Will industrial and agricultural subsidies ever be reformed?

Gary Hufbauer

No PB21-5, Policy Briefs from Peterson Institute for International Economics

Abstract: One economic argument for government subsidies is that they are necessary to compensate firms and industries for benefits they provide to society at large but cannot capture in the prices they charge for goods or services. For example, subsidies to renewable energy are defended because renewable energy limits carbon emissions. When a major economy subsidizes extensively, however, its trading partners are drawn into the game, with losses all around. As the prisoner’s dilemma suggests, a better outcome would entail mutual restraint. But the goal of mutual restraint is no less difficult in international trade than it is in international arms control. Both the European Union and the US federal system try, in different ways, to regulate industrial subsidies. Hufbauer examines efforts to contain unjustifiable subsidies and proposes modest improvements, bearing in mind that as countries struggle to overcome the global economic downturn resulting from the COVID-19 pandemic, there is little appetite for restoring a free market economy—one in which firms compete with minimum government assistance or regulation. Selective upgrading of the rulebook may nevertheless be possible.

Date: 2021-03
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.piie.com/publications/policy-briefs/wi ... ies-ever-be-reformed (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iie:pbrief:pb21-5

Access Statistics for this paper

More papers in Policy Briefs from Peterson Institute for International Economics Contact information at EDIRC.
Bibliographic data for series maintained by Peterson Institute webmaster ().