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Strategic trade policy and retaliation

Collie, David Robert 1994. Strategic trade policy and retaliation. Japan and the World Economy 6 (1) , pp. 75-88. 10.1016/0922-1425(94)90039-6

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This paper analyses the effect of retaliation with countervailing tariffs on the profit shifting argument for export subsidies. When the domestic country pursues a policy of laissez-faire it may be harmed by a foreign export subsidy. However, when the domestic country pursues an optimal trade policy it will always gain from a foreign export subsidy. The optimal domestic response to a foreign export subsidy is a partially countervailing tariff, and faced with such a response the foreign country will be deterred from subsidising exports. There is no profit shifting argument for an export subsidy when there is retaliation.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0922-1425
Last Modified: 04 Jun 2017 06:37

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