Subsidies Could Boost Global Trade and Welfare, Challenging Protectionist Policies
The article explores trade policies using a model that looks at factors like production subsidies and import/export tariffs. The researchers compared different trade policy scenarios to see how they affect trade outcomes. Contrary to previous beliefs, the main reasons for countries not cooperating on trade policies are to remove monopolistic distortions and improve their own trade conditions, not just to boost their own markets. Surprisingly, following non-cooperative trade policies doesn't always mean being protective. In fact, allowing countries to strategically set subsidies could sometimes be better than full free trade. This suggests that the non-cooperative approach might have benefits and that banning subsidies might not always be the best move.