The Global Presence of SOEs and Their Receipts of Advantages

Wu, Yingying

doi:10.1007/978-981-13-3561-7_1

Yingying Wu²

366 Accesses

Abstract

The focus of this book is the treatment by governments of their state-owned enterprises (SOEs). This Chapter broadly describes the problem to be addressed, i.e., the various advantages granted to SOEs, and explains why it is a problem from a historical and an economic perspective. In addition, it explains why governments grant advantages to SOEs. It is important to examine the problem from these different perspectives to provide a context for the analysis of current legal rules and possible proposals to improve them.

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Notes

1.
There is an extensive literature that analyses state capitalism, including its definitions, its various forms, whether the state capitalism is a good economic model, and its impact on nations and the global trading system. Bremmer distinguishes state capitalism from command economies and free market economies. The state functions as the leading economic actor and uses markets primarily for political gain. The state uses SOEs and SWFs, or selects POEs to maximize the state’s profits. The ultimate motive is not economically maximizing growth but politically maximizing the state’s power and the leadership’s chances of survival. See Ian Bremmer, “State Capitalism Comes of Age,” Foreign Affairs, Vol. 88, Iss. 3 (May/Jun 2009): 40. https://www.scribd.com/doc/89651394/Bremmer-State-Capitalism-Comes-of-Age.
2.
An investigation of the world’s largest 2000 public companies (Forbes Global 2000) reveals that more than 10% of these firms are majority state-owned. See Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 9. https://doi.org/10.1787/5k4869ckqk7l-en
3.
Aldo Musacchio and Sergio G. Lazzarini, “Leviathan in Business: Varieties of State Capitalism and Their Implications for Economic Performance” (working paper 12–108, Harvard Business School, June 4, 2012), 2. http://www.hbs.edu/faculty/Publication%20Files/12-108.pdf
4.
There might be some deviations across different definitions of SOEs. The definition that SOEs are “government owned or government controlled economic entities that generate the bulk of their revenues from selling goods and services”, is used by the World Bank in its research report. See World Bank, “Bureaucrats in Business,” World Bank Policy Research Report (Washington, DC: World Bank, 1995), 26.
5.
The state might also exert de facto control over a firm through holding a minority share such as a golden share or any other specific enabling legislation, see Max Büge, Matias Egeland, Przemyslaw Kowalski and Monika Sztajerowska, “State-owned Enterprises in the Global Economy: Reason for Concern?” VOX: CEPR’s Policy Portal, May 2, 2013. http://voxeu.org/article/state-owned-enterprises-global-economy-reason-concern
6.
For a discussion regarding the distinction between international trade and international finance (international capital markets), see Michael Gadbaw, “Systemic Regulation of Global Trade and Finance: A Tale of Two Systems,” in International Law in Financial Regulation and Monetary Affairs, eds., Tomas Cottier, John Jackson and Rosa Lastra (UK: Oxford University Press, Jan. 2013). See also Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 1–7.
7.
See Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013). https://doi.org/10.1787/5k4869ckqk7l-en
8.
There were 204 SOEs in the year 2010–2011 out of 2000 largest companies listed on Forbes Global, see Grzegorz Kwiatkowski and Pawel Augustynowicz, “State-owned Enterprises in the Global Economy-Analysis Based on Fortune Global 500 List,” (Conference Paper, Management, Knowledge and Learning Joint International Conference 2015, held by Managing Intellectual Capital and Innovation for Sustainable and Inclusive Society, 27–29 May 2015, Bari Italy), 1740. http://www.toknowpress.net/ISBN/978-961-6914-13-0/papers/ML15-353.pdf
9.
Max Büge, Matias Egeland, Przemyslaw Kowalski and Monika Sztajerowska, “State-owned Enterprises in the Global Economy: Reason for Concern?” VOX: CEPR’s Policy Portal, May 2, 2013.
10.
See Hans Christiansen, “The Size and Composition of the SOE Sector in OECD Countries”, OECD Corporate Governance Working Papers, No. 5, (OECD Publishing, 2011); OECD Working Group on Privatisation and Corporate Governance of State-Owned Assets, “The Role of State-Owned Enterprises in the Economy: An Initial Review of the Evidence,” DAF/CA/PRIV (2008) 9, 18 Nov. 2008; OECD Working Group on Privatisation and Corporate Governance of State Owned Assets, “State-Owned Enterprises in India,” DAF/CA/PRIV/RD(2008)15, 18 Nov. 2008;
11.
Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 29. https://doi.org/10.1787/5k4869ckqk7l-en
12.
OECD, “Corporate Governance of State-Owned Enterprises: A Survey of OECD Countries” (Paris: OECD Publishing, 2005); Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 30. https://doi.org/10.1787/5k4869ckqk7l-en
13.
Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 22–25.
14.
Country SOEs shares (CSS) is a weighted average of SOE shares of sales, assets and market values among country’s top ten companies. See Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 22. https://doi.org/10.1787/5k4869ckqk7l-en
15.
Data comes from Forbes, World Development Indicator by World Banks, Orbis database, Forbes Global 2000, and my calculation.
16.
William Krist and Kent HugHes, “Negotiations for a Trans-Pacific Partnership Agreement,” Wilson Center: Trade and Development, Dec. 4, 2012, https://www.wilsoncenter.org/publication/negotiations-for-trans-pacific-partnership-agreement; Ian F. Fergusson, Mark A. McMinimy and Brock R. Williams, “The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress,” Congressional Research Service, 7–5700 R42694 (20 Mar. 2015), 43, in its footnote 116 quoting “Economist Intelligence Unit,” Vietnam Country Report, (Mar. 2012), 12.
17.
Hans Christiansen, “The Size and Composition of the SOE Sector in OECD Countries” OECD Corporate Governance Working Papers, No. 5, (OECD Publishing, Paris, 2011), 7–8. https://doi.org/10.1787/5kg54cwps0s3-en
18.
Id., at 72.
19.
Id., at 72. Normally, the golden share are taken into account in finding SOEs in OECD countries.
20.
Hans Christiansen, “The Size and Composition of the SOE Sector in OECD Countries”, OECD Corporate Governance Working Papers, No. 5, (OECD Publishing, 2011), 3. Jeremy Schwartz, “Emerging Markets and State-Owned Enterprises,” NASDAQ, Dec. 05, 2014. http://www.nasdaq.com/article/emerging-markets-and-state-owned-enterprises-cm420401
21.
Keith Bradsher, “Trans-Pacific Partnership’s Potential Impact Weighed in Asia and U.S.” International Business, New York Times, July 8, 2015.
22.
Sprenger, “The Role of State Owned Enterprises in the Russian Economy,” (paper written for the OECD Roundtable on Corporate Governance of SOEs. 2008).
23.
“The Rise of State Capitalism,” Emerging-Market Multinationals, The Economist, Jan 21st, 2012.
24.
Seven out of the 10 largest oil companies are state owned, they are Saudi Aramco, Gazprom (Russia), National Iranian Oil Company, Rosneft (Russia), PetroChina, Pemex (Mexico), Kuwait Petroleum Company. http://www.forbes.com/pictures/mef45miid/1-saudi-aramco/
25.
“The Rise of State Capitalism,” Emerging-Market Multinationals, The Economist, Jan 21st, 2012.
26.
“Nationalization in Latin America”, Infographic, The Globe and Mail, Jul. 11, 2012. http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/nationalization-in-latin-america/article4409002/; John Paul Rathbone, “Latin American Nationalization Dominoes,” Blogs.ft.com, May 2, 2012. http://blogs.ft.com/the-world/2012/05/latin-american-nationalisation-dominoes/
27.
For a general discussion on special privileges enjoyed by SOEs, see Richard R. Geddes, “Case Studies of Anticompetitive SOE Behavior,” in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004); OECD Policy Roundtables on “Competition, State Aids and Subsidies,” in the OECD Global Forum on Competition 2010, DAF/COMP/GF(2010)5, (May 19, 2011), 17.
28.
Capobianco, A. and H. Christiansen, “Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options”, OECD Corporate Governance Working Papers, No. 1 (OECD Publishing, 2011), 5–7. https://doi.org/10.1787/5kg9xfgjdhg6-en; OECD, “State Owned Enterprises and the Principle of Competitive Neutrality,” Policy Roundtables, DAF/COMP(2009)37, (OECD, 2009), 36–37.
29.
For instance, the transfer of shares of Chinese SOEs that will affect the state’s control over the entity, needs approval from the SASAC or its local office, see the legal document, Measures for Supervision and Management of State Assets, Article 7, June 24, 2016. [Qiye Guoyou Zichan Jiaoyi Jiandu Guanli Banfa].
30.
For more information about grants of advantages granted to SOEs in detail, see Richard R. Geddes, “Case Studies of Anticompetitive SOE Behavior,” in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004), 28–34.
31.
Geddes, Ibid.
32.
Edmond M. Ianni, “State Trading: Its Nature and International Treatment,” 5 Nw. J. Int’l L. & Bus. 46, 4 (1983–1984).
33.
OECD, “State Owned Enterprises and the Principle of Competitive Neutrality,” Policy Roundtables, DAF/COMP(2009)37, (OECD, 2009), 7–12, 35–37.
34.
“State-Owned Enterprises: Correcting A twenty-first Century Market Distortion,” Coalition of Services Industries & U.S. Chamber of Commerce’s Global Regulatory Cooperation Project (Feb. 22, 2011), 2–3. http://209.61.243.105/SOEpaperfinalfeb222011.pdf; Capobianco, A. and H. Christiansen, “Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options”, OECD Corporate Governance Working Papers, No. 1 (OECD Publishing, 2011), 6–7.
35.
Daniel Chow, “How China Promotes its State-Owned Enterprises at the Expense of Multinational Companies Doing Business in China and Other Countries,” (Public Law and Legal Theory Working Paper Series, No. 307, Oct. 5, 2015), 2–7.
36.
The Postal Service in U.S. has the power of eminent domain. See Richard R. Geddes, “Case Studies of Anticompetitive SOE Behavior,” in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004), 34.
37.
