This survey pays attention to a recent development of the literature that analyzes two important regulatory features found in the Agreement on Subsidies and Countervailing Measures (the SCM agreement): the restrictive treatment of domestic subsidies and the general prohibition of export subsidies. The WTO's restriction on domestic subsidies is challenged by the existing terms-of-trade theory that offers an efficiency foundation for the market-access focus of the GATT rules. On the other hand, against the backdrop of the SCM agreement and preferential trade agreements (PTAs), a recent literature attempts to provide a rationale for the WTO to restrict the use of domestic subsidies and for trade agreements to take a deep-integration approach to domestic policies. To offer a rationale for the prohibition of export subsidies, a recent literature considers a firm-delocation externality and a profit-shifting externality in various imperfect competition settings.
SCM agreement, Domestic subsidies, Export subsidies, Countervailing duties, Shallow integration, Deep integration, Delocation, Profit-Shifting
Finance | International Economics
Handbook of Commercial Policy
Kyle Bagwell & Robert W. Staiger
City or Country
Gea M. LEE.
Subsidies and countervailing duties. (2016). Handbook of Commercial Policy. 1B, 161-210. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1914
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