Countervailing Duties, Foreign Export Subsidies and Import Tariffs

Yu‐Ter Wang

The Japanese Economic Review, 2004, vol. 55, issue 2, 153-161

Abstract: Given that countervailing duties and import tariffs are set in different ways and for different purposes, I re‐examine the relationship between countervailing duties, foreign export subsidies and import tariffs under imperfect competition. I find that (i) the optimal countervailing duty depends on the existing import tariff level; (ii) the optimal import tariff is so high that the optimal countervailing duty is zero and hence foreign export subsidization occurs; and (iii) it is more likely for countervailing duties to be imposed on a foreign firm whose government takes no action when other foreign countries reduce or eliminate their subsidies on exports.

Date: 2004
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