International disputes over subsidies are increasingly disrupting the world trading system. The creation of the WTO was nearly prevented by disputes in the Uruguay Round of GATT negotiations over the issue of negotiating disciplines on agricultural subsidies, an issue which continues to plague the ongoing Doha Round of WTO negotiations. Ongoing disputes over subsidies that violate existing WTO rules have led to the largest amount of authorized retaliation in GATT/WTO history. Yet the international rules that govern subsidies have received little attention in the form of systematic economic analysis. In this paper we provide a first formal analysis of the international rules that govern the use of subsidies to domestic production (as distinct from export subsidies). Our analysis highlights the impact of the new disciplines on subsidies that were added to GATT rules with the creation of the WTO. Our results suggest that, although GATT subsidy rules were typically viewed as weak and inadequate while the WTO subsidy rules are seen as representing a significant strengthening of multilateral disciplines on subsidies, 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.
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|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.|
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- Bagwell,K. & Staiger,R.W., 1998.
"An economic theory of GATT,"
15, Wisconsin Madison - Social Systems.
- Kyle Bagwell & Robert W. Staiger, 1996.
"Strategic Export Subsidies and Reciprocal Trade Agreements: The Natural Monopoly Case,"
NBER Working Papers
5574, National Bureau of Economic Research, Inc.
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- Kyle Bagwell & Robert W. Staiger, 1996. "Strategic Export Subsidies and Reciprocal Trade Agreements: The Natural Monopoly Case," Discussion Papers 1156, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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"Domestic Policies, National Sovereignty and International Economic Institutions,"
NBER Working Papers
7293, National Bureau of Economic Research, Inc.
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"Strategic Trade, Competitive Industries and Agricultural Trade Disputes,"
NBER Working Papers
7822, National Bureau of Economic Research, Inc.
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- Robert Z. Lawrence, 2003. "Crimes and Punishments?: Retaliation under the WTO," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 372.
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