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Arms Export Controls, Subsidies And The Wto Exemption

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  • María del Carmen García-Alonso
  • Paul Levine

Abstract

Owing to the World Trade Organization (WTO) exemption that allows governments to subsidize arms exports, the arms trade is one of the few remaining areas of trade where we observe export subsidies. This paper examines the effect of arms controls, in the form of licensing delays, on the incentives to subsidize 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 abrogation of arms controls. Transparency actually worsens the Nash inefficiencies at play in that incomplete information leads to lower subsidies and lower arms exports. Copyright (c) Scottish Economic Society 2005.

Suggested Citation

  • 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, May.
  • Handle: RePEc:bla:scotjp:v:52:y:2005:i:2:p:305-322
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    References listed on IDEAS

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    1. Brainard, S. Lael & Martimort, David, 1997. "Strategic trade policy with incompletely informed policymakers," Journal of International Economics, Elsevier, pages 33-65.
    2. Régibeau, Pierre & Rockett, Katharine, 2003. "Administrative Delays as Barriers to Trade," Economics Discussion Papers 2848, University of Essex, Department of Economics.
    3. 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 357-380, April.
    4. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, pages 83-100.
    5. Paul Levine & Fotis Mouzakis & Ron Smith, 2000. "Arms export controls and emerging domestic producers," Defence and Peace Economics, Taylor & Francis Journals, pages 505-531.
    6. Anton, James J. & Gertler, Paul J., 1988. "External markets and regulation," Journal of Public Economics, Elsevier, pages 243-260.
    7. Regibeau Pierre M & Rockett Katharine E, 2006. "Administrative Delays as Barriers to Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-47.
    8. Regibeau Pierre M & Rockett Katharine E, 2006. "Administrative Delays as Barriers to Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-47.
    9. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, pages 83-100.
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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