Info Service on WTO and Trade Issues (July07/09)
US gave huge industrial subsidies, while now proposing WTO ban
in June proposed to expand the list of prohibited industrial subsidies
under the WTO's Agreement on Subsidies and Countervailing Measures (SCM).
was opposed by many developing countries on the grounds that this would
deprive them of the tools the developed countries used to facilitate
their own industrialization, and that the US did not propose to eliminate
another important point to note is that the US even
at present is heavily subsidizing its industries, including some practices
it seeks to prohibit.
example, the US Congress approved
$15 billion in cash and loans to 55 airline
$5 billion in aid, and $10 billion in guaranteed loans.
is an article by Samuel Bollier and Robert Weissman of the Multinational
was first published in SUNS on 16 July.
gave huge industrial subsidies, while now proposing WTO ban
Samuel Bollier and Robert Weissman*
13 July 2007
United States in June brazenly proposed
to expand the list of prohibited subsidies under the WTO's Agreement
on Subsidies and Countervailing Measures (SCM).
developing countries reacted angrily. First, they complained, the United States sought to deprive developing
nations of many of the tools it used to facilitate its own industrialization.
Second, the United
States did not propose to eliminate
the heavy agricultural subsidies on which it still relies.
objections to the US proposal were meritorious, but they overlooked
the ongoing pervasiveness of subsidization in the US economy, including some of the very practices
the United States
seeks to prohibit through the World Trade Organization - but which it
certainly does not intend to abandon for its own economy.
US proposals would prohibit government
payments or loans to, or investments in, failing companies.
the last several decades, however, the United
States has frequently undertaken such
measures for industries or companies in distress.
notably, in the wake of 9/11, the US Congress approved $15 billion in
cash and loans to 55 airline companies, prime among them American, Delta
and United Airlines. This consisted of $5 billion of aid, and $10 billion
in guaranteed loans.
Air Transportation Stabilization Board was created to issue these loans.
After its bankruptcy and subsequent bailout, US Airways demanded that
the Pension Benefit Guarantee Corporation (PBGC), a government-run corporation,
help pay the pensions of its workers. The matter remains unresolved.
was not a unique case. Since 1970, the US
government has bailed out numerous firms. In 1971, a $250 million loan
guarantee kept Lockheed Aircraft (the forerunner of Lockheed Martin)
from sliding into bankruptcy.
1973, the US government
provided at least $5 billion to bail out the railroad industry. Eventually,
in 1976, the Consolidated Rail Corporation (Conrail), a conglomerate
of Penn Central Railroad and many other firms under the operation of
the government, began operating, finally becoming profitable in 1981.
It was privatized in 1987 in what was at the time the largest initial
public offering in US history.
1979, the Chrysler Corporation Loan Guarantee Act, signed into law by
President Jimmy Carter, infused $1.5 billion into the struggling car
the 1980s and 1990s, with a segment of the US
financial industry known as savings and loans facing collapse, the government
spent well over $100 billion in supports.
1998, with a massive hedge fund known as Long-Term Capital facing collapse,
the government provided a different kind of support. Fearing ripple
effects from a Long-Term Capital bankruptcy, the Federal Reserve - the
US central bank - organized and pressured
private bankers to provide $3.5 billion in funding to Long-Term Capital.
generally, the United States
may fairly be accused of double standards at the WTO for urging a prohibition
on certain categories of giveaways, subsidies, loans and bailouts while
permitting massive corporate welfare subsidies of different kinds within
its own borders.
highlight just a few examples:
The 1872 Mining Act allows companies to buy federal land at the giveaway
price of $5 an acre for mining purposes, and does not require any royalties
on the profits obtained from extracting these minerals. Thanks to the
1872 Mining Act, the government - and the taxpayers - are being robbed
of billions of dollars of wealth that is extracted from land that is
The 1996 Telecommunications Act mandated that licenses to use the public-owned
airwaves be given away for free to television broadcasters. The Federal
Communications Commission, which oversaw the giveaway, estimated the
value of the licenses at anywhere from $11-70 billion.
The United States
provides hundreds of millions of dollars in loans and loan guarantees
to exporters and US firms investing overseas through
the Export-Import Bank and the Overseas Private Investment Corporation.
These benefits are typically conferred on health companies, but they
provide massive subsidies by instituting the US
government as an enforcer for overseas' partners' financial obligations.
The US tax code provides for gigantic
targeted subsidies to all kinds of industry. Corporations get tens of
billions of dollars in special tax breaks every year, according to the
president's own budget presentation. A single tax benefit for the oil
industry (the oil depletion deduction) will be worth about $3.4 billion
over the next five years, according to the president's budget statement;
and a similar deal for minerals will confer $2.5 billion in subsidies
on mining companies. An accelerated depreciation schedule for machinery
will lavish more than $300 billion on business over the next five years!
has evolved in Washington, D. C. a culture of corporate welfare provision
so profound as to make almost unimaginable US demands that other countries
eliminate industrial subsidies.
is true that while Washington has a long history
of bailing out companies in distress, the vast majority of US corporate
welfare goes to companies that are in fine financial shape. But doesn't
this make such subsidies less rather than more defensible?
Samuel Bollier is an intern at and Robert Weissman is editor of the
Washington, D. C.-based Multinational Monitor.) +
TO MAIN | ONLINE
BOOKSTORE | HOW TO ORDER