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The Economics of Trade Agreements in the Linear Cournot Delocation Model

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  • Kyle Bagwell
  • Robert W. Staiger

Abstract

Existing theories of trade agreements suggest that GATT/WTO efforts to reign in export subsidies represent an inefficient victory for exporting governments that comes at the expense of importing governments. Building from the Cournot delocation model first introduced by Venables (1985), we demonstrate that it is possible to develop a formal treatment of export subsidies in trade agreements in which a more benign interpretation of efforts to restrain export subsidies emerges. And we suggest that the gradual tightening of restraints on export subsidies that has occurred in the GATT/WTO may be interpreted as deriving naturally from the gradual reduction in import barriers that member countries have negotiated. Together with existing theories, the Cournot delocation model may help to provide a more nuanced and complete understanding of the treatment of export subsidies in trade agreements.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15492.

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Date of creation: Nov 2009
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Publication status: published as Bagwell, Kyle & Staiger, Robert W., 2012. "The economics of trade agreements in the linear Cournot delocation model," Journal of International Economics, Elsevier, vol. 88(1), pages 32-46.
Handle: RePEc:nbr:nberwo:15492

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  1. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  2. Kyle Bagwell & Robert W. Staiger, 2009. "Delocation and Trade Agreements in Imperfectly Competitive Markets," NBER Working Papers 15444, National Bureau of Economic Research, Inc.
  3. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  4. Kyle Bagwell & Robert W. Staiger, 2001. "Strategic Trade, Competitive Industries and Agricultural Trade Disputes," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 113-128, 07.
  5. Bagwell, Kyle & Staiger, Robert W., 1997. "Multilateral tariff cooperation during the formation of customs unions," Journal of International Economics, Elsevier, vol. 42(1-2), pages 91-123, February.
  6. Bagwell, Kyle & Staiger, Robert W., 2012. "The economics of trade agreements in the linear Cournot delocation model," Journal of International Economics, Elsevier, vol. 88(1), pages 32-46.
  7. Markusen, James R. & Venables, Anthony J., 1986. "Trade Policy with Increasing Returns and Imperfect Competition: Contradictory Results from Competing Assumptions," CEPR Discussion Papers 120, C.E.P.R. Discussion Papers.
  8. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
  9. Venables, Anthony J, 1987. "Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model," Economic Journal, Royal Economic Society, vol. 97(387), pages 700-717, September.
  10. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
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Cited by:
  1. Paulo Bastos & Odd Rune Straume & Jaime A. Urrego, 2012. "Rain, food and tariffs," NIPE Working Papers 06/2012, NIPE - Universidade do Minho.
  2. Kyle Bagwell & Robert W. Staiger, 2009. "The Economics of Trade Agreements in the Linear Cournot Delocation Model," NBER Working Papers 15492, National Bureau of Economic Research, Inc.
  3. Bastos, Paulo & Straume, Odd Rune & Urrego, Jaime A., 2013. "Rain, agriculture, and tariffs," Journal of International Economics, Elsevier, vol. 90(2), pages 364-377.
  4. repec:kgu:wpaper:99 is not listed on IDEAS
  5. Kenji Fujiwara, 2013. "Pareto-improving tariff-tax reforms under imperfect competition," Discussion Paper Series 110, School of Economics, Kwansei Gakuin University, revised Oct 2013.
  6. Kenji Fujiwara & Ryoma Kitamura, 2013. "A trade and domestic tax reform in imperfectly competitive markets," Discussion Paper Series 099, School of Economics, Kwansei Gakuin University, revised Jan 2013.

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