Who wins from competitive subsidization?

Would a U.S. auto bailout trigger a world wide race to the subsidize auto production?  In the wake of the American discussions of an auto bailout, other countries are beginning to think about subsidizing their own industries  Jennifer M. Freedman reports for Bloomberg: American Hypocrisy in Auto Rescue Spurs Me-Too Trade Ire.

The U.S. kicked off the bailout war. Congress is trying to reach a compromise on giving automakers $25 billion they say they need to survive the next year, either by speeding up the use of funds already approved to develop more fuel-saving technologies and models or providing a new source of funds. President-elect Barack Obama supports helping the industry....

Now similar proposals are proliferating around the globe. ``When one of the major powers grants subsidies to a high- profile industry, the other is inevitably led to react by defending its own interests,'' said Pierre Kirch, a trade lawyer at Paul Hastings in Paris....

and

``The temptation may be greater now for member states to give subsidies that can result in their economic problems being exported to their neighbors, but that would only worsen the economic difficulties,'' Kroes said at a conference in Brussels.

Depending on the type of bailout we provide, we may see a WTO challenge.  But,

Any World Trade Organization complaints may open a Pandora's Box, bringing to a head a long-simmering dispute over policies that U.S.-based General Motors Corp., Ford Motor Co. and Chrysler LLC say unfairly aid rivals, including state- financed health-care and retirement benefits, and currency policies.

Hat tip to Simon Lester: More on Auto Trade Tensions.