Max Büge, Matias Egeland, Przemyslaw Kowalski and Monika Sztajerowska, “State-owned Enterprises in the Global Economy: Reason for Concern?” VOX: CEPR’s Policy Portal, May 2, 2013.
38.
Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 30–33.
39.
Kowalski, Ibid.
40.
Hejing Chen and John Whalley, “The State-owned Enterprises Issue in China’s Prospective Trade Negotiations,” the Centre for International Governance Innovation, CIGI Papers No. 48 (Oct. 2014), 12. https://www.cigionline.org/sites/default/files/no.48.pdf
41.
World Trade Organization, “International Trade Statistics 2015, Special Focus: World Trade and the WTO: 1995–2014.” https://www.wto.org/english/res_e/statis_e/its2015_e/its2015_e.pdf; Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 31.
42.
Kathryn Gordon and David Gaukrodger, “Foreign Government-Controlled Investors and Host Country Investment Policies: OECD Perspectives” in Sovereign Investment: Concerns and Policy Reactions, eds., Karl P Sauvant, Lisa E. Sachs, and Wouter P.F. Schmit Jongbloed (New York: Oxford University Press, 2012), 496–498; United Nations Conference on Trade and Development (UNCTAD), World investment Report 2014: Investing in the SDGs: An Action Plan, UN Doc., UN Symbol: UNCTAD/WIR/2014, Sales No. E.14.II.D.1, (2014), 9. http://unctad.org/en/PublicationsLibrary/wir2014_en.pdf
43.
“The Rise of State Capitalism,” Emerging-Market Multinationals, The Economist, Jan 21st, 2012.
44.
Nicola Bellini, “The Decline of State-Owned Enterprise and the New Foundations of the State-Industry Relationship,” in The Rise and Fall of State-Owned Enterprise in the Western World, Pier Angelo Toninelli (Cambridge: Cambridge University Press, 2008), 42.
45.
Data sources comes from Forbes Global 2000 and Orbis. See Kowalski, P. et al., “State-Owned Enterprises: Trade Effects and Policy Implications”, OECD Trade Policy Papers, No. 147 (OECD Publishing, 2013), 36. https://doi.org/10.1787/5k4869ckqk7l-en
46.
“Economic warfare is defined as the conscious attempt to enhance the relative economic, military, and political position of a country through foreign economic relations.” See Robert Loring Allen, State Trading and Economic Warfare, 24 Law and Contemporary Problems (Spring 1959): 256–275, 259. http://scholarship.law.duke.edu/lcp/vol24/iss2/3
47.
OECD Corporate Affairs Division, Directorate for Financial and Enterprise Affairs, “SOEs Operating Abroad: An Application of the OECD Guidelines on Corporate Governance of State-Owned Enterprises to the Cross-border Operations of SOEs” (Paris: OECD), para. 6.
https://www.oecd.org/daf/ca/corporategovernanceofstate-ownedenterprises/44215438.pdf
48.
Robert Loring Allen, “State Trading and Economic Warfare,” 24 Law and Contemporary Problems (Spring 1959): 256–275, 263–264.
49.
There are three forms of political advantages obtained from economic warfare: respectability and status; alliances or support of other countries; and takeover of another country. See Robert Loring Allen, State Trading and Economic Warfare, 24 Law and Contemporary Problems (Spring 1959): 256–275, 262.
50.
See Robert Loring Allen, State Trading and Economic Warfare, 24 Law and Contemporary Problems (Spring 1959): 256–275, 261. For information about the impact of SOEs in trade, see Madanmohan Ghosh and John Whalley, “State-owned Enterprises, Shirking and Trade Liberalization” (NBER Working Paper Series, Working Paper 7696. May 2000) http://www.nber.org/papers/w7696
51.
Abdul Ghafoor Awan, “State Versus Free Market Capitalism: A Comparative Analysis,” 6(1) Journal of Economics and Sustainable Development (2015): 171.
52.
Capobianco, A. and H. Christiansen, “Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options”, OECD Corporate Governance Working Papers, No. 1 (OECD Publishing, 2011), 3.
53.
Sara Sultan Balbuena, Concerns Related to the Internationalisation of State-Owned Enterprises: Perspective from Regulators, Government Owners and the Broader Business Community, OECD Corporate Governance Working Paper No.19, (Paris: OECD Publishing, Apr. 6, 2016), 23–38.
54.
See Robert Loring Allen, “State Trading and Economic Warfare,” 24 Law and Contemporary Problems (Spring 1959): 256–275, 263–5; Kenneth C. Baseman, “Open Entry Costs and Cross-Subsidization in Regulated Markets,” in: Gary Fromm eds., Studies in Public Regulation (Cambridge MA: MIT Press, 1981), 329–370; Timothy J. Brennan, “Cross-Subsidization and Cost Misallocation by Regulated Monopolies,” 2(1) Journal of Regulatory Economics, (March 1990): 37–51.
55.
David E. M. Sappington and J. Gregory Sidak, “Anticompetitive Behavior by State-Owned Enterprises: Incentives and Capabilities,” in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004), 7–14.
56.
A nation may use its the large-trader position and that of the debtor. See Robert Loring Allen, “State Trading and Economic Warfare,” 24 Law and Contemporary Problems (Spring 1959): 256–275, 263,
57.
Crane Brinton, John B. Christopher & Robert Lee Wolff, A History of Civilization, 3rd edition, Volume 1 (Englewood Cliffs, N.J.: Prentice-Hall, 1967), 550–54; Samuel Williston, “The History of the Law of Business Corporations before 1800,” 2(3) Harvard Law Review (Oct 15, 1888): 105–124, 109; Before fifteenth century, it was more about the expansion of territory. Colonization began after the Great Discoveries overseas in 1492, and colonialism was operated as a joint public-private venture by England, France, Netherland. See Marc Ferro, Colonization: A Global History (London: Routledge, 2005), 3.
58.
Venkatesh Rao, “A Brief History of the Corporation: 1600 to 2100,” Ribbon Farm: Experiments in Refactored Perception, June 8, 2011, http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-corporation-1600-to-2100/
59.
Samuel Williston, “The History of the Law of Business Corporations before 1800,” 2 (3) Harvard Law Review (Oct 15, 1888): 105–124, 114.
60.
Venkatesh Rao, ibid.
61.
Samuel Williston, “The History of the Law of Business Corporations before 1800,” 2 (3) Harvard Law Review (Oct 15, 1888): 105–124, 111.
62.
Crane Brinton, John B. Christopher and Robert Lee Wolff, A History of Civilization, 3rd edition, Volume 1 (Englewood Cliffs, N.J.: Prentice-Hall, 1967), 562–64.
63.
Fernand Braudel, Civilization and Capitalism: 15th–18th Century, Volume II, The Wheels of Commerce, Translation from the French by Siân Reynolds, (New York: Harper & Row, 1982–1984), 449–50.
64.
The Government of India Act 1858, formally dissolved the company, ruling powers over India transferring to the British Crown, see “India Rebellion of 1857,” New World Encyclopedia, http://www.newworldencyclopedia.org/entry/Indian_Rebellion_of_1857
65.
Fernand Braudel, Civilization and Capitalism: 15th–18th Century, Volume II, The Wheels of Commerce, Translation from the French by Siân Reynolds, (New York: Harper & Row, 1982–1984), 446, 455.
66.
Benedikt Stuchtey,“Colonialism and Imperialism, 1450–1950,” in: European History Online (EGO), (Mainz, Germany: the Institute of European History, Jan. 24, 2011), 11. http://www.ieg-ego.eu/stuchteyb-2010-en
67.
Marc Ferro, Colonization: A Global History (London: Routledge, 2005), 54.
68.
Id., at 16.
69.
Benedikt Stuchtey,“Colonialism and Imperialism, 1450–1950,” in: European History Online (EGO), (Mainz, Germany: the Institute of European History, Jan. 24, 2011), 10–11. Other countries following the model of British, Netherland, and France, are Sweden, Denmark, Scotland, Austria, Brandenburg-Prussia and Poland. See Fernand Braudel, A History of Civilizations, translated by Richard Mayne (New York: Penguin Books, 1995).
70.
The theory of free market had not developed until 1776 when Adam Smith wrote the book An Inquiry into the Nature and Causes of the Wealth of Nations.
71.
Particularly since the Second Industrial Revolution, which is generally dated between 1870 and 1914 up to the start of World War. See Ryan Engelman, “The Second Industrial Revolution: 1870–1914,” U.S. History Scene, http://ushistoryscene.com/article/second-industrial-revolution/
72.
John N. Hazard, “State Trading in History and Theory,” 24 Law and Contemporary Problems (Spring 1959): 243–255, 244; M. M. Kostecki, “State Trading in Industrialized and Developing Countries,” 12(3) Journal of World Trade Law (May/June 1978): 201; M. M. Kostecki, “State Trading in Agricultural Products by the Advanced Countries,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 22–54 (UK: Palgrave Macmillan, 1982), 27.
73.
Julian M. Alston and Richard Gray, “State Trading versus Export Subsidies: The Case of Canadian Wheat,” Journal of Agricultural and Resource Economics 25(1):51–67 (July 2000): 65–6; M. M. Kostecki, “State Trading by the Advanced and Developing Countries: The Background,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 6–21 (UK: Palgrave Macmillan, 1982). For instance, crown corporations in Canada accounted for 15.7% of corporate assets and 11% of GNP in Canada at the end of twentieth century, such as The Canadian Wheat Board, which had export monopoly. See D. Wayne Taylor, Business and Government Relations: Partners in the 1990s (Gage Educational Publishing Company, 1991), 97. The Canadian provincial liquor boards had monopolies on the importation, distribution, and sale of alcoholic beverages. See Nuri T. Jazairi, “The Impact of Privatizing the Liquor Control Board of Ontario (1994)”, Report prepared for the Ontario Liquor Boards Employees’ Union, (1994), 1–14; The Australian Wheat Board created in the late 1930s, had control over the exportation of wheat. The New Zealand Dairy Board had the control of exporting almost all New Zealand dairy products since 1923. See “International Agriculture and Trade Reports: Agriculture in the WTO,” Economic Research Service/USDA, WRS-98-4/December 1998, 45; Japan Food Agency had import monopolies on wheat, rice and barley. See International Agriculture and Trade Reports: Agriculture in the WTO, Economic Research Service/USDA, WRS-98-4/December 1998, 46; Livestock Products Marketing Organization, an SOE in South Korea, purchased 90% of Korea’s beef imports in 1993. See Ibid. The Federal Wheat Administration in Switzerland purchased domestic wheat and had an import monopoly for bread flour in the 1970s. See Special distribution by “Agriculture” sub-group on grains in multilateral trade negotiations, document on international trade in grains, addendum, Switzerland, MTN/GR/W/8/Rev.1/Add.7, Jan. 26, 1976.
