Subsidies as an Instrument of Industrial Policy: Are they WTO Compliant?

This policy briefing examines the trend of trade protectionism and 'bail-out' subsidies following the global economic recession, specifically analyzing whether South Africa's industrial support measures comply with World Trade Organization (WTO) rules under the Agreement on Subsidies and Countervailing Measures (ASCM).

• Following the Great Recession, G20 countries adopted trade-restrictive measures, including tariffs, import bans, and subsidies for sectors such as renewable energy, aviation, and the automotive industry. The automotive sector specifically received subsidies totaling $48 billion, with the US providing $17.4 billion to three national companies.
• South Africa responded to the economic crisis through the 'Framework for South Africa’s Response to the International Economic Crisis', targeting sectors like mining, clothing, textiles, footwear, and capital equipment. Implementation included a ZAR 6.1 billion fund administered by the Industrial Development Corporation (IDC) and a ZAR 2.9 billion training layoff scheme.
• The author argues that South Africa's rescue measures, particularly the IDC-administered preferential financial schemes, likely meet the WTO's ASCM definition of a subsidy. This is because the IDC is primarily government-funded, the loans are provided on 'preferential terms' (conferring a benefit), and the funding is limited to specific companies and sectors (meeting the 'specificity' requirement).
• While subsidies are not inherently illegal under WTO rules—as they can support legitimate goals like poverty alleviation or national security—they become 'actionable' if they distort trade or cause harm to the industries and exports of other countries.
• The briefing warns that relying on state assistance and 'cherry picking' specific sectors may damage South Africa's long-term competitiveness and erode the multilateral trading system. It recommends focusing on long-term trade facilitation, such as improving infrastructure and technical standards, rather than short-term bail-outs.

APA

Feris, L. (2011). Subsidies as an Instrument of Industrial Policy: Are they WTO Compliant? South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2011/03/Policy-Briefing-31.pdf

Chicago

Feris, Loretta. Subsidies as an Instrument of Industrial Policy: Are they WTO Compliant? South African Institute of International Affairs, 2011. https://saiia.org.za/wp-content/uploads/2011/03/Policy-Briefing-31.pdf.

Wikipedia

{{cite report |last1=Feris |first1=Loretta |title=Subsidies as an Instrument of Industrial Policy: Are they WTO Compliant? |publisher=South African Institute of International Affairs |date=31 March 2011 |url=https://saiia.org.za/wp-content/uploads/2011/03/Policy-Briefing-31.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{feris2011subsidies, author = {Feris, Loretta}, title = {{Subsidies as an Instrument of Industrial Policy: Are they WTO Compliant?}}, institution = {South African Institute of International Affairs}, year = {2011}, month = mar, url = {https://saiia.org.za/wp-content/uploads/2011/03/Policy-Briefing-31.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }