Import tariffs and export subsidies in the World Trade Organization : a small-country approach
Date
2012-09
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ARTNeT, United Nations ESCAP
Abstract
This paper proposes a simple small-country model to explain the asymmetric treatment between import tariffs and export subsidies in WTO. In the model, the anticipation of protection creates inefficient investment. A government may choose to commit to a tariff prohibition agreement and/or export subsidy prohibition agreement in order to eliminate this anticipation and achieve a social welfare gain. However, when committing to these agreements, the government loses political contributions collected from protectionism. Governments choose protection rates (import tariffs/export subsidies) to maximize a weighted sum of social welfare and lobbying contributions.
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Keywords
EXPORT SUBSIDIES, TRADE BARRIERS, GOVERNMENT ROLE, IMPORT RESTRICTIONS, POLITICAL ASPECTS, CAPITAL MOVEMENTS, ECONOMETRIC ANALYSIS, TRADE AGREEMENTS, INTERNATIONAL TRADE, WTO