74.
K. Ackerman, P. Dixit, and M. Simone, “State Trading Enterprises: Their Role in World Markets,” in U.S. Department of Agriculture, Economic Research Service, Agricultural Outlook (June 1997), 11–12. (its Table 1. STE Agricultural Exporters Dominate in the WTO List)
75.
Id., at 11. The chief dairy export STE, the New Zealand Dairy Board, handled about 30% of world dairy product exports in 1999. See Karen Z. Ackerman and Praveen M. Dixit, “An Introduction to State Trading in Agriculture,” Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture. Agricultural Economic Report No. 783. (October 1999), 6.
76.
Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 4; France in the post-war period expanded the nationalized sectors, such as tobacco sales, postal, national rail and telecommunications services, and nationalized most banks and automobile manufacturers in 1945, a mining company, an electricity company and a gas company in 1946. See David H. Pinkney, “Nationalization of Key Industries and Credit in France After the Liberation”. Political Science Quarterly 62 (3), 368–80, (1947), 368; Charles Hauss, Comparative Politics: Domestic Responses to Global Challenges, 5th edition (Belmont, CA: West/Wadsworth, 2006), 132; Spain nationalized its railways in 1941 and the Spanish Rumasa in 1983, a company with business from banks to hotels. See “History of Nationalization,” World Encyclopedia of Law (Apr. 2013). http://lawin.org/
77.
“Nationalization,” Economics Online, News Analysis Theory Comment,
http://www.economicsonline.co.uk/Business_economics/Nationalisation.html (last visited Sep. 2016.).
78.
Canada had large public ownership in its cultural industry beginning in 1920s. Canada nationalized Canadian National Railways in 1918, and fully nationalized electricity in early 1960s in Quebec, and 16 of Canada’s top 500 industrial companies were wholly owned by provinces. See Robert O′ Brien, Subsidy Regulation and State Transformation in North America, the GATT and the EU (Basingstoke, Hampshire, England: Macmillan Press, 1997), 56.
79.
Id., at 67–95. Other examples can be found that Europe had SOEs that receive periodic infusions of new “equity” capital and the steel, textile industries got support from their governments to consolidate operations. See Alan Mathews, “End the Use of Export Subsidies in the 2013 CAP Review,” CAP Reform EU, April 5, 2012, http://capreform.eu/end-the-use-of-export-subsidies-in-the-2013-cap-review/
80.
Office of the United States Trade Representative, “Real Results: Leveling the Playing Field for American Workers and Farmers,” Archive, July 08, 2004. https://ustr.gov/archive/Document_Library/Fact_Sheets/2004/Real_Results_Leveling_the_Playing_Field_for_American_Workers_Farmers.html; United States Department of Agriculture, “Farm and Foreign Agricultural Services” in USDA FY 2006 Budget Summary and Annual Performance Plan, 2006. http://www.usda.gov/documents/FY06budsum.pdf; Robert O′ Brien, Subsidy Regulation and State Transformation in North America, the GATT and the EU (Basingstoke, Hampshire, England: Macmillan Press, 1997), 126–40. Dominick Salvatore (edited), Protectionism and World Welfare (Cambridge England: Cambridge University Press, 1993), 1, 136–40.
81.
“History of Nationalization,” lawin.org. 04, 2013. Accessed 03 2016. http://lawin.org/
82.
United Nations Conference on Trade and Development, Handbook of Trade Control Measures of Developing Countries 1987, prepared by the Trade Information System (TIS) of UNCTAD with the support of the United Nations Development Programme, UNCTAD, (New York: United Nations, 1987). Doc symbol: TD/UNCTAD/ST/ECDC/33.
83.
Walter C. Labys, “The Role of State Trading in Mineral Commodity Markets,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 78–101 (UK: Palgrave Macmillan, 1982).
84.
Id., at 81–4. The State Trading Corporation of India was established and owned by the Government of India in 1956 for the importation of essential goods into India, including edible oils, sugar, wheat, and hydrocarbons, and exportation of agricultural commodities and manufactured products. See M. M. Kostecki, “State Trading by the Advanced and Developing Countries: The Background,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 6–21 (UK: Palgrave Macmillan, 1982), 10; “State Trading Corporation of India, LTD.,” NTI Building A Safer World, http://www.nti.org/learn/facilities/273/
85.
Amy L. Chua, “The Privatization-Nationalization Cycle: The Link Between Markets and Ethnicity in Developing Countries,” 95(2) Columbia Law Review (March 1995): 223, 224–25.
86.
“History of Nationalization” lawin.org. 04, 2013. Accessed 03 2016. http://lawin.org/
87.
OPEC Brief History, http://www.opec.org/opec_web/en/about_us/24.htm; Øystein Noreng, “State Trading and the Politics of Oil,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 103–116 (UK: Palgrave Macmillan, 1982), 103–15.
88.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 346–347.
89.
Werner Baer, “Import Substitution and Industrialization in Latin America: Experiences and Interpretations,” 7(1) Latin American Research Review (Spring, 1972): 95–122, 95.
90.
Ibid.
91.
“Nationalization,” International Encyclopedia of the Social Sciences 1968, Encyclopedia.com . (20 Mar. 2016). http://www.encyclopedia.com/doc/1G2-3045000860.html
92.
Fernand Braudel, A History of Civilizations, translated by Richard Mayne (New York: Penguin Books, 1995), 547–73; “Nationalization after WW2, Property Restitution in Poland,” Information Website, http://propertyrestitution.pl/Nationalization,after,WW2,18.html; Most enterprises in East Germany were nationalized following the World War II. See Glenn E. Curtis, ed. Post-War East Germany, Excerpted from East Germany: A Country Study, (Washington, D.C.: Federal Research Division of the Library of Congress, 1992). http://www.shsu.edu/~his_ncp/EGermPW.html; Burton W. Folsom, ed., The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 4.
93.
The Council for Mutual Economic Assistance was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc with a number of communist states. See “COMECON,” Encyclopedia Britannica, available at https://www.britannica.com/topic/Comecon
94.
Walter C. Labys, “The Role of State Trading in Mineral Commodity Markets,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 78–101 (UK: Palgrave Macmillan, 1982), 79.
95.
Vladimir Drebentsov and Constantine Michalopoulos, “State Trading in Russia,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 303–318 (University of Michigan Press, 1998), 308.
96.
James Roaf, Ruben Atoyan, Bikas Joshi, Krzysztof Krogulski, and etc., “25 Years of Transition Post-Communist Europe and the IMF,” International Monetary Fund, Regional Economic Issues Special Report (2014); “Transition to a Market Economy in Eastern Europe: Project Site: Hungary and Poland,” http://www.jica.go.jp/english/our_work/evaluation/reports/2002/pdf/2002_0111.pdf
97.
In addition, the Russian government has a series of agreements with the Commonwealth of Independent States members and several former COMECON countries (Cuba and Mongolia). These agreements envisaged mutual shipments of specified goods, with prices usually different from market prices. In Russia the company Roscontract (an SOE established in 1992) was the main beneficiary of such agreements. It received a loan from the federal budget for the interstate transactions, and the repayment to date is unknown. See Vladimir Drebentsov and Constantine Michalopoulos, “State Trading in Russia,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 303–318 (University of Michigan Press, 1998), 310.
98.
Fernand Braudel, A History of Civilizations, translated by Richard Mayne (New York: Penguin Books, 1995), 373–98.
99.
E.g., British textile industry. See Marc Ferro, Colonization: A Global History (London: Routledge, 2005), 17.
100.
For instance, In the first half of the nineteenth century in England, protectionist tariffs shielded British farmers from competition by keeping the domestic price of food artificially high. See John Chodes, “Richard Cobden: Creator of the Free Market,” in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 35.
101.
Ludwig von Mises, Facts About the “Industrial Revolution”, in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 55.
102.
Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 1.
103.
The Second Industrial Revolution is generally dated between 1870 and 1914 up to the start of World War. See Ryan Engelman, The Second Industrial Revolution: 1870–1914, U.S. History Scene, available at http://ushistoryscene.com/article/second-industrial-revolution/
104.
Murray N. Rothbard, “Mercantilisim: A Lesson for Our Times?” In Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 7.
105.
Mercantilists measure the wealth of a nation by the possession of metals, while in contrast, today, nations value resources (human, man-made, natural resources) available for producing goods and services. During the period 1815–1914, almost every Western has been mercantilist. See Andrzej Cirślik, International Trade: Theory and Policy, Lecture 1, slide 37, http://slideplayer.com/slide/8724296/; Thomas Munn, England’s Treasure by Foreign Trade, (reprented, Oxford: Basil Blackwell, 1928); Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 27–28.
106.
Murray N. Rothbard, “Mercantilisim: A Lesson for Our Times?” In Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 7.
107.
Id., at 7 and 10.
108.
Nick Elliott, “John Bright: Voice of Victorian Liberalism,” in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 28.
109.
John Chodes, “Richard Cobden: Creator of the Free Market,” in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 35.
110.
“Soviet Union: Trade with Western Industrialized Countries,” May 1989, http://www.country-data.com/cgi-bin/query/r-12794.html
111.
John N. Hazard, “State Trading in History and Theory,” 24 Law and Contemporary Problems (Spring 1959): 243–255, 246.
112.
Robert Loring Allen, “State Trading and Economic Warfare,” 24 Law and Contemporary Problems (Spring 1959): 256–275, 267–72. http://scholarship.law.duke.edu/lcp/vol24/iss2/3; for an account of Soviet policy, see Joseph S. Berliner, Soviet Economic Aid: The New Aid and Trade Policy in Undeveloped Countries (Council on Foreign Relations, 1958).
113.
The agent-principal problem is more severe within SOEs as compared to POEs since SOEs are not subject to takeover threats and less subject to the discipline of capital markets than POEs. See David E. M. Sappington and J. Gregory Sidak, “Anticompetitive Behavior by State-Owned Enterprises: Incentives and Capabilities,” in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004), 6.
114.
Vickers, J., and V. Wright. “The politics of industrial privatization in Western Europe: An overview” West European Politics 4, 1–30 (October1998).
115.
Joseph E. Stiglitz, “Public enterprise economics: Theory and application,” in The Economic Role of the State, ed. Heertje (Oxford, 1989), 9–85.
116.
Pier Angelo Toninelli, The Rise and Fall of State-Owned Enterprise in the Western World (Cambridge: Cambridge University Press, 2008), 22.
117.
Robert W. Poole, Jr. edited by Leonard Gilroy, Annual Privatization Report 2014: Air Transportation, http://reason.org/files/apr-2014-air-transportation.pdf
http://reason.org/files/6a983123788632131171e022e6466a7a.pdf
118.
William L. Megginson and Jeffry M. Netter, “From State to Market: A Survey Of Empirical Studies On Privatization,” 39(2) Journal of Economic Literature (June 2001): 321–389; Stephen J.K Walters, Enterprises, Government and the Public (New York: McGraw-Hill Book, 1993), 104; Madanmohan Ghosh and John Whalley, “State-owned Enterprises, Shirking and Trade Liberalization” (NBER Working Paper Series, Working Paper 7696. May 2000) http://www.nber.org/papers/w7696; Davie Haarmeyer and Peter Yorke, “Port Privatization: An International Perspective,” Policy Study No. 156, April 1993, http://reason.org/files/6a983123788632131171e022e6466a7a.pdf
119.
Bryan Taylor, “How 3 Countries Lost Their Position as The World’s Dominant Financial Power Over The Last 800 Years,” Business Insider, Dec.8, 2013. http://www.businessinsider.com/700-years-of-government-bond-yields-2013-12
120.
Ludwig von Mises, “Facts About the ‘Industrial Revolution’”, in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 55; Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 28.
121.
William Blackstone, Commentaries on the Laws of England (Oxford University Press 2016).
122.
Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 1–3.
123.
Stephen Gold, “The Rise of Markets and the Fall of Infectious Disease,” in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 80.
124.
The Fabian Society was formed in the late nineteenth century to push for socialism. See John N. Hazard, “State Trading in History and Theory,” 24 Law and Contemporary Problems 243–255 (Spring 1959), 244; Jagdish Bhagwati, The World Trading System at Risk (Princeton University Press, 1991), 110.
125.
Margaret Thatcher’s Conservatives in 1979 led to the vast majority of nationalized industries, services and utilities privatized within a decade. See “History of Nationalization” lawin.org. 04, 2013, accessed 03 2016. http://lawin.org/; John Vickers & George Yarrow, “Privatization in Britain,” in Privatization and State-owned Enterprises, ed. by Paul W. Macavoy, W. T. Stanbury, George Yarrow and Richard J. Zeckhauser, (1989), 210; Tony Prosser and Michael Moran, “Privatization and Regulatory Change: The Case of Great Britain,” in Michael Moran and Tony Prosser ed., Privatization and Regulatory Change in Europe (Open Uni. Press, 1994), 35–8; News Analysis Theory Comment, Nationalization, Economics Online, http://www.economicsonline.co.uk/Business_economics/Nationalisation.html;
In France, many of those companies nationalized in 1982 (banks, electronics and communications) were privatized after 1986. See William L. Megginson & Jeffry M. Netter, “From State to Market: A Survey of Empirical Studies on Privatization,” 39 (2) Journal of Economic Literature (June 2001): 321–389, 325; “History of Nationalization” lawin.org. 04, 2013. Accessed 03 2016. http://lawin.org/; Germany, Italy, Spain and other European countries launched large privatization programs during the 1990s. See Sabino Cassese, “Deregulation and Privatization in Italy”, in Michael Moran & Tony Prosser (edited), Privatization and Regulatory Change in Europe (Open Uni. Press, 1994), 51–62; Canada largely sold federal and provincial Crown corporations to private investors in 1970s and 1980s, and privatized national railways in 1995. See W.T. Stanbury, “Privatization in Canada: Ideology, Symbolism or Substance?” in Privatization and State-owned Enterprises, eds. Paul W. Macavoy, W. T. Stanbury, George Yarrow and Richard J. Zeckhauser, 273–340 (Springer Netherlands, 1989), 273–300.
126.
Pier Angelo Toninelli, The Rise and Fall of State-Owned Enterprise in the Western World (Cambridge: Cambridge University Press, 2008), 11.
127.
By 1992, Mexico had privatized 361 of its 1200 SOEs, with only the giant PEMEX oil company (an SOE) remains. See William L. Megginson and Jeffry M. Netter, “From State to Market: A Survey of Empirical Studies on Privatization,” 39 (2) Journal of Economic Literature (June 2001): 321–389, 326; Brazil began privatization since 1980s. See Rogério L. F. Werneck, “The Uneasy Steps toward Privatization in Brazil,” in Privatization in Latin America: Myths and Reality, eds., Alberto Chong and Florencio López-de-Silanes (Stanford University Press 2005), 59.
128.
Such as Bulgaria, Czechoslovakia, Romania, Hungary (since 1960s) and Poland (since 1980s). See Robert W. Poole, “The Concise Encyclopedia of Economics: Privatization,” Library Economics Liberty,
http://www.econlib.org/library/Enc/Privatization.html; Michael Mejstrík and Milan Sojka, “Privatization and Regulatory Change: The Case of Czechoslovakia,” in Privatization and Regulatory Change in Europe, eds. Michael Moran and Tony Prosser (Open Univ. Press, 1994), 66–85; Roman Frydman, Andrzej Rapaczynski and John S. Earle (et al), The Privatization Process in Central Europe, Volume 1 (Oxford University Press, 1993), 3, 40, 95, 148, 210.
129.
Mary M. Shirley, “The What, Why, and How of Privatization: A World Bank Perspective”, 60 Fordham L. Rev. S23 (1992), Issue 6, S33–S36 (graph 1, 2, 3, 4). http://ir.lawnet.fordham.edu/flr/vol60/iss6/2
130.
Only a few Members provided information on export values, prices and destinations so it was difficult to assess the influence of agricultural exporting STEs on global markets. See Minutes of the Meeting of the Working party on State Trading Enterprises, June 25, 2015, G/STR/M/27, paras.3. and 22.
131.
Currently the only STE is the Rice Marketing Board of New South Wales. See Minutes of the Meeting of the Working party on State Trading Enterprises, June 25, 2015, G/STR/M/27, para.12.
132.
These countries, prior to their accession to the WTO, liberalized their foreign trade, and initiated their privatization programs. See William J. Davey, “Article XVII GATT: An Overview” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 17–36 (University of Michigan Press, 1998), 33.
133.
The Working Party Report of Russia’s accession to the WTO, para. 88.
134.
Minutes of the Meeting of the Working party on State Trading Enterprises, June 25, 2015, G/STR/M/27, paras. 26 and 28.
135.
See Commission Directive 88/301/EEC of 16 May 1988 on Competition in the Markets in Telecommunications Terminal Equipment. http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A31988L0301; Andre Sapir, “The Role of Articles 37 and 90 ECT in the Integration of EC Markets: The Case of Utilities,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 231–244 (University of Michigan Press, 1998), 235.
136.
Chao-Chung Kang, “Privatization and Production Efficiency in Taiwan’s Telecommunications Industry, Telecommunications Policy,” Volume 33, Issue 9 (October 2009): 495–505; Xuejin Zuo and Hangsheng Cheng, State-owned Enterprise Governance in China: An International Comparative Perspective (China: Social Science Academic Press, 2006), 1–14.
137.
Mary M. Shirley, “The What, Why, and How of Privatization: A World Bank Perspective,” 60 Fordham L. Rev. S23 (1992): S31. http://ir.lawnet.fordham.edu/flr/vol60/iss6/2
138.
Ibid.
139.
Jon Basil Utley, “Lessons for Europe from Latin American De-Nationalization,” (Privatization) Programs (Lecture Delivered in Cyprus), Hispanic American Center for Economic Research. http://www.hacer.org/news/lessons.php
140.
Data can be found e.g., State Aid Statistics, European Commission, available at http://ec.europa.eu/competition/state_aid/statistics/statistics_en.html State Aid Scoreboard from 1997 to 2015, available at http://ec.europa.eu/competition/state_aid/studies_reports/archive/scoreboard_arch.html
141.
OECD, “Global Forum on Competition,” Ninth Meeting 18–19 Feb. 2010, Background Documentation, Keynote speech by Joaquin Almunia, “Competition, State aid and Subsidies in the European Union”, 9th Global Forum on Competition, (Paris: OECD, 18 Feb. 2010), 3.
http://www.oecd.org/competition/globalforum/GlobalForum-February2010.pdf
142.
John F. Coyle, “The Treaty of Friendship, Commerce, and Navigation in the Modern Era” 51 Columbia Journal of Transnational Law (2013): 302.
143.
Tariff Act of 1897, ch. 11; 30 Stat. 151, 205;
144.
Douglas Irwin, Petros Mavroidis & Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 157–161.
145.
Andreas F. Lowenfeld, International Economic Law, 2nd edition (Oxford University Press, 2008), 24–5.
146.
U.S. “Proposals for Expansion of World Trade and Employment”, 1945, for consideration by an International Conference on Trade and Employment. US Dep’t of State, Press Release of 6 Dec. 1945, 13 US Dep’t of State Bulletin 912–929 (1945). US Dep’t of State, Publication No. 2411 (Commercial Policy Series No. 79, 1945).
