I. PROBLEM: STEETCARS FOR ALL? Your firm represents Sterling Streetcars, a US company that manufactures world-class light-rail trams, trains, and streetcars. Sterling operates in several states and employs roughly 10,000 skilled workers. The popularity of light-rail transportation projects in cities around the country has been a boon for the industry (and, not to mention, for your firm). Each streetcar sells for $150 million. Although streetcar production is extremely capital- intensive and the barriers to entry are high, this recent boom has helped to bring down costs (especially for companies backed by long-term investments) and Sterling has ramped up production in response to the growing demand from municipal buyers nationwide. Given all this, when Sterling's general counsel arrives at your offices to discuss the company's lucrative new contract with the city of Milwaukee, you expect that everyone will be in high spirits. Instead, the general counsel announces that Milwaukee has just cancelled its order and that Austin and Los Angeles have terminated negotiations for two other light- rail projects. All three cities, he explains, have opted to go with the competition a little-known Korean streetcar producer, KTram. \"If this keeps up, layoffs are sure to come. In fact, we're already looking at scaling back. The truth is, there is just no way we can offer those same terms that KTram is offering. The economics of the industry just don't work that way. I'm not even sure how they're able to operate like that it just doesn't add up,\" the general counsel explains. After a pause he adds: \"We think they must be getting government backing, but if that's the case I'm not sure there's anything we can do about it.\" As the firm's incipient trade lawyer, you assure the client that if unfair subsidization is taking place, there may be options. Upon researching the issue, however, the only evidence you can find connecting KTram to the Korean government is an announcement about a bid to host the Olympics several years ago. The announcement indicates that, in anticipation of hosting the Olympic Games, the government would be partnering with StarBright (a major and well-connected construction company, general contractor and steel producer) and Capital Power (a state-owned utility) to re-invest in city infrastructure. Together these partners would form a \"Global Welcome Committee\" to oversee plans for stadium construction, transportation improvements, and hospitality initiatives. With $2.3 billion of government funding, the Global Welcome Committee would be very careful in selecting contractors for these projects, designating only the most qualified businesses as \"Global Welcome Companies.\" StarBright, along with the Global Welcome Companies, would be responsible for building stadiums, updating public transportation systems, and carrying out airport renovations including a new light rail line between the airport and downtown. Upon further research, you discover that: - K-Tram was indeed approved as a Global Welcome Company after meeting the Committee's extensive criteria and received $700 million for providing four streetcars for the new line, as well as a $100 million grant for future R811). 0 Capital Power, as a proud member of the Global Welcome Committee, provided all of the electricity for the project free of charge. 0 The CEO of StarBright (and brother of the President of Korea) saw this opportunity as a chance to strengthen his company's relationship with K-Tram; to do so, StarBright supplied the steel for K-Tram's streetcars at quite a steep discount. The CEO didn't mind that it was originally his brother's suggestion; after all, that might just mean StarBright could be reimbursed someday. I Of the four additional companies designated as Global Welcome Companies, none were exporters, but all four could be considered part of the transportation industry. Between the four of them, they received $400 million from the Committee for their services. With this research in hand, you draft a memo for Sterling's general counsel, outlining the \"options\" you mentioned earlier