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

The document examines the trend of trade protectionism following the Great Recession, specifically focusing on government subsidies and bail-outs. It argues that while subsidies are not inherently illegal under WTO rules, South Africa's specific rescue packages—administered through the Industrial Development Corporation (IDC)—may constitute 'actionable subsidies' under the Agreement on Subsidies and Countervailing Measures (ASCM) because they provide preferential financial benefits to specific enterprises. The author recommends that South Africa shift from short-term unilateral protectionism toward long-term trade facilitation and the promotion of policy space for developing countries to invest in emerging industries like green technology.

• Following the Great Recession, G20 countries adopted trade-restrictive measures, including tariffs, import bans, and subsidies for sectors such as renewable energy, green products, 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 via the 'Framework for South Africa’s Response to the International Economic Crisis', which targeted vulnerable sectors including 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.
• Under the Agreement on Subsidies and Countervailing Measures (ASCM), subsidies are not automatically violations of WTO rules, as they can support legitimate goals like poverty alleviation or national security. However, they become 'actionable subsidies' if they distort trade, harm the industry of another country, or are aimed at import substitution or maximizing exports.
• The IDC-administered preferential financial schemes in South Africa likely meet the three WTO criteria for a subsidy: they are a 'financial contribution' (as the government funds the IDC), they confer a 'benefit' (by providing loans on preferential terms more favourable than market rates), and they exhibit 'specificity' (by limiting access to specific companies and sectors).
• The author warns that relying on state assistance and the protectionist actions outlined in the Industrial Policy Action Plan (IPAP)—such as preferential procurement and concessional credit—could damage South Africa's long-term competitiveness and violate multilateral trade rules.

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} }