147.
At the time of 1947, all the Contracting Parties of the GATT were market economies. The U.S.S.R refused to attend negotiations.
148.
Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 58–62.
149.
“Articles of Agreement for a Proposed Multilateral Convention on Commercial Policy,” Harry Hawkins’s Executive Committee on Economic Foreign Policy (Oct. 1944); See Michael Franczak, “Multilateralism with an American Face: The United States, Great Britain, and the Formation of the Postwar Economic Order, 1941–1947,” A thesis submitted in partial fulfillment of the requirements for the degree of Bachelor of Arts with Hours, (20 Mar. 2011), 100; Irwin, id., at 75–8.
150.
See Foreign Relations of the United States: diplomatic papers, 1945, Volume VI, p138, FRUS (1945, VI, 138), http://images.library.wisc.edu/FRUS/EFacs/1945v06/reference/frus.frus1945v06.i0005.pdf; Documents of British Policy Overseas (DBPO) (III, 181–183), http://diplomatic-documents.org/editions/united-kingdom (need login in)
151.
United States Department of State, Foreign relations of the United States: diplomatic papers, 1945. The British Commonwealth, the Far East, Volume VI, U.S. Government Printing Office, 1945 (FRUS 1945 VI, 140), http://images.library.wisc.edu/FRUS/EFacs/1945v06/reference/frus.frus1945v06.i0005.pdf
152.
Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 105.
153.
Id., 77–8.
154.
It was held by the UN Preparatory Committee for the International Conference on Trade and Employment. The documentation for the conference was published by the Economic and Social Council of the United Nations document series E/PC/T, there are several committees, and one committee was for GATT. https://www.wto.org/gatt_docs/1946_50.htm
155.
Section E, Article of Suggested Charter for an International Trade Organization of the United Nations, Department of State, September1946.
https://law.drupal.ku.edu/sites/law.drupal.ku.edu/files/docs/resources/library/IntlTradeLaw/1946%20Suggested%20Charter%20for%20an%20International%20Trade%20Organization%20of%20the%20United%20Nations.pdf
156.
Report of the First Session of the London Preparatory Committee of the United Nations Conference on Trade and Employment (UN Document E/PC/T/33), October 1946, (London Draft); E/PC/T/C.II/61, E/PC/T/C.II/60, E/PC/T/C II/60, E/PC/T/C.II & IV/PP/PV/2, E/PC/T/C.II & IV/PP/PV/1, https://www.wto.org/gatt_docs/1946_50.htm; Dominic Coppens, WTO Disciplines on Subsidies and Countervailing Measures: Balancing Policy Space and Legal Constraints (Cambridge University Press, 2014), 21–2; Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 157–61.
157.
Report of the Drafting Committee of the Preparatory Committee of the UN Conference on Trade and Employment (New York Draft), UN Document EPCT/34, (Lake Success, NY, 5 Mar. 1947, https://www.wto.org/gatt_docs/1946_50.htm https://www.wto.org/gatt_docs/English/SULPDF/92290038.pdf
E/PC/T/C.6/55, 1947,
https://www.wto.org/gatt_docs/English/SULPDF/90230108.pdf https://www.wto.org/gatt_docs/1946_50.htm; Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 120–21.
158.
Articles 25, 26, 27 and 28 of the Havana Charter. https://www.wto.org/english/docs_e/legal_e/havana_e.pdf
159.
Para 1 of Art. XVI of GATT; Robert O′ Brien, Subsidy Regulation and State Transformation in North America, the GATT and the EU (Basingstoke, Hampshire, England: Macmillan Press, 1997), 105; Export subsidy disciplines were primarily about competition between countries in markets of a third country, an area not covered by the GATT, which initially aimed at reducing import barriers, hence, domestic subsidies were disciplined due to the fact that they impede concessions made in respect of market access, see E/PC/T/TAC/PV/11, (September 5, 1947), 14–5.
https://www.wto.org/gatt_docs/English/SULPDF/90260038.pdf
160.
See Article XVI: 1 of GATT 1947. Peter Van Den Bossche, The Law and Policy of the World Trade Organization, Text, Cases and Materials, 2nd edition (Cambridge University Press, 2010), 559.
161.
See Article VI: 3 of GATT 1947.
162.
Dominic Coppens, WTO Disciplines on Subsidies and Countervailing Measures: Balancing Policy Space and Legal Constraints (Cambridge University Press, 2014), 24.
163.
GATT was signed on 1st Jan. 1948 by Australia, Belgium, Brazil, Canada, France, India, Luxembourg, Myanmar, Netherlands, New Zealand, Norway, Pakistan, South Africa, Sri Lanka, UK, US, Zimbabwe, all of which were not central planned economies.
164.
Developed countries favored a strengthening of the disciplines on subsidies and prohibiting export subsidies at least on non-primary products. Developing countries proposed a series of exceptions for developing countries. The U.S. proposed that subsidies should not lead to the subsidizing state acquiring more than an equitable share of world trade. Australia proposed that a ban should also imposed on domestic subsidies. For more about different positions by different contracting parties, see Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 157–161; Dominic Coppens, WTO Disciplines on Subsidies and Countervailing Measures: Balancing Policy Space and Legal Constraints (Cambridge University Press, 2014), 24–5.
165.
Paragraph 2 through 5 of Article XVI of GATT.
166.
See Article XVI: 3 of GATT 1947.
167.
See Article XVI: 4 of GATT 1947.
168.
MTN.GNG/NG10/W/4, (April 28 1987), 75.
https://docs.wto.org/gattdocs/q/.%5CUR%5CGNGNG10%5CW4.PDF
169.
Peter Van Den Bossche, The Law and Policy of the World Trade Organization, Text, Cases and Materials, 2nd edition (Cambridge University Press, 2010); John H. Jackson, World Trade and the Law of GATT (Lexis Law Pub., 1969), 372–374.
170.
Agreement on Interpretation and Application of Article VI, XVI and XXIII of the General Agreement on Tariffs and Trade (the Subsidies Code) (MTN/NTM/W/236, April 5, 1979). https://www.wto.org/gatt_docs/English/SULPDF/91990092.pdf
171.
Article 1 and 6 of the Subsidies Code; John H. Jackson, The World Trading System: Law and Policy of International Economic Relations, 2nd edition (Cambridge, MA: MIT Press, 1997), chapter 11.
172.
Article 9 of the Subsidies Code and Annex; John H. Jackson, The World Trading System: Law and Policy of International Economic Relations, 2nd edition (Cambridge, MA: MIT Press, 1997), chapter 11.
173.
Article 8 of the Subsidies Code.
174.
“In this Agreement, the term ‘subsidies’ shall be deemed to include subsidies granted by any government or any public body within the territory of a signatory…(omitted)” See footnote 1 on page 18 of The Agreement on Interpretation and Application of Article VI, XVI and XXIII of the General Agreement on Tariffs and Trade (the Subsidies Code).
175.
Robert O′ Brien, Subsidy Regulation and State Transformation in North America, the GATT and the EU (Basingstoke, Hampshire, England: Macmillan Press, 1997), 114.
176.
Dominic Coppens, WTO Disciplines on Subsidies and Countervailing Measures: Balancing Policy Space and Legal Constraints (Cambridge University Press, 2014), 46.
177.
Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 60.
178.
United States Department of State, Foreign relations of the United States diplomatic papers, 1944. General: economic and social matters, Volume II, U.S. Government Printing Office, 1944, http://digicoll.library.wisc.edu/cgi-bin/FRUS/FRUS-idx?type=header&id=FRUS.FRUS1944v02&isize=M FRUS (1944 II, 71, 72,87).
http://images.library.wisc.edu/FRUS/EFacs/1944v02/reference/frus.frus1944v02.i0005.pdf
179.
Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 80.
180.
Foreign Relations of the United States diplomatic papers, Volume 6, FRUS (1945, VI, 138), (1945),138.
http://images.library.wisc.edu/FRUS/EFacs/1945v06/reference/frus.frus1945v06.i0005.pdf; the British account in Documents of British Policy Overseas (DBPO) (III, 181–183). http://diplomatic-documents.org/editions/united-kingdom (need login in)
181.
United States Department of State, Foreign relations of the United States: diplomatic papers, 1945. The British Commonwealth, the Far East, Volume VI, U.S. Government Printing Office, 1945 (FRUS 1945 VI, 144). http://images.library.wisc.edu/FRUS/EFacs/1945v06/reference/frus.frus1945v06.i0005.pdf
182.
Id., at 144; Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 106.
183.
Report of the First Session of the London Preparatory Committee of the United Nations Conference on Trade and Employment (London Draft) (UN Document E/PC/T/33), October 1946,
184.
In the footnote, paragraph 1 (e), Article 31, Report of the Drafting Committee of the Preparatory Committee of the UN Conference on Trade and Employment, UN Document E/PC/T/34 (Lake Success, NY, 5 Mar. 1947) (New York Draft) https://www.wto.org/gatt_docs/1946_50.htm https://www.wto.org/gatt_docs/English/SULPDF/92290038.pdf
185.
The Interpretative Note Ad Art. XVII of GATT.
186.
Petros C. Mavroidis, The Regulation of International Trade: Volume 1: GATT (The MIT Press, 2015), 401.
187.
Douglas Irwin, Petros Mavroidis and Alan Sykes, The Genesis of the GATT (Cambridge University Press, 2008), 157–161.
188.
Ernst-Ulrich Petersmann, “GATT Law on State Trading Enterprises: Critical Evaluation of Article XVII and Proposals for Reform,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 71–96 (University of Michigan Press, 1998), 76.
189.
George Bermann, Roger Goebel, William Davey and Eleanor Fox, Cases and Materials on European Union Law, 3rd edition (West Academic Publishing, 2010), 1043–44.
190.
For a brief introduction of rules of EU, see OECD, “State Owned Enterprises and the Principle of Competitive Neutrality, Policy Roundtables,” DAF/COMP(2009)37, (2009), 51–2.
191.
Treaty establishing the European Coal and Steel Community (ECSC Treaty). http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV:xy0022
192.
