As China expands its influence over the Global South, particularly through the Belt and Road Initiative (BRI), the United States and the European Union have proactively initiated new Antidumping and Countervailing Duties (AD/CVD) investigations into transnational subsidies to minimize adverse impacts on their economies and to counter China’s global expansion. These newly emerging transnational subsidies are now causing a paradigm shift from territoriality to transnationalism. However, it remains unclear whether Agreement on Subsidies and Countervailing Measures (the SCM Agreement), designed to regulate traditional subsidies, can keep up with this paradigm shift. Even after the first World Trade Organization (WTO) Panel ruling on transnational subsidies, legal uncertainty persists, as the Panel left important questions unanswered. In this vein, this paper critically reviews the first WTO ruling, focusing on the attribution and the specificity issues of transnational subsidies. After reaching a conclusion that the SCM Agreement is insufficient to regulate transnational subsidies within its current framework, this paper sheds light on how this paradigm shift will lead to the creation of a new transnational subsidy rule. Specifically, this paper employs the Median Voter Theorem to analyse how the preferences of states will converge and to predict the feasible trajectory of new transnational subsidy rules.
Journal of World Trade