Research On R&D Subsidy Policy Under The Framework Of WTO

Nowadays,R&D activities are more concentrated by various countries.R&D subsidy policies has become a common means adopted by WTO main members to support scientific research and technological innovation.The compliance of R&D subsidy policies under the multilateral trade system and its rationality in practice are worth exploring.First of all,in the multilateral trade system of WTO,the compliance of R&D subsidy policies is concerned.During the early time of WTO,R&D subsidies adopted by members were restricted to some extent.Due to the spillover effect of R&D,WTO only regards the government’s assistance to the cost of entire basic research,most industrial research and some pre-competitive development as non-actionable subsidy,which is stipulated in Article 8.2 called Non-actionable Subsidies.However,the legitimacy of such kind of subsidies lasted only five years and expired at the end of 1999.The reason why rules established,expired,and its evolution and development,are worth exploring.As a kind of non-actionable subsidies,R&D subsidy was focuses during the Uruguay Round of the GATT.After a wide and profound discussion,members finally agreed with the classification of three categories of subsidies,dividing all subsidies into prohibited subsidy,actionable subsidy and non-actionable subsidy.But differences were still existed.The existence of this historical problem also led to the interruption of negotiations on non-actionable subsidies before the Doha Round.Finally,the rules of WTO R&D Subsidy or even of all non-actionable subsidies had never been discussed again in Doha Round.Consequently,the rules of WTO R&D Subsidy become a "zombie clause" without legal validity.The invalidation of this clause is not caused by the Irrationality of rules rather than many historical,political and negotiating factors.In WTO reform proposals by some members these days,the applicability of non-actionable subsidies has been mentioned again.In view of the quasi precedent nature of WTO dispute settlement,this paper studies two cases involving R&D subsidy policies.This paper further analyzes the consistency between the specific R&D subsidy policy and the WTO rules by studying the practice of defense by both complaints and respondents and reports of panel and appellate body.These cases provide reference for the formulation and implementation of R&D policies and future litigation response.Based on the above background,this paper first describes the practice of R&D subsidy of main members.On the one hand,as major developed members of the WTO,the United States,the European Union,the United Kingdom,France,Germany,Spain pay more attention on supportive policies of R&D activities.They have carried out a large number of strong domestic R&D subsidies mainly by financial means such as grants,taxes and few financial instruments.At the same time,their policy objectives,subjects and means of R&D subsidies are full of strategies.However,these policies are not fully in line with WTO rules,and are also in conflict with multilateral trade rules.On the other hand,China also concentrate on R&D subsidies.Although the number of notifications is less,the number of policies is large.The intensity of R&D support in China is also increasing year by year,and all these policies are also directions of Industrial development.Chinese R&D subsidy regime includes R&D plans,programs and tax policies.R&D programs and tax policies are main parts of all subsidies and there is a greater possibility to be a potential focus in future dispute.As the top-level design of the policy regime,R&D plans,including none specific supporting measures,are more likely to become adverse evidence in trade disputes.Secondly,the trade effect of R&D subsidy policy is worthy of attention.It is economically reasonable,which can promote technological progress and productivity,thus promoting exports.This paper establishes the dynamic unbalanced panel data of R&D subsidies based on the Global Trade Alert(GTA)database to make an empirical analysis on their trade effects.Conclusions are as follows.R&D subsidies have trade effects,which can not only expand exports,but also inhibit imports,and brings improvement welfare.R&D subsidies can promote exports in the long run and the short run,while the inhibition of imports is only reflected in the short run.The export effect of indirect R&D subsidy is more obvious,but the export effect of direct R&D subsidy is not significant.However,on the whole,the trade effect of R&D subsidies is relatively small,which cannot significantly increase exports or reduce imports,resulting in significant trade impact.Because of the positive effect of R&D subsidy,the supportive policies of R&D exist in reality.The limited effect on trade makes R&D subsidies belong to the category of actionable subsidy rather than the prohibited subsidy according to ASCM.So,if such measures cannot be effectively constrained by WTO,it will lead to abuse of this kind of trade policies.Unfortunately,ASCM rules directly related to R&D subsidies have expired.But in practice,the universality and controversy of R&D subsidies put forward higher requirements to WTO rules.At present,the main members have issued statements and submitted suggestions on WTO reform,which is imperative.However,there are still differences between developed and developing members on R&D subsidy rules.It is difficult to cross the political,economic,trade,technological and legal gaps between different economies.WTO members should adhere to multilateralism and actively maintain the international regulatory framework of R&D subsidies.This paper indicates that R&D subsidies can be included in the list of non-actionable subsidies and WTO must consider the fair treatment of developing economies.All members should also promote the establishment of an effective notification system of R&D subsidies.China should,as always,safeguard the multilateral trading system,actively participate in the negotiation and formulation of a new round of R&D subsidy rules,and put forward effective and reasonable suggestions and propositions.China should continue to maintain the multilateral trading system as well as concentrate on the strategy and skills of policymaking.Trade disputes are likely to occur at any time,and China should treat it with a normal mind.We should not only be prepared to respond positively,but also attach importance to the construction of response measures and case databases to master the initiative.