State-aid programs of BRICS countries: Сase of transport equipment trade

Abstract

State aid or subsidy programs are a common practice in developed and developing countries for supporting national companies. Despite the fact that they are strictly regulated by the WTO rules, BRICS countries actively apply this measure, even though they claim to adhere to the usual path of liberalization and trade cooperation. The aim of the paper is to reveal the distinguishing features of such programs in BRICS counties for trade in transport equipment. Using a cross-country comparative analysis and case studies, the authors first explain the controversy in theoretical approaches to state aid policy analysis. They then identify the peculiarities of non-tariff measures applied by BRICS and the role of state aid. Finally, the authors present data from specific case studies in transport equipment trade. The authors conclude that the effectiveness of subsidies in the transport sector is not obvious, as dynamics of imports and exports of relevant products depends on various external factors. Nevertheless, the application of state aid in the industry provides national producers a more favorable environment. State aid programs, in most cases, do not comply with WTO regulations, which implies trade distortion and could provoke trade disputes. BRICS countries should strengthen monitoring of these programs and focus on the opportunity for applying horizontal rather than vertical subsidies.