The Economics of Trade Agreements in the Linear Cournot Delocation Model
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.
We thank Michele Ruta, Assaf Zimring and lecture participants at the WTO for very useful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Bagwell, Kyle & Staiger, Robert W., 2012. "The economics of trade agreements in the linear Cournot delocation model," Journal of International Economics, Elsevier, vol. 88(1), pages 32-46. citation courtesy of