There is lots of talk about bailouts these days, mostly to the financial industry. Given that there are no subsidies rules for services, we are not likely to see many WTO disputes over this. However, when the government starts bailing companies out, sometimes it becomes hard to draw the line. Now there is talk about a bailout for GM, Ford and Chrysler:
Electoral politics and the recent willingness of the federal government to aid teetering financial firms have come into play, analysts and congressional sources said. "We know the auto industry feels somewhat emboldened to come to Washington and ask for subsidies," the associate director of the Cato Institute's Center for Trade Policy Studies, Daniel Ikenson, said.
So what are they asking for specfically?
The nation's top car manufacturers are pushing Congress to act by the end of this month to guarantee $25 billion in loans to help them invest in the production of fuel-efficient vehicles.
And what do the Presidential contenders think?
The Democratic nominee, Senator Obama, supports the full $50 billion loan guarantee, while the Republican nominee, Senator McCain, signaled last month that he would agree to unspecified federal backing after earlier warning against "predicting failure" for the Big Three automakers.
What I'm curious about is how our trading partners will react. For example, having just been on the losing end of a WTO panel ruling on auto parts, would China decide to challenge these subsidies?