A while back, we talked about whether prizes offered by the government could be challenged at the WTO as subsidies. This discussion was somewhat in the abstract. Now, though, we have an actual prize program to talk about: The "L Prize." The New York Times describes it as "an Energy Department contest that will award up to $10 million to the first person or group to create a new energy-sipping version of the most popular type of light bulb used in America." The government's web site for the prize further explains:
The Energy Independence and Security Act of 2007 directs the U.S. Department of Energy (DOE) to establish the Bright Tomorrow Lighting Prizes (L Prize) competition. The L Prize competition is the first government-sponsored technology competition designed to spur development of ultra-efficient solid-state lighting products to replace the common light bulb.
My original post was mostly about whether such prizes were "subsidies" and whether they were "specific." With this program, though, there is a more obvious trade problem. As the Times notes: "at least 75 percent of the bulb must be made or assembled in the United States." More specifically, the competition requirements state:
In addition to meeting technical performance specifications discussed in Section IV, qualified entrants must meet one of the requirements from Section A and the requirement of Section B:
A1) A majority (≥75% by count) of the LED die or chip, defined as the solid-state semiconductor material that converts electrical energy directly into light, must be manufactured in the United States.
or
A2) The LED must be packaged in the United States. Packaged LED (also known as an LED device) refers to an assembly of one or more LED dies possibly including the mounting substrate, encapsulant, phosphor if applicable, electrical connections, and optical components along with thermal and mechanical interfaces.
or
A3) A majority (≥75% by subsystem and assembly cost) of the final product assembly/integration must be carried out within the United States. This includes all of the applicable: final assembly of the LED die or chip, packaged LED, optics, heat sink or cooling components, and driver and electronics.
and
B) In the case of a private entity, the entity shall be incorporated in and maintain a primary place of business in the United States; and in the case of an individual, (whether participating as a single individual or in a group), the individual shall be a citizen or a lawful permanent resident of the United States.
I'm not sure how big a deal these local content requirements are. If it's just for the actual product entered in the competition rather than subsequent commercial production, it's not likely to have much of an impact. Technically, though, the requirement to use local content in order to be eligible for the prize seems like a probable violation of GATT Article III:4 and SCM Agreement Article 3.1(b).
I also had some questions as to the exact nature of the government involvement in the program, but I'll leave those for another time.
