The FiFo Institute for Public Economics of the University of Cologne has applied a template developed by the GSI for notifying subsidies to the World Trade Organization (WTO), using Germany as the test case. The study reveals that the template vastly improves subsidy reporting.

Instead of the 11 subsidies notified by Germany for 2006 (with a total value of € 1.25 billion), the study’s conservative approach identifies 180 specific subsidy programmes that should have been notified (totalling € 10.8 billion). Germany was chosen because it has one of the poorest records among large OECD economies for notifying subsidies to the WTO, even though it has some of the best data.

Germany, however, is far from the only country that under-reports its subsidies. Only around half of WTO members notify their subsidies, as required under the Agreement on Subsidies and Countervailing Measures (ASCM). This undermines the effectiveness of the ASCM, and disadvantages WTO members that do not have the resources to investigate other countries’ potentially trade-distorting subsidies.

The GSI’s proposed template for WTO subsidy notifications is designed to address some of the problems inherent in the notification format which contribute to poor compliance. For example, under the current format, it is not clear whether the absence of subsidies is because they do not exist, or because the WTO member has neglected to notify them. The GSI template, in contrast, requires explicit reporting of the absence of subsidies to specific sectors or products.

However, there are fundamental flaws in the ASCM’s reporting requirement beyond the format; namely, the fact that although it is obligatory, sanctions for non-compliance are weak. This encourages convergence towards the lowest minimum standard of reporting and discourages countries from putting more resources into their own data-collection and reporting efforts.

Michael Thöne and Stephan Dobroschke, the report’s authors, say: “The template has huge potential to improve transparency and to reduce the workload of notifications. But further work is needed to also tackle the basic political economy of the ASCM, including the incentives and penalties for notification. In this sense, the GSI-template can be seen as a necessary step; yet alone, it will not be a sufficient step to reach full and timely notifications.”

In addition to an improved format for notifying subsidies, the study also recommends that the WTO secretariat be empowered to increase the pressure on Members to comply with their notification duties.

The study, Assessing German subsidies under the GSI notification template proposed for the WTO, is available online:http://www.iisd.org/pdf/2008/wto_subsidies_germany.pdf

The WTO model notification is also available on-line:
http://www.globalsubsidies.org/IMG/pdf/A_new_template_for_notifying_subsidies_to_the_WTO.pdf