24 - Non-Commercial Assistance Rules in the TPP: A Comparative Analysis with the SCM Agreement

Summary

One of the concerns surrounding state-owned enterprises (SOEs) in the international trade context is that they may acquire a competitive edge through “hidden subsidies or other advantages that would not be available to private firms.” The Organisation for Economic Co-operation and Development (OECD) report exemplifies the advantages that SOEs can enjoy. These are (a) outright subsidization, such as the creation of favorable tax regimes or conferring of in-kind benefits; (b) concessionary financing and guarantees, e.g. granting of credit at below-market interest rates; (c) other preferential treatment by governments, including exemptions from antitrust enforcement and building permit regulations; (d) monopolies and the advantages of incumbency; (e) captive equity, namely, the advantages that SOEs may enjoy thanks to the inability of their owners to transfer ownership rights; and (f) exemption from bankruptcy rules and information advantages. Through such means, SOEs may gain a competitive advantage merely by virtue of their state-owned status.