Subsidy Estimation: A survey of current practice

This document is addressed primarily to those individuals who are interested in preparing estimates of subsidies to particular products or sectors—people who engage in what might be called “subsidy accounting.”  Unlike financial accounting for the business sector, or public-sector accounting for governments, there exists no agreed set of standards for producing such accounts. This surprising state of affairs reflects, in part, the diverse backgrounds and aims of subsidy-accounting practitioners, who include experts working for countervail authorities (those charged with estimating countervailing duties on imports fromforeign countries), competition commissions, producers of national account statistics, intergovernmental organizations undertaking research on the trade or environmental effects of subsidies, international financial institutions, non-governmental organizations, and individual academics.

An internationally agreed set of standards for estimating subsidy elements, and for preparing and using aggregates and derived indicators, is sorely needed. Interest in subsidies and their effects is growing. As import tariffs, previously the main instruments of trade protection, have been ratcheted down through successive multilateral and bilateral negotiations, the importance (and some would say the use of) subsidies has become more apparent. Similarly, as sub-national units compete more vigorously to attract businesses to locate in their jurisdictions, investment incentives and similar local subsidies have attracted the attention of organized labour and competition authorities. And, as environmental policy-makers and non-governmental organizations consider how to address problems such as climate change and over-fishing more cost-effectively, they are coming to realize that the first order of business is to reform or cease providing those subsidies that are contributing to such problems.

International standards relating to methods do not emerge spontaneously, however. One cannot impose such a set of standards on such a diverse set of practitioners. Creating them is a process that requires a dialogue. This document, which quotes from the extant documentation of subsidy methods published mainly by intergovernmental organizations and governments, is intended to kick start such a dialogue, leading in the next stage to the promulgation of best-practice recommendations and, ultimately, a set of agreed international standards.