Trade in Goods

The Expando Co. in State A receives a wide variety of general subsidies from the State A government (including tax breaks, low interest financing, and technical assistance) that State A offers to all domestic enterprises within its territory.

Expando manufactures wristwatch bands that it recently began to sell in State B. The Flexo Co. in State B manufactures similar watchbands and it has began to lose some of its market share to Expando. State A and State B are both WTO member states. Flexo would like State B to impose a countervailing duty to offset the subsidies received by Expando from State A, and Flexo has asked the State B Customs Service (which is responsible for imposing such duties) to do so.

After making an investigation, the Customs Service refused to impose any duties. Flexo has appealed to a court. Should the court overrule the decision of Customs Service? Explain.