Somebody call a lawyer.
I just read that Joseph Stiglitz, in an article in the bepress.com "Economist's Voice" publication (thanks to Dan Drezner for mentioning this to me), has argued that Japan, Europe and other signatories of the Kyoto Protocol should bring a WTO case against the U.S. for the subsidy conferred by virtue of the U.S. failure to comply with the Kyoto Protocol, which does not bind the U.S. He asserts that except in certain limited situations, the WTO does not allow subsidies. This is simply incorrect. Well, the WTO does allow domestic subsidies to be countervailed, provided that they are specific, and provided that there is a government financial contribution. Before the WTO was created, there was a possible argument that lax environmental regulation could be understood as a subsidy, and in 1993 I even wrote an article describing this possibility. But the definition of "subsidy" in the SCM requires a financial contribution. I suppose that GATT does not, and a panel or the AB might find the GATT requirements do not require a financial contribution. But we still have the question--where is the subsidy, and how is it measured. How did the Kyoto Protocol become the baseline against which subsidization is measured? When does the search for subsidization by virtue of lax regulation end--at the time when all states have the same regulation?
