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Will International Rules on Subsidies Disrupt the World Trading System?

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  • Kyle Bagwell
  • Robert W. Staiger

Abstract

We provide a first formal analysis of the international rules that govern the use of subsidies to domestic production. Our analysis highlights the impact of the new subsidy disciplines that were added to GATT rules with the creation of the WTO. While GATT subsidy rules were typically viewed as weak and inadequate, our results suggest that the key changes introduced by the WTO subsidy rules may ultimately do more harm than good to the multilateral trading system by undermining the ability of tariff negotiations to serve as the mechanism for expanding market access to more efficient levels. (JEL: F02, F11, F13, F15, F53)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.3.877
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 3 (June)
Pages: 877-895

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:3:p:877-895

Note: DOI: 10.1257/aer.96.3.877
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References

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  1. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  2. Bagwell,K. & Staiger,R.W., 2004. "Subsidy agreements," Working papers 1, Wisconsin Madison - Social Systems.
  3. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  4. Bagwell,K. & Staiger,R.W., 2000. "Strategic trade, competitive industries and agricultural trade disputes," Working papers 11, Wisconsin Madison - Social Systems.
  5. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341, December.
  6. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, And International Economic Institutions," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 519-562, May.
  7. Kennan, John & Riezman, Raymond, 1988. "Do Big Countries Win Tariff Wars?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
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Citations

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Cited by:
  1. Ralph Ossa, 2008. "A 'new trade' theory of GATT/WTO negotiations," LSE Research Online Documents on Economics 19564, London School of Economics and Political Science, LSE Library.
  2. Bajona, Claustre & Kelly, David L., 2012. "Trade and the environment with pre-existing subsidies: A dynamic general equilibrium analysis," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 253-278.
  3. David L. Kelly, 2006. "Subsidies to Industry and the Environment," Working Papers 0602, University of Miami, Department of Economics.
  4. Johan F.M.Swinnen & Alessandro Olper & Thijs Vandemoortele, 2011. "The Political Economy of Policy Instrument Choice: Theory and Evidence from Agricultural Policies," LICOS Discussion Papers 27911, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  5. Beate Grundig & Christian Leßmann & Anna Sophie Müller & Joachim Ragnitz & Michael Reinhard & Beate Schirwitz & Heinz Schmalholz & Marcel Thum, 2008. "Rechtfertigung von Ansiedlungssubventionen am Beispiel der Halbleiterindustrie : Gutachten im Auftrag der Sächsischen Staatskanzlei," ifo Dresden Studien, Ifo Institute for Economic Research at the University of Munich, number 45, October.
  6. Sauré, Philip, 2014. "Domestic policies in self-enforcing trade agreements," European Economic Review, Elsevier, vol. 68(C), pages 19-30.
  7. Bown, Chad P., 2014. "Trade policy instruments over time," Policy Research Working Paper Series 6757, The World Bank.
  8. Ralph Ossa, 2008. "A 'New Trade' Theory of GATT/WTO Negotiations," CEP Discussion Papers dp0877, Centre for Economic Performance, LSE.
  9. Bernard M. Hoekman, 2013. "Global Governance of International Competitiveness Spillovers," RSCAS Working Papers 2013/33, European University Institute.
  10. Yu-Ter Wang, 2010. "The Profits Of Firms And Countervailing Duties In Vertically Related Markets," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(04), pages 749-756.
  11. Kyle Bagwell & Robert W. Staiger, 2009. "The WTO: Theory and Practice," NBER Working Papers 15445, National Bureau of Economic Research, Inc.
  12. Meredith Crowley, 2006. "The agreement on subsidies and countervailing measures: tying one's hands through the WTO," Working Paper Series WP-06-22, Federal Reserve Bank of Chicago.

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