WTO Subsidy Reform: Confronting Great-Power Resistance
“That is not a question.”
Ngozi Okonjo-Iweala, the Director-General of the World Trade Organization, jabbed her finger in my direction. She had just given a speech outlining her priorities, and during the Q&A I had suggested reforms that I had been advocating to the Canadian government. She was right, of course. This was a Q&A and I hadn't asked a question. I wanted to disappear. But then, to my astonishment, she turned to an adviser and asked for my contact information.
That encounter helped set in motion a three-year effort to tackle one of the WTO's most difficult problems: industrial subsidies.
The problem was becoming impossible to ignore. China's massive industrial subsidies were reshaping global competition. Meanwhile, the United States and Europe were embracing industrial policies of their own, subsidizing semiconductors, clean energy and other strategic industries. Some subsidies serve legitimate public purposes. Others distort trade, harm foreign competitors and provoke retaliation. The WTO's subsidy rules were increasingly inadequate to the task.
Yet reform was politically explosive. China and the United States had very different interests, and neither was eager to accept new constraints on its industrial policies.
Working with Bob Staiger and Ralph Ossa, who became the WTO's Chief Economist in 2023, I helped launch an ambitious research project to rethink the rules. We wanted to bring serious economic and legal analysis to a debate increasingly dominated by geopolitical conflict.
We approached three extraordinary scholars: Penny Goldberg of Yale to lead the empirical work; Gene Grossman of Princeton, a leading trade theorist, for the theory; and Alan Sykes of Stanford, one of the world's foremost trade lawyers, for the legal analysis. To our delight, all three agreed despite their demanding schedules.
Our goal was not another academic exercise. We wanted to prevent a global subsidy war in which economic might, rather than international rules, determined who could compete.
In June 2024, we convened a full-day meeting at IMF headquarters in Washington to present our initial findings to senior officials from the WTO, IMF, World Bank, OECD and Inter-American Development Bank. Their feedback helped sharpen the work.
But the real challenge lay ahead. To influence WTO reform, we needed to reach the representatives of member countries—the people who would ultimately negotiate changes to the rules.
In March 2025, we brought our work to Geneva. As our work moved closer to WTO decision-makers, we encountered resistance from both China and the United States. Even organizing a forum for independent discussion of subsidy reform proved politically contentious. The resistance was sufficiently strong that we had to make major last-minute adjustments to ensure the conference went ahead. Nevertheless, we succeeded in bringing our research directly to the WTO's diplomatic community. We had constructive discussions with key representatives from many countries, including the United States and China.
We subsequently completed a confidential report setting out our findings and reform proposals.
WTO subsidy negotiations are continuing, and it is too early to see what influence our work will ultimately have. But we have certainly helped kick-start the dialogue. And we have succeeded in bringing independent, research-based proposals into direct contact with the people responsible for reforming the international trading system.