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Export Subsidies and Countervailing Tariffs

David Collie

No 268388, Economic Research Papers from University of Warwick - Department of Economics

Abstract: This paper analyses how retaliation affects the profit shifting argument for export subsidies. Trade policy is modelled as a multistage game. At the first stage the foreign country sets its export subsidy, and then at the second stage the domestic country sets its tariff and/or production subsidy. If the domestic country pursues an optimal trade policy then it will always gain from a foreign export subsidy. When the domestic country uses a tariff and a production subsidy, the optimal foreign policy is an export subsidy. If the domestic country only uses a tariff then an export tax is usually the optimal foreign policy.

Keywords: Financial Economics; International Relations/Trade (search for similar items in EconPapers)
Pages: 28
Date: 1990-03-03
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DOI: 10.22004/ag.econ.268388

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