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The economics of trade agreements in the linear Cournot delocation model

Kyle Bagwell and Robert Staiger ()

No ERSD-2009-10, WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division

Abstract: Existing theories of trade agreements suggest that GATT/WTO efforts to reign in export subsidies represent an inefficient victory for exporting governments that comes at the expense of importing governments.Building from the Cournot delocation model first introduced by Venables (1985), we demonstrate that it is possible to develop a formal treatment of export subsidies in trade agreements in which a more benign interpretation of efforts to restrain export subsidies emerges. And we suggest that the gradual tightening of restraints on export subsidies that has occurred in the GATT/WTO may be interpreted as deriving naturally from the gradual reduction in import barriers that member countries have negotiated. Together with existing theories, the Cournot delocation model may help to provide a more nuanced and complete understanding of the treatment of export subsidies in trade agreements.

Date: 2009
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Related works:
Journal Article: The economics of trade agreements in the linear Cournot delocation model (2012) Downloads
Working Paper: The Economics of Trade Agreements in the Linear Cournot Delocation Model (2009) Downloads
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