Treaty Establishing the European Economic Community. (Treaty of Rome 1957).
193.
Treaty Establishing the European Economic Community. (Treaty of Rome 1957), Articles 92, 93 and 94 on Aids Granted by States, and Article 90 on public undertakings; See also Frieder Roessler, “State Trading and Trade Liberalization,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 7261–284 (UK: Palgrave Macmillan, 1982), 261–82.
194.
Treaty of Maastricht on European Union (TEC) inserted Article 92(3) on make exceptions for aid to promote culture and heritage conservation, and revised Article 94 on procedural issues.
195.
Article 345 of TFEU (Article 222 of ECT).
196.
Articles 107 and 108 of TFEU.
197.
Article 107.1 of TFEU.
198.
Article 107. 2 of TFEU.
199.
Article 107.3 of TFEU.
200.
Article 108 of TFEU.
201.
See George Bermann, Roger Goebel, William Davey and Eleanor Fox, Cases and Materials on European Union Law, 3rd edition (West Academic Publishing, 2010),1085; Jacques H.J. Bourgeois, “EC Rules on State Monopolies and Public Undertakings: Any Relevance for the WTO?” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 161–180 (University of Michigan Press, 1998), 165.
202.
Article 106 of TFEU (ex Article 86 TEC, ex article 90 Treaty of Rome).
203.
The ECJ confirmed the Commission’s decision that any undertaking over which the public authorities directly or indirectly exercise a dominant influence is a public undertaking. See France, Italy and United Kingdom v. Commission, joint cases 188 to 190/88, ECR 1982 p. 2545, ECLI:EU:C:1982:257, Judgement of July 6, 1982, at 26. Jacques H.J. Bourgeois, “EC Rules on State Monopolies and Public Undertakings: Any Relevance for the WTO?” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 161–180 (University of Michigan Press, 1998), 164.
204.
Article 37 of TFEU (ex Article 31 TEC)
205.
For instance, it has been seen how import monopolies are contrary to Article 37. See Jacques H.J. Bourgeois, “EC Rules on State Monopolies and Public Undertakings: Any Relevance for the WTO?” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 161–180 (University of Michigan Press, 1998), 169.
206.
Article 102 of TFEU (ex Article 82 TEC); United Brads Company en United Brands Continentaal BV tegen Commissie van de Europese Gemeenschappen. European Court Reports 1978–00207, (United Brands [1978] ECR 207), ECLI identifier: ECLI:EU:C:1978:22, Feb. 02, 1978. http://eur-lex.europa.eu/legal-content/NL/ALL/?uri=CELEX:61976CJ0027
207.
Article 34 (ex Article 28 TEC); Article 35 (ex Article 29 TEC). Andre Sapir, “The Role of Articles 37 and 90 ECT in the Integration of EC Markets: The Case of Utilities,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 231–244 (University of Michigan Press, 1998), 237; Jacques H.J. Bourgeois, “EC Rules on State Monopolies and Public Undertakings: Any Relevance for the WTO?” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 161–180 (University of Michigan Press, 1998), 169.
208.
Article 56 of TFEU, ex article 49 of TEC; Elliniki Radiophonia Tileorassi [1991] ECR I-2925; M. Kerf, “The Impact of EC Law on Public Service Concessions,” 18 World Competition 85 (1995): 101.
209.
Id., at 167.
210.
Andre Sapir, “The Role of Articles 37 and 90 ECT in the Integration of EC Markets: The Case of Utilities,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 231–244 (University of Michigan Press, 1998), 237.
211.
The principle of proportionality would be applied to the invocation of such exemption, such that the task granted would be impossible to carry out if the Treaty applied, not merely more difficult to carry out. See Jacques H.J. Bourgeois, “EC Rules on State Monopolies and Public Undertakings: Any Relevance for the WTO?” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 161–180 (University of Michigan Press, 1998), 165–6.
212.
Judgment of the Court of 10 July 1984, Campus Oil Limited and others v. Minister for Industry and Energy and others, Campus Oil [1984] ECR 2742, at 19, Case 72/83. European Court Reports 1984–02727, ECLI identifier: ECLI:EU:C:1984:256, http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61983CJ0072; Bourgeois, id., at 169–70.
213.
The U.S. industry wants rules in a TPP agreement to ensure that SOEs do not “nullify or impair” market access in the party’s home market, the markets of other TPP countries, or in third-country markets. See Ian F. Fergusson, Mark A. McMinimy and Brock R. Williams, “The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress,” Congressional Research Service, 7–5700 www.crs.gov R42694, March 20, 2015.
https://www.fas.org/sgp/crs/row/R42694.pdf; William Krist, edited with an introduction by Kent HugHes, “Negotiations for a Trans-Pacific Partnership Agreement,” Program on America and the Global Economy Woodrow Wilson International Center for Scholars, ISBN: 978-1-938027-08-6.
https://www.wilsoncenter.org/sites/default/files/PAGE_TPP_REPORT.pdf
214.
The U.S.’s proposals and position can be found in Office of the United States Trade Representative, “State-Owned Enterprises and Competition Policy: SOEs: Leveling the Playing field for American Workers through Fair Competition”. https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-chapter-chapter-negotiating-7; For a general discussion about SOEs in the context of TPP Agreement Negotiations, see Tsuyoshi Kawase, “Trans-Pacific Partnership Negotiations and Rulemaking to Regulate Stat-Owned Enterprises”, 29 July 2014, http://voxeu.org/article/trans-pacific-partnership-negotiations-and-rulemaking-regulate-state-owned-enterprises
215.
Chapter 17 of the TPP Agreement.
216.
Keith Bradsher, “International Business: Trans-Pacific Partnership’s Potential Impact Weighed in Asia and U.S.”, New York Times, July 8, 2015
http://www.nytimes.com/2015/07/09/business/international/trans-pacific-partnerships-potential-impact-weighed-in-asia-and-us.html?_r=0; Tuong Lai, “What Vietnam Must Now Do,”, New York Times (The Opinion Pages), translated by Nguyen Trung Truc from the Vietnamese, April 6, 2015.
http://www.nytimes.com/2015/04/07/opinion/what-vietnam-must-now-do.html
217.
See Office of the United States Trade Representative, “USTR: Trump Administration Announces Intent to Renegotiate the North American Free Trade Agreement,” U.S.T.R. Press Release, May 2017, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/may/ustr-trump-administration-announces
218.
See Office of the United States Trade Representative, “Summary of Objective for the NAFTA Renegotiation,” July 17, 2017, p. 11, https://ustr.gov/sites/default/files/files/Press/Releases/NAFTAObjectives.pdf; Although Article 1503 of NAFTA touches SOEs, it leaves much to the hand of the WTO rules. The TPP Agreement may divert some attention from the WTO to elsewhere.
219.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 28.
220.
With the assumption of a model of two-nation. Matthias Herdegen, Principles of International Economic Law (Oxford University Press, 2013), 14; John H. Jackson, William J. Davey and Alan O. Sykes, Legal Problems of International Economic Relations, Cases, Materials and Text, 5th edition (St. Paul, MN: Thomson/West, 2008), 21; Paul A. Samuelson, Economics, 9th edition (McGraw Hill, 1973), 692.
221.
Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 1–3; Adam Smith’s The Wealth of Nations (1776).
222.
Folsom, id., 20–1; Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book IV, Ch.2, 414 (1776, repr. Modern Library edn., 1937); Dominick Salvatore, International Economics, fifth edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 26–30.
223.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 29.
224.
Andreas F. Lowenfeld, International Economic Law, 2nd edition (Oxford University Press, 2008), 6.
225.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 37.
226.
The classis work is David Ricardo, On the Principle of Political Economy, and Taxation (London: John Murray, 1817); Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 24–27.
227.
Krugman, i.d., at 34; Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 109; John Stuart Mill, The Principles of Political Economy: with some of their applications to social philosophy (1848), Book III; Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 31, 33; Andreas F. Lowenfeld, International Economic Law, 2nd edition (Oxford University Press, 2008), 6; David Ricardo, On the Principle of Political Economy, and Taxation (London: John Murray, 1817).
228.
Salvatore, i.d., at 36–37, 109. Under the model with constant opportunity costs, both nations specialize completely in production of the commodity of their comparative advantage, i.e., produce only that commodity. Under the model with increasing opportunity costs, which means that the nation must give up more and more of one commodity to release just enough resources to produce each additional unit of another commodity, there is incomplete specialization in production in both nations. Salvatore, id., at 55 and 65–66. For more about the theory of comparative advantage, see Paul Krugman, “Is Free Trade Passe?” 1 Economic Perspective 131–144 (1987).
229.
Other assumptions such as both commodities are produced under constant returns to scale in both nations, incomplete specialization in production in both nations, tastes are equal in both nations can be found in Salvatore, id., at 110–111.
230.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 80–81.
231.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 118–9.
232.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 104.
233.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 127.
234.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 91–93, 97.
235.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 129. Redistribution policy of taxes on owners of capital and subsidies to labor can make both classes of factors of production benefit from international trade., Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 120.
236.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 158.
237.
Ibid.
238.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 137.
239.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 171.
240.
Salvatore, id., at 68, 70. 162, 167.
241.
Non-zero-sum game means that both parties to the game can gain. See Jagdish Bhagwati, The World Trading System at Risk (Princeton University Press, 1991), 52.
242.
Id., 52.
243.
The terms of trade of a nation are the ratio of the price of its export commodity to the price of its import commodity. “A rise in the terms of trade increases a country’s welfare.” Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 93–94.
244.
For instance, the tariff results in a reduction in consumer surplus and an increase in producer surplus or rent, and directing resources from the nation’s abundant factor (producing exportables) to the nation’s scarce factor (producing importables) due to the fact that the domestic price of the importable commodity will rise by the amount of the tariff. This leads to inefficiencies by distorting the incentives of producers and consumers, i.e., the protection cost or deadweight loss. Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 232–235, 225–226; Consumer surplus means the difference between what consumers would be willing to pay for each unit of the commodity and what they actually pay for that unit. Salvatore, id., at 224.
245.
Salvatore, id., at 236–7.
246.
