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Will International Rules on Subsidies Disrupt the World Trading System?

Author

Listed:
  • Kyle Bagwell
  • Robert W. Staiger

Abstract

We provide a first formal analysis of the international rules that govern the use of subsidies to domestic production. Our analysis highlights the impact of the new subsidy disciplines that were added to GATT rules with the creation of the WTO. While GATT subsidy rules were typically viewed as weak and inadequate, our results suggest that the key changes introduced by the WTO subsidy rules may ultimately do more harm than good to the multilateral trading system by undermining the ability of tariff negotiations to serve as the mechanism for expanding market access to more efficient levels. (JEL: F02, F11, F13, F15, F53)

Suggested Citation

  • Kyle Bagwell & Robert W. Staiger, 2006. "Will International Rules on Subsidies Disrupt the World Trading System?," American Economic Review, American Economic Association, vol. 96(3), pages 877-895, June.
  • Handle: RePEc:aea:aecrev:v:96:y:2006:i:3:p:877-895
    Note: DOI: 10.1257/aer.96.3.877
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.3.877
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    References listed on IDEAS

    as
    1. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341, March.
    2. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, and International Economic Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 519-562.
    3. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    4. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
    5. 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, July.
    6. John Kennan & Raymond Riezman, 2013. "Do Big Countries Win Tariff Wars?," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 4, pages 45-51 World Scientific Publishing Co. Pte. Ltd..
    7. Kyle Bagwell & Robert W. Staiger, 2004. "Subsidy Agreements," NBER Working Papers 10292, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. David L. Kelly, 2006. "Subsidies to Industry and the Environment," Working Papers 0602, University of Miami, Department of Economics.
    2. Pol Antràs & Robert W. Staiger, 2012. "Offshoring and the Role of Trade Agreements," American Economic Review, American Economic Association, vol. 102(7), pages 3140-3183, December.
    3. David De Remer, 2013. "The Evolution of International Subsidy Rules," Working Papers ECARES ECARES 2013-45, ULB -- Universite Libre de Bruxelles.
    4. Gene M. Grossman, 2016. "The Purpose of Trade Agreements," NBER Working Papers 22070, National Bureau of Economic Research, Inc.
    5. Johan F.M.Swinnen & Alessandro Olper & Thijs Vandemoortele, 2011. "The Political Economy of Policy Instrument Choice: Theory and Evidence from Agricultural Policies," LICOS Discussion Papers 27911, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    6. Fabrice Defever & José-Daniel Reyes & Alejandro Riaño & Miguel Eduardo Sánchez-Martín, 2017. "Special Economic Zones and WTO Compliance: Evidence from the Dominican Republic," CESifo Working Paper Series 6791, CESifo Group Munich.
    7. Defever, F. & Reyes, J-D., 2016. "Does the Elimination of Export Requirements in Special Economic Zones A ect Export Performance? Evidence from the Dominican Republic," Working Papers 16/04, Department of Economics, City University London.
    8. Bown, Chad P. & Ruta, Michele, 2008. "The economics of permissible WTO retaliation," WTO Staff Working Papers ERSD-2008-04, World Trade Organization (WTO), Economic Research and Statistics Division.
    9. Ralph Ossa, 2011. "A "New Trade" Theory of GATT/WTO Negotiations," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 122-152.
    10. Sauré, Philip, 2014. "Domestic policies in self-enforcing trade agreements," European Economic Review, Elsevier, vol. 68(C), pages 19-30.
    11. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    12. Kyle Bagwell & Robert W. Staiger, 2009. "The WTO: Theory and Practice," NBER Working Papers 15445, National Bureau of Economic Research, Inc.
    13. Beate Henschel & Christian Leßmann & Anna Sophie Müller & Joachim Ragnitz & Michael Reinhard & Beate Schirwitz & Heinz Schmalholz & Marcel Thum, 2008. "Rechtfertigung von Ansiedlungssubventionen am Beispiel der Halbleiterindustrie : Gutachten im Auftrag der Sächsischen Staatskanzlei," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 45, October.
    14. Jeffrey Kucik, 2012. "The Domestic Politics of Institutional Design: Producer Preferences over Trade Agreement Rules," Economics and Politics, Wiley Blackwell, vol. 24(2), pages 95-118, July.
    15. Bernard M. Hoekman, 2013. "Global Governance of International Competitiveness Spillovers," RSCAS Working Papers 2013/33, European University Institute.
    16. Lee, Gea M., 2016. "Optimal international agreement and restriction on domestic efficiency," Journal of International Economics, Elsevier, vol. 99(C), pages 138-155.
    17. Bajona, Claustre & Kelly, David L., 2012. "Trade and the environment with pre-existing subsidies: A dynamic general equilibrium analysis," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 253-278.
    18. Meredith A. Crowley, 2006. "The agreement on subsidies and countervailing measures: tying one's hands through the WTO," Working Paper Series WP-06-22, Federal Reserve Bank of Chicago.
    19. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, Elsevier.
    20. Kyle Bagwell & Robert W. Staiger, 2016. "The Design of Trade Agreements," NBER Working Papers 22087, National Bureau of Economic Research, Inc.
    21. Sacchidananda Mukherjee & Debashis Chakraborty & Julien Chaisse, 2014. "Influence of Subsidies on Exports empirical estimates,policy evidences and regulatory prospects," Working Papers 1422, Indian Institute of Foreign Trade.
    22. Bown, Chad P., 2014. "Trade policy instruments over time," Policy Research Working Paper Series 6757, The World Bank.
    23. Jean-Philippe Gervais & Bruno Larue & Harvey E. Lapan, 2008. "WTO Disciplines on Domestic Support and Market Access in Agri-Food Supply Chains," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(4), pages 429-444, December.
    24. repec:bla:glopol:v:8:y:2017:i:1:p:107-112 is not listed on IDEAS

    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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