The Dilemma and Way Out of Global Industrial Subsidy Governance: A Study on WTO Rule Reform

Abstract

Industrial subsidies, as a vital policy instrument for nations to drive industrial development and enhance economic competitiveness, have long transcended national borders in their impact and significance, becoming a core issue and focal point of strategic manoeuvring within the global trading system. The World Trade Organisation (WTO), as the central institution governing global trade rules, shoulders the responsibility of regulating subsidy practices, safeguarding fair competition environments, and resolving trade disputes. However, amid profound shifts in the global economic landscape, accelerated technological evolution within industries, and intensifying industrial strategic competition between major powers, the subsidy rules under the current WTO framework now face unprecedented challenges and dilemmas. This paper provides an in-depth analysis of the complex landscape of industrial subsidies within the international trade environment and the multidimensional issues they engender. It outlines the WTO’s core functions in subsidy management, dispute resolution and rule-making, while defining the fundamental concepts, primary forms and dual characteristics of industrial subsidies, namely their inherent economic stimulus potential and latent capacity to distort trade. By examining specific subsidy practices in the United States and China, the study reveals how such policies profoundly influence global industrial chain configurations, market competition dynamics and trade flows, becoming pivotal bargaining chips in geopolitical and economic rivalries between major powers. Following an in-depth analysis of the risks and strategic dynamics embedded in the EU’s anti-subsidy investigations against China, the paper clarifies the necessity for explicit definition and restoration of ‘non-actionable subsidies’ (such as environmental subsidies, regional development subsidies, and disaster relief subsidies). It proposes concrete recommendations for enhancing the regulatory capacity of large-scale industrial subsidies, encompassing optimisation of application review processes, strengthening of specialised audits, establishment of post-project evaluation mechanisms, and implementation of rigorous accountability systems. Through case analysis and profound reflection on the predicaments of international rules, this study offers a more comprehensive perspective for understanding the complex issue of industrial subsidies, thereby advancing the establishment of a fairer, more effective, and contemporary international subsidy rules framework. In today’s world of deep economic integration and concurrent competition, balancing national industrial development needs with the constraints of multilateral trade rules, and appropriately addressing the international dilemmas arising from industrial subsidies, constitutes a pivotal question concerning the future trajectory of the global economic governance system.