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Will International Rules on Subsidies Disrupt the World Trading System?

  • Kyle Bagwell
  • Robert W. Staiger

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)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 3 (June)
Pages: 877-895

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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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  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, June.
  2. Bagwell,K. & Staiger,R.W., 2000. "Strategic trade, competitive industries and agricultural trade disputes," Working papers 11, Wisconsin Madison - Social Systems.
  3. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  4. Kyle Bagwell & Robert W. Staiger, 1999. "Domestic Policies, National Sovereignty and International Economic Institutions," NBER Working Papers 7293, National Bureau of Economic Research, Inc.
  5. 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..
  6. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  7. Kyle Bagwell & Robert W. Staiger, 2004. "Subsidy Agreements," NBER Working Papers 10292, National Bureau of Economic Research, Inc.
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