This paper examines the WTO legal framework governing subsidies and reviews recent reform proposals concerning the identification and categorization of subsidies under the SCM Agreement. It argues that the prevailing trade-distortion-centred approach to subsidy regulation is increasingly misaligned with the WTO’s sustainable development mandate. The paper therefore proposes a reform of WTO subsidy disciplines in which alignment with sustainable development objectives becomes a central criterion, alongside trade effects, for assessing the permissibility of subsidies, while preserving the fundamental principles of the multilateral trading system.