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Britain will follow WTO subsidy rules after Brexit transition period, minister says

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LONDON (Reuters) - Britain will follow World Trade Organisation (WTO) rules on subsidies after its exit from the European Union is completed at the end of the year, business minister Alok Sharma said on Wednesday, promising not to adopt a “picking winners” approach.

The extent to which Britain can use state money to support firms and industries after Brexit is at the heart of disagreements holding up a deal on future relations with the European Union.

The EU is worried that Britain could use subsidies to create a competitive advantage over its members, while Britain is adamant it will be an independent state and can choose its own path.

“While our guiding philosophy remains that we do not want a return to the 1970s approach of picking winners and bailing out unsustainable companies with taxpayers’ money, the UK must have flexibility as an independent, sovereign nation to intervene to protect jobs and to support new and emerging industries,” Sharma said in a statement.

Setting out its broad policy objectives on subsidies for the first time, Britain confirmed it would follow WTO rules, describing them as “an internationally recognised common standard covering financial assistance granted by governments and public authorities to companies.”

The announcement comes on the same day Britain published legislation which breaches international law and unilaterally modifies the terms of the Brexit divorce deal - a move which has plunged the already-stalled talks on a future relationship deeper into crisis.

WTO rules apply to goods only, and ban subsidies that are dependent on either how much a company exports, or the use of domestic goods in preference to imports, the government said. The WTO also provides a mechanism to resolve disputes between countries.

Reporting by William James; editing by Stephen Addison