The Economics of Trade Agreements in the Linear Cournot Delocation Model

36 Pages Posted: 9 Nov 2009 Last revised: 2 May 2021

See all articles by Kyle Bagwell

Kyle Bagwell

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Robert W. Staiger

Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 2009

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.

Suggested Citation

Bagwell, Kyle and Staiger, Robert W., The Economics of Trade Agreements in the Linear Cournot Delocation Model (November 2009). NBER Working Paper No. w15492, Available at SSRN: https://ssrn.com/abstract=1501516

Kyle Bagwell (Contact Author)

Stanford University - Department of Economics ( email )

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Robert W. Staiger

Stanford University ( email )

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University of Wisconsin - Madison - Department of Economics ( email )

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