While SOEs are emerging as a key player in the global economy, WTO law is revealing its limits. The WTO subsidy rules cannot get to the core of the SOE-subsidization problem. This is because they do not regulate situations where not the government but SOEs provide subsidies to private enterprises, unless the latter is demonstrated to be a “public body”. That demonstration, however, turns out to be quite burdensome given the recent Appellate Body findings.

Against this backdrop the United States chose to step forward by including WTO-plus SOE disciplines in RTAs. For instance, the CPTPP defines SOEs based on the government’s ownership or control of an entity at hand. This runs contrary to the government authority test under the WTO Subsidies Agreement. The USMCA also defines SOEs based on government ownership and control.

The core of the ongoing trilateral discussion between the US, the EU, and Japan is how to define a “public body.” There is a strong possibility that modification of Article 1.1(a)(1) of the WTO Subsidies Agreement will be proposed in a manner to expand the scope of a public body to include SOEs. While keeping the amendment of the treaty text to the minimum, addition of a new footnote on SOEs is most likely to happen. Also the proposal may include a list of specific elements which need to be taken into account in determining whether an SOE constitutes a public body. This would be directly contrary to the government authority test adopted by the Appellate Body, and more in line with recent developments on SOE definitions under the CPTPP and the USMCA.

In case of Korea’s domestic law or the "Act on the Management of Public Institutions", it reflects indirect ownership in defining a public body in a similar manner as Article 22.1 of the USMCA. In other words, Korea has already made the scope of public bodies broad enough. Thus even if the “public body” provision is to be amended to include SOEs in the sense of the CPTPP, it is not expected that there will be any ‘radical’ changes from a legal  point of view.

The WTO reform may take a few years, but it is regarded to be the most important trial ever since the unsuccessful Doha Development Agenda (DDA) back in 2001 and may bring a significant change to the current multilateral trading system. The author suggests that the Korean Government closely monitor the ongoing trilateral discussion between the US, the EU and Japan. Further, before choosing Korea’s positioning with regards to the WTO Reform on SOE disciplines, it will be crucial to prepare multiple scenarios for possible WTO amendments and go though comprehensive legal and economic pre-evaluation of possible outcomes, taking into account the advantages and disadvantages of joining such WTO amendment discussion and impact on our domestic industries.