DISCIPLINING THE RESPONSES TO CROSS-BORDER SUBSIDIES: THE CASE STUDY OF EU TRADE REMEDY INVESTIGATION AGAINST PRODUCTS FROM INDONESIA AND IMPLICATIONS FOR THAILAND

Abstract

The escalating geopolitical tensions between China and the United States have intensified competition in the trade field, with subsidies playing a significant role. This dynamic is particularly relevant for Indonesia and Thailand, both of which are strategically positioned in global trade relations with China, the EU, and the US. On the one hand, both countries have emerged as the most attractive destinations for China’s BRI investment in ASEAN; on the other hand, they are increasingly subjected to trade remedy investigations by the EU and the US. This research explores how trade remedy rules are applied to cross-border subsidies, focusing on the practices of the EU in the BRI context. By analysing existing WTO subsidy rules and the EU’s actions against products from Indonesia, this research sheds light on the implications for Thailand in securing its economic interests in the global market. The analysis reveals that, while WTO rules offer remedies for certain subsidies, cross-border subsidies pose unique challenges due to their transnational nature. Case studies indicate that the EU has expanded the application of WTO trade remedy rules to address these issues under the BRI. A WTO-consistent approach to cross-border subsidies must strike a delicate balance between mitigating their trade-distortive effects and facilitating development. For Thailand to remain competitive as a leading investment destination in ASEAN, leverage the benefits of the BRI, and assist its industries to move up the value chain, it is crucial to prioritize development needs in its proposal for WTO subsidy rule reforms.