Government hardship grants

The only exception is the Agreement on Subsidies and Countervailing Measures of the World Trade Organization (WTO) which provides a precise definition of subsidies that have legal capacity. The reason for this precision is to avoid any ambiguity in the assessment of subsidies when they are used to justify countervailing duties and other disciplines against states that may violate the Agreement. It defines grants as direct transfers of funds, or possible government hardship loans direct transfers of funds, from governments to companies or individuals (eg, donations, loans and capital contributions), forgiveness or non-collection of public revenue (eg, exemptions or tax deferrals), contribution by the government of goods and services other than general infrastructure, at prices below market prices, and any form of income or price support. For there to be a subsidy, the measure must provide a benefit to the company or person, and must be specific to a company or group of companie .

As we will see, this attempt, and probably any other similar one, to define unambiguously what a subsidy is, leaves a lot of room for debate when trying to apply that definition.

In the case of the WTO Agreement, the definition is derived from two sources. On the one hand, it is about determining and stopping government actions that influence international trade in a way that provides "unfair" advantages for companies within its jurisdiction. On the other hand, the Agreement is exactly that, an agreement, and its content is what could be agreed. Thus, although the definition has a clear operational purpose, political realities played a role in determining its limits.

The WTO definition serves its operational purpose by setting a standard for maintaining "fair" international trade. For other purposes, each country has different official definitions and, for different specific purposes, analysts may prefer one of the multiple definitions.

Canada, for example, includes in the definition of subsidy “any financial or commercial benefit that has been derived or is derived, directly or indirectly, for persons engaged in the production, manufacture, cultivation, processing, distribution, sale, exploitation or import of articles, as a result of any plan, program, practice or activity carried out, provided or executed by the government of a country ”. Hart interprets this definition to include infrastructure support (eg, the US / Canada St. Lawrence Canal), land donations, government spending on cultural affairs, and major government purchases (eg, military, space programs, etc.).

Stanford takes an even broader view, arguing that government labor policies, such as those that prevent union organizing and include insufficient or non-existent regulations on health and safety in the workplace, are also subsidies . Such policies, although not included in the WTO definition, reduce costs and therefore allow companies in the countries concerned to lower prices on world markets.

Shoup presents an opinion more oriented to his own country, and considers subsidies as government policies of payments or tax reductions that offer companies incentives to modify the relative prices of their products and, in this way, reallocate resources in the directions which, for whatever reason, favors the government. Changes in relative prices may influence international trade and therefore may or may not be included under the Agreement on Subsidies and Countervailing Measures.

The world of agricultural subsidies is characterized by many forms of government financial support, each of which falls into one of two general classes, the first of which involves lowering consumer food prices below the level. the free market and, the other, the support to agricultural production. The first class of subsidies, frequently used in developing countries, includes methods as diverse as rationing in Pakistan and price controls in India.. The second, frequently used in developed countries, also includes very different methods, such as the management of supplies and the setting of prices of fertilizers in Canada or the controls of acreage and subsidized credits and insurance in the United States of America.