Subsidies and countervailing duties

• Main Author: Gea M. LEE
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: SCM agreement; Domestic subsidies; Export subsidies; Countervailing duties; Shallow integration; Deep integration; Delocation; Profit-Shifting; Finance; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1914; https://ink.library.smu.edu.sg/context/soe_research/article/2913/viewcontent/10_2016.pdf
• Institution: Singapore Management University

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.