Brave New World: International Regulation of Subsidies and the Future of State and Local Economic Development Programs

Abstract

Recent international trade agreements are likely to have profound effects on state and local development programs in coming years. The most important changes will come as a result of the new Agreement on Subsidies and Countervailing Measures concluded as part of the General Agreement on Tariffs and Trade. Provisions of the North American Free Trade Agreement and the United States-Canada Free Trade Agreement may also affect development efforts. This article examines the new rules on subsidies and their implications for state and local economic development programs. It concludes that these programs are likely to come under increasing attack from trading partners of the United States. While there are limited exceptions to the new disciplines, many programs may have to be changed to comply with the new rules. Some programs may face countermeasures in other countries or may even be required to be removed by international dispute settlement procedures.