The $76 billion the U.S. Government provided to General Motors and Chrysler, may constitute violations of the Subsidies and Countervailing Measures Agreement under the General Agreement on Tariffs and Trade. This matters because violations entitle other World Trade Organization members to retaliate against any U.S. industry to correct the imbalance caused by the subsidies. As other U.S. industries are more internationally competitive than General Motors or Chrysler, retaliation against those industries yields greater competitive returns for the challenging member. Therefore, as challenges remove the benefits of subsidies, or at least transfers income from one industry to another, governments should carefully consider their implementation. Not all subsidies are prohibited, or actionable, under the Agreement, and as adjudications under the Agreement are fact-intensive inquiries, the terms of the subsidies drive the subsidy determination. One example is government loans: government loans with below market rates may constitute subsidies, however, loans with market rates may not. For respondents, failure to indicate intent to gain from the contributions constitutes an admission of a prohibited subsidy. Part I provides a background on the General Agreement on Tariffs and Trade, as well as, the Subsidies and Countervailing Measures Agreement. Sections A and B provide backgrounds on the GATT and the agreement, and Section C provides a background for the auto bailouts. Section D details precedent under the Agreement in terms of the elements for finding a subsidy under the Agreement. Part II details how the U.S. auto bailouts constitute subsidy violations under the Agreement. It specifically describes how the terms of the U.S. loans, the debt forgiveness, low-interest rates, and non-commercial motives, preclude the U.S. from satisfying the market benchmark required to rebut a subsidy claim. Part II also discusses the slippery nature of the Agreement’s “Traffic Light System.” As Prohibited Subsidies are limited, factually, and Allowable Subsidies are also limited, procedurally and substantively, the presumptions included in Actionable Subsidies analysis makes the Actionable determination all but assured