The optimum tariff is that rate of tariff that maximizes the net benefit resulting from the improvement in the nation’s terms of trade against the negative effect resulting from reduction in the volume of trade. Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 225; Dominick Salvatore (edited), Protectionism and World Welfare (Cambridge England: Cambridge University Press, 1993), 32–3.
247.
Salvatore, id., at 258–30.
248.
Voluntary export restraints have equivalent economic effects of import quotas, except that they are administered by the exporting country, and so the revenue effect or monopoly profits are captured by foreign exporters. See Salvatore, id., at 260–261. VER producers a loss for the importing country, see Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 208.
249.
Export taxes create government revenue, while depressing domestic prices, reducing output and increasing consumption. If the country is large enough to have some market power, the world price will typically rise and foreigners will bear some of the burden of the tax. It may increase national welfare provided that the tax is kept sufficiently small. See Ryan Scholefield and James Gaisford, “Export Taxes: How They Work and Why They Are Used,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (Edward Elgar Press, 2007), 237.
250.
Imperfect competition is where firms can influence the prices of their products and they can sell more only by reducing their price. This type of competition is an inevitable outcome when there are economies of scale at the level of the firm. Oligopoly is where several firms are large enough to affect prices, but none has an uncontested monopoly. See Krugman, id., at156, 159.
251.
Jonathan Eaton & Gene M. Grossman, Optimal Trade and Industrial Policy under Oligopoly, in Jagdish Bhagwati, International Trade, 2nd edition (1987),161–79; Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 294–296.
252.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 229–32; Mancur Olson, The Logic of Collective Action: Public Goods and The Theory of Groups (Cambridge, MA: Harvard University Press, 1965), 9–22.
253.
Olson, id., at 11.
254.
Gene Grossman and Elhanan Helpman, “Protection for Sale,” 84(4) The American Economic Review (Sept. 1994): 833–850, 848; Paul Krugman, “Is Free Trade Passe?” 1 Economic Perspective (1987): 131–144, 141.
255.
Grossman, id., 848.
256.
For more about the lobbying activities, which are referred as unproductive profit-seeking, see Jagdish Bhagwati, Writing on International Economics, ed. by V. M. Balasubramanyam, (1997), 8–9, 134–51.
257.
With respect to the theory of trade agreements, except for the traditional economic approach, the other one is the political-economy approach, that the government faces political constraints when setting trade policy, (political motivations); and another one is the commitment approach that stresses the difficulty governments may face in making policy commitments to the private sector, in a sense that trade agreements can help governments stick to the agreements when facing pressure from domestic interest groups asking for protection. See Kyle Bagwell and Robert W. Staiger, The Economics of the World Trading System (The MIT, 2002), 7, 13–42, 165.
258.
Jagdish Bhagwati, The World Trading System at Risk (Princeton University Press, 1991), 32–3.
259.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 201–202. The Stolper-Samuelson Theorem explains that imposition of a tariff increases the price of a commodity, and raises the return of earnings of the factor used intensively in the production of the commodity. Thus, the real return to the nation’s scarce factor of production will rise with the imposition of a tariff. A small nation as a whole is harmed by the tariff, while the nation’s scarce factor benefits at the expense of the nation’s abundant factor. The latter is larger than the former. See Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 225–6, 232–236.
260.
Eric Poser and Alan Sykes, Economic Foundations of International Law (The Belknap Press of Harvard University Press, 2013), 13–14.
261.
Kyle Bagwell and Robert W. Staiger, The Economics of the World Trading System (The MIT, 2002), 16–8, 135.
262.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 116–117.
263.
Kyle Bagwell and Robert W. Staiger, The Economics of the World Trading System (The MIT, 2002), 133–5.
264.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 235–6; John H. Jackson, William J. Davey and Alan O. Sykes, Legal Problems of International Economic Relations, Cases, Materials and Text, 5th edition (St. Paul, MN: Thomson/West, 2008), 51;
Paul Krugman, “Is Free Trade Passe?” 1 Economic Perspective (1987):131–144, 141. Matthias Herdegen, Principles of International Economic Law (Oxford University Press, 2013), 13.
265.
The trading partner’s welfare declines since it has a lower volume of trade and deteriorating terms of trade.
266.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 244–6.
267.
Id., at 238–9; Although one country’s protection doesn’t justify another’s, nations retaliate in reality. “Protection by a trading partner lowers the real income both of the partner and at home. The microeconomic effects of trade barriers are argued to be welfare losses and departures from Pareto optimality.” See Dominick Salvatore (edited), Protectionism and World Welfare (Cambridge England: Cambridge University Press, 1993), 18–9, 67, 99.
268.
In a perfect market closed to international trade, production subsidies expand output, reduce the price, and create a welfare loss since resources are allocated inefficiently. See WTO, World Trade Report 2006: Exploring the Links between Subsidies, Trade and the WTO (WTO, 2006), 55.
269.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 203–204.
270.
Karl D. Meilke and John Cranfield, “Production Subsidies,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (Edward Elgar Press, 2007), 292.
271.
WTO, World Trade Report 2006: Exploring the links between subsidies, trade and the WTO (WTO, 2006), 56.
272.
Karl D. Meilke and John Cranfield, “Production Subsidies,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (Edward Elgar Press, 2007), 292–297.
273.
“SOEs would focus more on revenues instead of profit, and revenue often serves as a convenient proxy for scale.” See David E. M. Sappington and J. Gregory Sidak, “Anticompetitive Behavior by State-Owned Enterprises: Incentives and Capabilities,” in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004), 7.
274.
It is more likely to occur if the SOEs emphasize revenue or if customer demand for some of their products is sensitive to price. See David E. M. Sappington, id., at 8.
275.
James Rude, “Direct and Indirect Export Subsidies,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (UK: Edward Elgar Press, 2007), 282–291.
276.
WTO, World Trade Report 2006: Exploring the Links between Subsidies, Trade and the WTO (WTO, 2006), 5.
277.
John H. Jackson, The World Trading System: Law and Policy of International Economic Relations, 2nd edition (Cambridge, MA: MIT Press, 1997), 283.
278.
David E. M. Sappington and J. Gregory Sidak, “Anticompetitive Behavior by State-Owned Enterprises: Incentives and Capabilities,” in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004), 8.
279.
Alan Sykes, “The Questionable Case for Subsidies Regulation: A Comparative Perspective,” Law and Economics Research Paper Series Paper No. 380; see Karl D. Meilke and John Cranfield, “Production Subsidies,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (Edward Elgar Press, 2007), 292–301; John H. Jackson, The World Trading System: Law and Policy of International Economic Relations, 2nd edition (Cambridge, MA: MIT Press, 1997) To the extent that an export subsidy not only transfers production from one company to another but increases overall production, there might be a global benefit. See Andrew Green and Michael Trebilcock, “The Enduring Problem of World Trade Organization Export Subsidies Rules,” in Law and Economics of Contingent Protection in International Trade Kyle Bagwell, George Bermann and Petros Mavroidis eds. (Cambridge University Press, 2010), 116–171.
280.
The classic example of strategic trade argument is the Brander-Spencer analysis with the example of Boeing and Airbus. There were new developments in international trade theory since 1970s, emphasizing increasing returns and imperfect competition, The new view of international trade holds that trade is to an important degree driven by economies of scale rather than comparative advantage, and that international markets are typically imperfectly competitive, see Paul Krugman, “Is Free Trade Passe?” 1 Economic Perspective (1987): 131–144, 132.
281.
Warren F. Schwartz & Eugene W. Harper, Jr., The Regulation of Subsidies Affecting International Trade 70 Mich.L.Rev. (1972): 831.
282.
Gary C. Hufbauer & Joanna Shelton Erb, Subsidies in International Trade 5–6 (1984), Institute for International Economics. See also D. Wallace, F. Loftus and V. Krikorian, Interface Three: Legal Treatment of Domestic Subsidies (Washington, D.C.: International Law Institute, 1984).
283.
European Chamber, “European Business in China: Position Paper (2015/2016),” European Union Chamber of Commerce in China (2016). Kenneth W. Dam, The GATT: Law and International Economic Organization (Chicago: University of Chicago, 1977), 136; Andreas F. Lowenfeld, International Economic Law, 2nd edition (Oxford University Press, 2008), 216.
284.
James Brander, “Rationales for Strategic Trade and Industrial Policy,” in Strategic Trade Policy and the New International Economics, ed. Paul Krugman (Cambridge, MA: MIT Press, 1986).
285.
Katherine Baylis, “Unfair Subsidies & Countervailing Duties,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (Edward Elgar Press, 2007). Krugman, “Introduction: New Thinking about Trade Policy,” in in Strategic Trade Policy and the New International Economics, ed. Paul Krugman (Cambridge, MA: MIT Press, 1986).
286.
Dominick Salvatore (edited), Protectionism and World Welfare (Cambridge England: Cambridge University Press, 1993), 39–40; John H. Jackson, William J. Davey and Alan O. Sykes, Legal Problems of International Economic Relations, Cases, Materials and Text, 5th edition (St. Paul, MN: Thomson/West, 2008), 15–20; Andreas F. Lowenfeld, International Economic Law, 2nd edition (Oxford University Press, 2008), 8.
287.
Salvatore, id., at 39–40.
288.
Andreas F. Lowenfeld, International Economic Law, 2nd edition (Oxford University Press, 2008), 216.
289.
Stephen J.K. Walters, Enterprises, Government and the Public (New York: McGraw-Hill Book, 1993), 104.
290.
Coase, The Problem of Social Cost, 3 (1) J. Law & Econ. (1960). Resources will be employed in producing the subsidized goods rather than other goods of greater real value. See Warren Schwartz and Eugene Harper, The Regulation of Subsidies Affecting International Trade, 70 Mich. L. Rev. (1972): 831, 840.
291.
Alan, Sykes, “The Questionable Case for Subsidies Regulation: A Comparative Perspective, Law and Economics,” Research Paper Series Paper No. 380.
292.
