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Economic Effects of 'Leveling the Playing Field' in International Trade

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  • Alan V. Deardorff

    (University of Michigan)

Abstract

This paper uses simple economic theory to examine the effects of various policies that are intended to level the playing field in international trade. That is, when foreign producers are given advantages over domestic producers by government subsidies or other interventions that lower their costs, domestic firms may argue that their own governments should either provide comparable assistance or should protect them from competing with the foreign firms on grounds of fairness. Economic analysis easily shows that granting these requests is usually harmful for the domestic economy as a whole, but that may not prevent such policies from being implemented. Therefore this paper examines what the further effects of such policies may be. The main conclusion that emerges is that policies to level the playing field most often overcompensate those who request them, making them better off than if the playing field had not be tilted against them in the first place.

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File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers576-600/r589.pdf
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Bibliographic Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 589.

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Length: 42 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:mie:wpaper:589

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Keywords: level playing field; trade policy; countervailing duties;

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