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The Political Economy of Strategic Trade Policy and the Brazil-Canada Export Subsidies Saga

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Author Info

  • Andrea E. Goldstein
  • Steven M. McGuire

Abstract

In this paper we study the on-going trade dispute between Canada and Brazil on export subsidies in the aircraft industry and the reasons for its escalation. This is a peculiar case of strategic trade policy insofar as the good, i.e. regional jets, is heavily dependent on sub-systems that are imported in the two countries. The hypothesis that the dispute solely derives from the search for rents and externalities is therefore incomplete. Without downplaying the role of interest politics, we argue that in both countries ideas about the goals of trade policy have an important place in explaining why this dispute drags on. For Canada, the belief in a rules-based trading regime has led it to strongly oppose violations, while insecurity about its competitiveness has led to a variety of government schemes to support firms in advanced sectors like aerospace. For Brazil, its place as a leader of the developing world acted as a rallying point for government and firms alike. The research also argues that the WTO process has actually made a resolution of the dispute more difficult by making it too costly for firms and countries to comply with the costs of losing. Copyright 2004 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 27 (2004)
Issue (Month): 4 (04)
Pages: 541-566

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Handle: RePEc:bla:worlde:v:27:y:2004:i:4:p:541-566

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Cited by:
  1. Vertesy, Daniel & Szirmai, Adam, 2010. "Interrupted innovation: Innovation system dynamics in latecomer aerospace industries," MERIT Working Papers 059, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Armando Castelar Pinneiro & Regis Bonelli, 2008. "Nuevas Actividades Exportadoras en Brasil: Ventaja Comparativa, PolĂ­ticas o Auto-Descubrimiento?," Research Department Publications 3257, Inter-American Development Bank, Research Department.
  3. Armando Castelar Pinneiro & Regis Bonelli, 2008. "New Export Activities in Brazil: Comparative Advantage, Policy or Self-Discovery?," Research Department Publications 3256, Inter-American Development Bank, Research Department.

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