Working Paper: NBER ID: w15492
Authors: Kyle Bagwell; Robert W. Staiger
Abstract: Existing theories of trade agreements suggest that GATT/WTO efforts to reign in export subsidies represent an inefficient victory for exporting governments that comes at the expense of importing governments. Building from the Cournot delocation model first introduced by Venables (1985), we demonstrate that it is possible to develop a formal treatment of export subsidies in trade agreements in which a more benign interpretation of efforts to restrain export subsidies emerges. And we suggest that the gradual tightening of restraints on export subsidies that has occurred in the GATT/WTO may be interpreted as deriving naturally from the gradual reduction in import barriers that member countries have negotiated. Together with existing theories, the Cournot delocation model may help to provide a more nuanced and complete understanding of the treatment of export subsidies in trade agreements.
Keywords: Trade Agreements; Export Subsidies; Cournot Delocation Model
JEL Codes: F12; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| import tariff (F14) | domestic welfare (I38) |
| import tariff (F14) | foreign welfare (F35) |
| export subsidy (H20) | domestic welfare (I38) |
| export subsidy (H20) | foreign welfare (F35) |
| Nash policies (H39) | trade outcomes (F10) |