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Towards Developing Subsidy Disciplines Under the GATS

Entities like the European Community are being criticised by developing countries (and have been by the US for a long time) for subsidizing essential services like higher education and healthcare which cost dearly in the fast growing Asian countries, which hold most of the world's population. For example "In addition, other form of subsidy that can distort trade both within and outside domestic territory is subsidy given to residents for acquiring specialised skills. When the residents, armed with specialized skills that are subsidized by government, temporarily move abroad the subsidy causes distortion. At present this distortion is limited, if at all, since the members countries usually have strict immigration/visa regulations. But even when there is no temporary movement of natural persons, subsidized specialized skills may distort trade when, for example, outsourcing of services to the subsidizing member takes place via mode 1." (page 14) "Even if the above channels through which trade distortion takes place are addressed, trade distortion may still occur if one of the sub-sectors is subsidized or when any particular mode is subsidized. So a full blown subsidy disciplines should check against cross-(sub) sectoral and cross modal trade distortion, even when such subsidies in a specific mode or specific sub-sector are available to both domestic and foreign service suppliers. Subsidy disciplines ought to address these channels of subsidy-induced trade distortions". (page 15) "Trade Distortion" is when the normal hierarchies of quality/value/cost are disrupted by government intervention or lack of intervention or any other "measure", "devaluing" a service. See also the rlated principles of minimal derogation, (minimal trade restrictiveness" and proportionality.