> There is no real way to prevent this kind of thing
You do realise that US, EU and China regularly sue each-other in WTO over this? What counts as subsidies, etc. is a constant subject of dispute. That’s normal,
They regularly sue each other because it's intrinsically ambiguous. There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody. If anything they should be demanding that the other governments have lower taxes so they can't use the money for subsidies to distort international trade in their favor.
"There is nothing for a government to spend tax revenue on that isn't a subsidy to somebody."
That's just nonsense; so if the USA spent $1 and got a nuclear powered aircraft carrier in return that is subsidising the builder? More like running them out of business.
Government spending is only a subsidy if the government spends over the market price for something. And if your next statement is that the government *always* pays over the odds, you'll need some good evidence. Because although it does happen it is not always.
> Government spending is only a subsidy if the government spends over the market price for something.
All they have to do is control who gets the contract, because the market price for something already includes a margin.
But more than that, the subsidy isn't just who gets the money, its who gets the benefit of what's bought. Who benefits from the US having aircraft carriers, other than the defense contractors? Multinational oil companies, for example, who don't want their tankers captured by pirates or blockaded by adversarial nations.
Who benefits when a government subsidizes higher education? The schools, of course, but also the companies who hire the graduates.
"Well that's the good kind of subsidy", you might say. And so says everyone else about everything else.
"because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.
The government isn't some magical "outside the market" participant, as a purchaser it's a part of the market like all other participants. If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.
> "because the market price for something already includes a margin."; that's called value add, and all customers pay it, so it doesn't matter whether the government buys it or directs someone else to pay it, the value add becomes the profit.
And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.
> If they pay over the market price then they've been ripped off, just like if anyone else paid over the market price.
Only if the thing they want is the thing they're nominally buying, instead of the thing they're actually getting for the money, e.g. convincing a corporation to employ local workers or move into the jurisdiction and declare international profits there.
> And now the company has profit it wouldn't have had, as a result of the government, which can use control over that profit to attract businesses to the jurisdiction etc.
That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).
But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.
> That only works if the government buys something that no one else wants; in which case it is buying at a price, ipso facto, that no one else will pay (at that price which is above the market price).
Not at all.
Suppose the government funds research. Private entities fund research too. It's clearly worth something. But if the government funds it, the research happens in their jurisdiction. Even if the exact same private company paying the taxes that fund the research might have done the research themselves, they might have done it somewhere else, so the government is now creating a subsidy for doing research in their jurisdiction.
The value of the research could be fully identical regardless of where it happens, but the government subsidizes it because they want it to happen there.
> But if the government buys something at the same price (or lower) that everyone else pays, then it isn't a subsidy.
It could only not be a subsidy if the thing they're buying is identical in all respects to the thing the taxpayer would have bought had they been left to keep the money. Otherwise it's subsidizing the thing the money is being allocated to over the thing it would have been allocated to. That's what subsidies are -- the reallocation of resources through action of law. It's a synonym for spending tax money.
You do realise that US, EU and China regularly sue each-other in WTO over this? What counts as subsidies, etc. is a constant subject of dispute. That’s normal,