Arms Export Controls, Subsidies and the WTO Exemption
AbstractOwing to the WTO exemption that allows governments to subsidise arms exports, the arms trade is one of the few remaining areas of trade where we observe lump-sum and per unit transfers to exports. This paper examines the effect of arms controls, in the form of licensing delays, on the incentives to subsidise arms exports and conversely the effect of the WTO arms trade exemption on the incentives to break arms control agreements. Our main result is that arms controls and free trade commitments re-enforce each other. Licensing delays reduce the incentive to subsidise and free trade without subsidies reduces the benefits of a unilateral abrogration of arms controls. Transparency actually worsens the Nash inefficiencies at play in that incomplete information leads to lower subsidies and lower arms exports.
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Bibliographic InfoPaper provided by Department of Economics, University of Kent in its series Studies in Economics with number 0304.
Date of creation: Oct 2003
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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
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Other versions of this item:
- María del Carmen García-Alonso & Paul Levine, 2005. "Arms Export Controls, Subsidies And The Wto Exemption," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(2), pages 305-322, 05.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
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