The Articulation between WTO Disciplines on Subsidies and EU State Aid Law: From Cross-Fertilization to Hybrid Alternatives

WTO disciplines on subsidies and EU State aid law represent different approaches to regulating subsidies, and their operation creates risks of a double standard of analysis, leading to compliance issues for governments and firms and to an unlevel playing field. What is missing from the current literature is an in-depth analysis of the articulation between WTO disciplines on subsidies and EU State aid that goes beyond the mere comparison of the regimes and identification of their differences. The objective of this research is to identify, explain and critically evaluate the issues arising from the articulation between WTO disciplines on subsidies and EU State aid law, studying solutions on how to properly address them. To achieve this objective, the present research will be guided by three key questions: considering the similarities and differences between WTO disciplines on subsidies and the EU State aid law, what are the issues and conflicts arising from the articulation between these systems?; What can explain these frictions?; How can they be properly addressed? They translate into a four-part effort. First, an economic literature review will be conducted to identify the economic rationales for regulating subsidies. Second, the WTO disciplines on subsidies and the EU State aid rules will be compared using the functional method of comparative law. Third, legal case studies will be carried out to evaluate whether the inclusion of State aid clauses in PTAs and the recent EU Proposal on foreign subsidies constitute hybrid trade and competition approaches to regulating of subsidies, and whether they solve the issues of existing models. Finally, we hope to identify what are the possible approaches to addressing the issues arising from the articulation between WTO disciplines on subsidies and EU State aid, how to improve existing regulations. This will be done by analyzing the potential of reforms and whether these should happen at the WTO or at the EU level.