Thread by @ChadBown

1/

NEWS: WTO to authorize US tariffs on $8 billion of EU exports due to illegal subsidies provided to Airbus, report @BBaschuk @SDonnan & J Stearns
___

News is the $8bn number

The $8 bn would be the biggest authorized retaliation in WTO history...

bloomberg.com/news/articles/…

2/

The largest PRIOR WTO authorized retaliation was $4 billion.

That was the "US - Foreign Sales Corporation" (FSC) dispute of 2002 that the EU won and was authorized to retaliate against the US...

--> chadpbown.com/wp-content/upl…

3/

Once the report is public, we'll see HOW the arbitrators came up with the $8 billion limit.

Historically, depending on the type of dispute, arbitrators have focused on one of two approaches.

I describe the different ways in this paper... 🤓🤓🤓

-> chadpbown.com/wp-content/upl…

4/

In disputes over DOMESTIC SUBSIDIES or IMPORT RESTRICTIONS (eg, tariffs) arbitrators typically use the "trade effects" approach.

They estimate the level of lost trade and permit a country like the US to impose tariffs (of say 100%) to reduce trade by an equivalent amount...

5/

In disputes over EXPORT SUBSIDIES, the arbitrators typically allow retaliation equal to the value of the export subsidy.

Earlier examples: US - FSC, Canada - Aircraft, Brazil - Aircraft

6/

Here is the full paper

Bown, CP and M Ruta, “The Economics of Permissible WTO Retaliation,” in CP Bown and J Pauwelyn (eds.), The Law, Economics and Politics of Retaliation in WTO Dispute Settlement, Cambridge, UK: Cambridge University Press, 2010

-> chadpbown.com/wp-content/upl…