Regulating State Trading Enterprises in the GATT: An Urgent Need for Change? Evidence from the 2003-2004 U.S.--Canada Grain Dispute

Abstract

State Trading Enterprises (STEs) are one of the bete noirs of agricultural and other trade relations and trade negotiations. An STE is a government enterprises or quasi government enterprise that operates with special protections and/or privileges granted by its country’s central authority. STEs generally exist for one of two main reasons. Sometimes, as with many African parastatals, they are created to tax the domestic industry and/or imports for government revenue generation purposes (or income transfers to members of ruling elites). Alternatively, an STE’s mission is often to increase revenues or profits (though not necessarily both) from sales for domestic producers and/or processors and other marketing chain operations. In pursuing these revenue or profit objectives, STEs create trade distortions by implicitly levying tariffs on imports, taxing domestic sales, and subsidizing (or, on rare occasions, taxing) exports to different countries at different rates. They may also be vehicles through which domestic subsidies are more or less discretely funneled to producers, with corresponding implications for the effectiveness of disciplines on domestic supports. Hence, STEs are problematic in the context of trade negotiations.