Advanced economies have long avoided industrial policy and subsidies because of their inefficiency. But the United States has set a new tone with the Inflation Reduction Act (IRA), which includes extensive tax credits for electric vehicles, green manufacturing, and renewable energy production. China has long subsidized its state-owned enterprises and the European Union is relaxing its state aid rules. The global economy is entering a global subsidy race, and while some subsidies are necessary for the green transition, others risk distorting global markets and hampering innovation. The World Trade Organization (WTO), World Bank, and the International Monetary Fund (IMF) have launched a joint project to promote access to subsidy information, but is there a way to find common definitions of good and bad subsidies and avoid raising trade tensions?
Joining this episode of Trade Winds are:
Nonresident Senior Fellow, Peterson Institute for International Economics (PIIE)
Deputy Director-General, World Trade Organization
Fellow for Trade Policy, Council on Foreign Relations