is “to develop a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards”. Is it not past time to work towards the creation of a parallel ISASB — an International Accounting Standards Board (ISASB)? If you agree, then we would love to hear from you.