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Abstract

We analyze the impacts of removing export subsidies with or without reforms to domestic support and tariffs using a multi-country trade model. Model simulations are designed to assess both the magnitude and the direction of trade in the absence of export subsidies in connection with other domestic distortions and import barriers. Results show that the impacts of export subsidy removal, while significant for some countries and products, are comparatively smaller and are dominated by the much larger trade and welfare distortions imposed by import barriers. Hence, the removal of domestic subsidies, including export subsidies, by themselves may not be sufficient to improve global welfare and expand trade since the welfare gains by the net exporters are far outweighed by the losses of net importers. One implication from these simulations is that export subsidy reform must be combined with market access liberalization in order to benefit exporters and importers and to attract the widest support among WTO members.

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