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Arms Export Controls, Subsidies and the WTO Exemption

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  • Maria del Carmen Garcia-Alonso

    ()

  • Paul Levine

Abstract

Owing 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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File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/0304.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 0304.

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Date of creation: Oct 2003
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Handle: RePEc:ukc:ukcedp:0304

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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/

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Keywords: arms export controls; export subsidies; World Trade Organisation;

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  1. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  2. Anton, James J. & Gertler, Paul J., 1988. "External markets and regulation," Journal of Public Economics, Elsevier, vol. 37(2), pages 243-260, November.
  3. Paul Levine & Fotis Mouzakis & Ron Smith, 2000. "Arms export controls and emerging domestic producers," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(3), pages 505-531.
  4. Brainard, S.L. & Martimort, D., 1992. "Strategic Trade Policy with Incompletely Informed Policymakers," Papers 92.277, Toulouse - GREMAQ.
  5. Levine, Paul & Smith, Ron, 2000. "The Arms Trade Game: From Laissez-Faire to a Common Defence Policy," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 357-80, April.
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