John H. Jackson, William J. Davey and Alan O. Sykes, Legal Problems of International Economic Relations, Cases, Materials and Text, 5th edition (St. Paul, MN: Thomson/West, 2008), 22; John H. Jackson, The World Trading System: Law and Policy of International Economic Relations, 2nd edition (Cambridge, MA: MIT Press, 1997), 282.
293.
Consumers and taxpayers are one and the same subject. Consumers may also be the employees of companies. Consumers may also own a firm through pension and investment funds.
294.
Alan O. Sykes, “The Limited Economic Case for Subsidies Regulation,” E15Initiative, Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum, 2015. www.e15initiative.org/
295.
John H. Jackson, The World Trading System: Law and Policy of International Economic Relations, 2nd edition (Cambridge, MA: MIT Press, 1997); Karl D. Meilke and John Cranfield, “Production Subsidies,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (Edward Elgar Press, 2007), 294.
296.
The weaknesses of these arguments are also discussed. See Alan O. Sykes, “The Limited Economic Case for Subsidies Regulation,” E15Initiative, Geneva: International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum, 2015.
297.
Donald B. Billings and Ellis W. Lamborn, “Free Trade, Freedom of Enterprise, and All That,” in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 117.
298.
The effect of monopoly is to make some consumers switch to goods “that cost society more to produce than the monopolized good. The added cost is a waste to society---deadweight loss.” “The transfer of wealth from consumers to producers brought about by monopoly pricing is a conversion of consumer surplus into producer surplus. This transfer can be a source of social cost even if no distributional weights are assigned to transfers from consumers to producers.” “If a monopoly or cartel has any expected monopoly profits, that expectation will induce firms to expend resources on forming and maintaining monopolies and cartels,” and expanding market shares through non-price competition. These resources will be wasted from a social standpoint. See Richard A. Posner, Economic Analysis of Law, 6th edition (Wolters Kluwer Law & Business, 2003), 278–281.
299.
Richard A. Posner, Economic Analysis of Law, 6th edition (Wolters Kluwer Law & Business, 2003), 281–283.
300.
Steve McCorriston and Donald Maclaren, “Trade and Welfare Effects of State Trading Enterprises,” Paper prepared for presentation at the 11th Congress of the EAAE (European Association of Agricultural Economists), The Future of Rural Europe in the Global Agri-Food System, (Copenhagen, Denmark, August 24–27, 2005), 9.
301.
Donald B. Billings and Ellis W. Lamborn, “Free Trade, Freedom of Enterprise, and All That,” in Burton W. Folsom, ed. The Industrial Revolution and Free Trade (Foundation for Economic Education, 1996), 117.
302.
Jagdish N. Bhagwati, Arvind Panagariya & T.N. Srinivasan, Lectures on International Trade, 2nd ed. (1998), 309–11. J.R. Melvin and R.D. Warne, “Monopoly and the Theory of International Trade,” 3 Journal of International Economics (1973): 117–34.
303.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 215–217.
304.
Avinash Dixit, “International Trade Policy for Oligopolistic Industries,” in Jagdish Bhagwati, International Trade, 2nd edition (MIT Press, 1987), 187; Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 215–217.
305.
Mancur Olson, The Logic of Collective Action: Public Goods and The Theory of Groups (Cambridge, MA: Harvard University Press, 1965). Jagdish Bhagwati, Writings on International Economics (V. M. Balasubramanyam, eds.,1997), 9;
306.
Dominick Salvatore, International Economics, 5th edition (Englewood Cliffs, N.J.: Prentice-Hall, 1995), 277; Dominick Salvatore (edited), Protectionism and World Welfare (Cambridge England: Cambridge University Press, 1993), 97; John H. Jackson, William J. Davey & Alan O. Sykes, Legal Problems of International Economic Relations, Cases, Materials and Text, 5th edition (St. Paul, MN: Thomson/West, 2008), 50.
307.
Richard A. Posner, Economic Analysis of Law, 6th edition (Wolters Kluwer Law & Business, 2003), 281–283.
308.
Id., at 283–284.
309.
David E. M. Sappington and J. Gregory Sidak, Anticompetitive Behavior by State-Owned Enterprises: Incentives and Capabilities, in Competing with the Government, Anticompetitive Behavior and Public Enterprises, eds., Richard R. Geddes (Hoover Institution Press, 2004), 13.
310.
Aaditya Mattoo, “Dealing with Monopolies and State Enterprises: WTO rules for Goods and Services,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 37–70 (University of Michigan Press, 1998), 51.
311.
Ibid.
312.
Harriet Matejka, “Trade-Policy Instruments, State Trading and First-Best Trade Intervention,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 142–160 (UK: Palgrave Macmillan, 1982), 142; James E. Meade, The Theory of International Economic Policy, Volume Two: Trade and Welfare (London: Oxford University Press, 1955), 176; Charles P. Kindleberger, International Economics, 4th edition (Homewood, III.: Ricard D. Irwin Inc., 1968), 130.
313.
M. M. Kostecki, “State Trading by the Advanced and Developing Countries: The Background,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 6–21 (UK: Palgrave Macmillan, 1982), 6.
314.
Jagdish Bhagwati, The World Trading System at Risk (Princeton University Press, 1991), 110.
315.
Robert Loring Allen, “State Trading and Economic Warfare,” 24 Law and Contemporary Problems (Spring 1959): 256–275, 265.
316.
M. M. Kostecki, “State Trading by the Advanced and Developing Countries: The Background,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 6–21 (UK: Palgrave Macmillan, 1982), 6.
317.
Steve McCorriston & Donald Maclaren, “Trade and Welfare Effects of State Trading Enterprises,” Paper prepared for presentation at the XIth Congress of the EAAE (European Association of Agricultural Economists), The Future of Rural Europe in the Global Agri-Food System (Copenhagen, Denmark, August 24–27, 2005), 6.
318.
Jung-Hyun Yoon and Song Soo Lim, “Potential Trade Distortion Effects of State Trading Enterprises under the Tariff-Rate Quota Scheme,” Economics Discussion Papers, No 2013–22, Kiel Institute for the World Economy (2013), 1. http://www.economics-ejournal.org/economics/discussionpapers/2013-22; Koushi Maeda, Nobuhiro Suzuki, and Harry M. Kaiser, “Measuring the Effects of Eliminating State Trading Enterprises on the World Wheat Sector,” working paper, Department of Applied Economics and Management, Cornell University (2001). http://ageconsearch.umn.edu/handle/127664
319.
Jung-Hyun Yoon and Song Soo Lim, “Potential Trade Distortion Effects of State Trading Enterprises under the Tariff-Rate Quota Scheme,” Economics: The Open-Access, Open-Assessment E-Journal, Vol. 7, 2013–31. https://doi.org/10.5018/economics-ejournal.ja.2013-31; In a review of the role of the STE China National Cereals, Oils, and Foodstuffs Import and Export Company (COFCO), McCorriston and MacLaren (2010) measured COFCO’s tariff equivalent for wheat imports.
320.
M. M. Kostecki, “State Trading by the Advanced and Developing Countries: The Background,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 6–21 (UK: Palgrave Macmillan, 1982), 6.
321.
Steve McCorriston and Donald Maclaren, “Trade and Welfare Effects of State Trading Enterprises,” Paper prepared for presentation at the XIth Congress of the EAAE (European Association of Agricultural Economists), The Future of Rural Europe in the Global Agri-Food System (Copenhagen, Denmark, August 24–27, 2005), 7–8.
322.
The size of the distortion created by the STE depends upon the benchmark, and the greater the number of firms that would replace it, the smaller is the distortion. See Steve McCorriston & Donald Maclaren, id, at 8 and 9.
323.
See Alan Sykes, “The Questionable Case for Subsidies Regulation: A Comparative Perspective,” Law and Economics Research Paper Series Paper No. 38; P.J. Lloyd, “State Trading and the Theory of International Trade,” in State Trading in International Markets: Theory and Practice of Industrialized and Developing Countries, ed. M. M. Kostecki, 117–141 (UK: Palgrave Macmillan, 1982), 117–37.
324.
Robert Loring Allen, “State Trading and Economic Warfare,” 24 Law and Contemporary Problems (Spring 1959): 256–275, 266; Edmond M. Ianni, “State Trading: Its Nature and International Treatment,” 5 Nw. J. Int’l L. & Bus. (1983–1984): 46, 52.
325.
Bernard M. Hoekman and Patrick Low, “State Trading: Rule Making Alternatives for Entities with Exclusive Rights,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 327–344 (University of Michigan Press, 1998), 329.
326.
Robert Loring Allen, “State Trading and Economic Warfare,” 24 Law and Contemporary Problems (Spring 1959): 256–275, 258.
327.
Warren Schwartz & Eugene Harper, Jr., The regulation of Subsidies Affecting International Trade, 70 MICH. L. REV. (1972): 831, 841–2.
328.
Bernard M. Hoekman and Patrick Low, “State Trading: Rule Making Alternatives for Entities with Exclusive Rights,” in State Trading in the Twenty-First Century, eds., Thomas Cottier and Petros C. Mavroidis, 327–344 (University of Michigan Press, 1998), 329.
329.
Jagdish Bhagwati, Writings on International Economics (V. M. Balasubramanyam, eds.,1997), 86–87.
330.
Lump sum transfers should be designed so potential recipients cannot modify their behavior to affect who gets the transfer or the size of the transfer. See Karl D. Meilke and John Cranfield, “Production Subsidies,” in Handbook on International Trade Policy, eds., William A. Kerr and James D. Gaisford (Edward Elgar Press, 2007).
331.
Paul R. Krugman, Maurice Obstfeld and Marc J. Melitz, International Economics: Theory and Policy, 9th edition (Pearson Education, 2012), 226–227.
332.
Id., at 272–273.

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School of International Law, China University of Political Science and Law, Beijing, China
Yingying Wu

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Wu, Y. (2019). The Global Presence of SOEs and Their Receipts of Advantages. In: Reforming WTO Rules on State-Owned Enterprises. Springer, Singapore. https://doi.org/10.1007/978-981-13-3561-7_1

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DOI: https://doi.org/10.1007/978-981-13-3561-7_1
Published: 29 January 2019
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