Subsidies and Countervailing Duties with Firm Heterogeneity

Jota Ishikawa and Yoshimasa Komoriya

Chapter 7 in Strategic Trade Policy, 2026, pp 153-169 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The WTO allows importing countries to impose countervailing duties (CVDs) when subsidies provided in exporting countries cause serious injuries. This chapter examines the effects of CVDs as well as those of subsidies. Using an international oligopoly model, direct export subsidies and capital subsidies are explored in the presence of heterogeneity among recipients. All recipient firms gain from export subsidies, but this may not be the case for capital subsidies. The maximum CVD allowed under the WTO rules may be more than enough to offset the injury caused by a capital subsidy.

Keywords: Strategic Trade Policy; Rent-shifting; Monopoly; Oligopoly; Oligopsony; Trade Liberalization; Trade Costs; Tariffs; Subsidies; Foreign Direct Investment; Outsourcing; Segmented Markets; Integrated Markets; Intermediate Products; Vertical Market Structure; Information (search for similar items in EconPapers)
JEL-codes: F1 F10 F13 L1 (search for similar items in EconPapers)
Date: 2026
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