Export promoting policies under countervailing threats : GATT rules and practice

This paper reviews the General Agreement on Tariffs and Trade (GATT) rules on subsidies in trade and examines the quantitative importance and pattern of countervailing actions undertaken by major advanced industrial countries, particularly against imports from developing countries. The major purpose of the paper is to derive some policy implications for those developing countries contemplating turning to an outward-oriented development strategy or entering a new round of Multilateral Trade Negotiations on subsidy issues. The paper focuses on the conceptual as well as technical problems associated with the current GATT rules and on the countervailing actions undertaken by the U.S. The paper then makes a brief assessment of a prospective agenda for developing countries in the forthcoming Multilateral Trade Negotiations on subsidies. The paper also suggests a direction for policy reforms for domestic as well as trade incentives in developing countries facing the countervailing risks.