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ABSTRACTThis paper explores an export subsidy game in an international duopoly in which governments of countries as well as firms hold conjectures about the response of other governments. In the framework with linear demand/quadratic cost functions, a homogeneous good and no home consumption, I shall obtain the relations among the conjectural variation of firms, that of governments, and the optimal subsidies for countries. And I shall show that if and only if firms hold the consistent conjectures, Nash type behavior (zero conjectural variation) of governments is consistent.

While sugar is widely and progressively highly consumed worldwide, sugar production and exports are highly concentrated among a few countries. This invites many market distortions and demand-supply gaps. India, being the largest producer and the third-largest exporter, creates a lot more distortions than other major producers. Two main sources of volatility are India's production subsidies and export subsidies. These subsidies violate WTO principles of fair trade and increase volatility for other countries too. In addition, sugar is a disaster crop for India as it gets a high premium of subsidies and therefore crowds out other crops, causes resource diversion and immense groundwater depletion, and harbingers a public health crisis in the form of obesity and life-style diseases. We explore the dynamics of the world sugar market, the sources of all the above distortions and adverse effects of the sugar industry, and explore remedial courses, while keeping in mind the political realities.

While sugar is widely and progressively highly consumed worldwide, sugar production and exports are highly concentrated among a few countries. This invites many market distortions and demand-supply gaps. India, being the largest producer and the third-largest exporter, creates a lot more distortions than other major producers. Two main sources of volatility are India's production subsidies and export subsidies. These subsidies violate WTO principles of fair trade and increase volatility for other countries too. In addition, sugar is a disaster crop for India as it gets a high premium of subsidies and therefore crowds out other crops, causes resource diversion and immense groundwater depletion, and harbingers a public health crisis in the form of obesity and life-style diseases. We explore the dynamics of the world sugar market, the sources of all the above distortions and adverse effects of the sugar industry, and explore remedial courses, while keeping in mind the political realities.

Brander and Spencer (1988) and Bandyopadhyay et al. (2000) imply that the robust trade policy recommendation toward a unionized duopoly is an export subsidy. In this paper, we show that we cannot get such a result even in the linear case if the opportunity cost of public funds is sufficiently high. However, if we consider the case where the domestic firm and the trade union lobby the government to set favorable trade policies by giving the government political contributions, then the result of robustness will be restored if the government cares about political contributions sufficiently relative to national welfare.

Under United States law, the Department of Commerce (Department) and the International Trade Commission (ITC) are authorized to impose countervailing duties on imported merchandise that has been provided with foreign government export subsidies which result in, or threaten, material harm to United States industry. The United States is, however, a party to international agreements that contain elaborate "guidelines," and "illustrative" examples, dealing with both prohibited and permitted governmental export subsidies. These international export subsidy rules have been incorporated into the definition of "subsidy" set forth in United States countervailing duty law. Nevertheless, the Department evidently takes the positions that it has statutory authority to invoke countervailing duties directed against foreign governmental export subisidies that are expressly permitted to our trading partners by those international rules. In the Department's view, this result is required by domestic law even though the conduct in question - as the Department concedes- described as not prohibited by international obligations of the United Stats that the Congress purported to implement in 1979.

The World Trade Organization (WTO) recommends all members to phase out their export subsidies. While this may render export-oriented industries susceptible to tighter competition in their import markets, productivity improvements could help offset such disadvantages. This article explores the interaction between these two different aspects to evaluate the economy-wide impact of export subsidy reforms and productivity improvements in the Indian textile and clothing sector. Our analysis stands on various policy simulations applying the general equilibrium model of the Global Trade Analysis Project (GTAP; Hertel, 1997 ). The welfare impacts of the removal of Indian textile and clothing subsidies in terms of equivalent variation shows that India is expected to encounter a loss of about 71.5 million US$, while other Asian countries may gain about 218 million US$. In a different scenario, we simulate the impact of a complete phase-out of subsidies provided to the textile and clothing industry of India and a simultaneous increase in total factor productivity growth to 3.5 per cent. This leads to a net positive welfare change and an expected gain of about US$ 13.17 million in terms of allocative efficiency. We conclude that merely removing subsidies is not enough, as is often argued by Indian policymakers that such a policy reversal might result in contraction of the sector. Investments in total factor productivity should come about simultaneously, probably by employing surplus funds from saved subsidy payments in areas like research and development and infrastructure. This conclusion may be qualitatively generalised for any sector in the world, which is examined for export subsidy reforms, but similar economy-wide studies are recommended for specific cases. JEL Codes: F00, F13, C68, L670

During the decade-long relationship between the United States and the World Trade Organization (WTO), perhaps no controversy has fomented as long and bitterly as the dispute over the U.S. tax benefits for exporters. This article analyzes two competing bills before the House of Representatives, both devised to bring the United States in compliance with the WTO's ruling against the U.S. Foreign Sale Corporation (FSC) and Exterritorial Income (ETI) tax regimes as prohibited export subsidies. Hit with a $4 billion retaliatory tariff by the European Union, the House sought new tax legislation that would preserve at least some of the tax benefits exporters have enjoyed since 1971. The competition between these bills did not cut neatly across party lines; it reflected bipartisan ideological differences that pitted legislators of the same party against one another on how the revenues from the FSC/ETI repeal should be allocated.

Following the Gulf War, international discussions took place about multilateral restraints on "destabilising arms transfers". Given that the UK is one of the leading exporters of arms, any reduction in such exports would affect the UK economy. The UK government spends considerable sums promoting such exports and it benefits from defence exports as they reduce the Ministry of Defence's procurement costs. This paper analyses the direct financial implications of arms exports to the UK government, both as a buyer of defence equipment and as a promoter of such exports. The results suggest that in the UK each job generated by arms exports is subsidised by just under £2,000 per annum and that a one‐third reduction in UK defence exports would save the taxpayer some £76 million per annum (at 1995 prices).