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Capital subsidies and countervailing duties in oligopolistic industries

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  • Spencer, Barbara J.

Abstract

Under GATT, countries are allowed to impose countervailing duties to offset foreign subsidies. However GATT rules limit the amount of duty to the amount of the subsidy. This paper examines a generalized model of imperfect competition with capital subsidies and shows the conditions under which a countervailing duty will offset the effect of the subsidy on exports. Also, conditions are specified under which exports will increase despite the imposition of the maximum tariff under GATT. In addition, the paper considers whether profit shifting motives for a subsidy still exist even when this maximum duty is anticipated.
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Suggested Citation

  • Spencer, Barbara J., 1988. "Capital subsidies and countervailing duties in oligopolistic industries," Journal of International Economics, Elsevier, vol. 25(1-2), pages 45-69, August.
    • Handle: RePEc:eee:inecon:v:25:y:1988:i:1-2:p:45-69
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    Cited by:

    1. Collie, David, 1991. "Export subsidies and countervailing tariffs," Journal of International Economics, Elsevier, vol. 31(3-4), pages 309-324, November.
    2. Bagwell, Kyle & Staiger, Robert W., 1994. "The sensitivity of strategic and corrective R&D policy in oligopolistic industries," Journal of International Economics, Elsevier, vol. 36(1-2), pages 133-150, February.
    3. Meredith A. Crowley, 2003. "An introduction to the WTO and GATT," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 27(Q IV), pages 42-57.
    4. 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.
    5. Qiu, Larry D., 1995. "Why can't countervailing duties deter export subsidization?," Journal of International Economics, Elsevier, vol. 39(3-4), pages 249-272, November.
    6. Sang-Kee Kim & Young-Han Kim, 2020. "Welfare implications of upstream subsidy in the presence of countervailing duties under limited verifiability," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 643-663, June.
    7. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.

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