Domestic Subsidies Research Articles

Trade Spillovers of Domestic Subsidies

Trade Spillovers of Domestic Subsidies

A Techno-Economic Analysis of Natural Gas Valuation in the Amazon Region to Increase the Liquefied Petroleum Gas (LPG) Production in Ecuador

Liquefied petroleum gas (LPG) is a C3/C4’s hydrocarbon mixture used as fuel gas, obtained through natural gas processing or crude oil refining. The Ecuadorian LPG production (~1.88 MMbbl/year) comes from the Shushufindi gas plant and the Esmeraldas refinery. However, LPG production cannot meet the Ecuadorian market demand, and over 90% of this commodity is imported. At the same time, the natural gas produced in the Amazon region is not fully valued. A significant quantity of the associated gas is flared (~100 MMscfd), representing wasted energy with a significant environmental impact. Therefore, this study aimed to develop a technical and economic assessment of the potential natural gas valuation in the Amazon region to increase LPG production. The study started with a detailed review of the associated gas produced in the Amazon region. The data were analyzed considering the geographic location of the hydrocarbon fields, molar composition, flowrates, and operational conditions. Then, a natural gas value chain visualization was proposed and technically analyzed. Finally, an economic feasibility (class V) study was conducted, considering a preliminary analysis of capital expenditure (CAPEX) and an economic balance. The outcome of this study showed that by processing 21.50 MMscfd of associated gas from the Sacha field, domestic LPG production could increase by 30.9%. The required infrastructure consists of conventional processes for natural gas processing, with an estimated CAPEX of 36.6 MMUSD. Furthermore, despite the domestic subsidies of commodities, the potential savings for the country would be 32.13 MMUSD/year, an alternative more economically viable than the current LPG imports. Thus, the investment cost will be justified.

Time to pay the piper: Fossil fuel companies’ reparations for climate damages

Time to pay the piper: Fossil fuel companies’ reparations for climate damages

Determinants of dairy‐product trade: Do subsidies matter?

AbstractGiven the recent changes in the supply and demand of dairy products, many opportunities arise for exporting and importing countries. This paper examines determinants of dairy‐product trade by applying the Poisson Pseudo‐Maximum Likelihood (PPML) method to the gravity model using panel data on 49 exporting and 235 importing countries for the 17 years from 2000 to 2016. The gravity model is estimated using both interval data and dynamic analyses. The results show that domestic subsidies have a modest, but significant, impact on dairy‐product trade across the models. For example, a 1% increase in subsidies leads to a roughly 0.02% increase in trade for an average country. Memberships in trade agreements, market size factors, and government institutions also positively affect dairy‐product trade. However, tariffs are insignificant in the main model specification. Results from the lag‐policy analysis show that the impact of subsidies disappears after the second year of distribution; whereas for the lead‐policy analysis, results suggest at least 3 years of anticipatory effects on domestic subsidies.

The WTO and Vaccine Supply Chain Resilience during a Pandemic

ABSTRACT Cross-border supply chains and international trade enabled the manufacturing and delivery of billions of vaccine doses to inoculate the world against the Coronavirus disease (COVID-19). At the same time, the pandemic revealed how the World Trade Organization (WTO) must change to become more useful in the face of a public health emergency. This paper describes the market failures—especially on the supply side—justifying the domestic subsidies and contracting arrangements used to accelerate vaccine research and development and to increase the scale of vaccine production to save lives, livelihoods, and economic activity during a pandemic. It highlights the trade-offs associated with the US subsidies and the priority-rated contracts written for vaccines through the Defense Production Act under Operation Warp Speed. This case study reveals a rich environment in which cross-border supply chains exacerbate input shortages in ways that constrain vaccine production, highlighting the need for the WTO to embrace new forms of international policy coordination for pandemic preparedness and response. As part of a pandemic treaty, the paper proposes a plurilateral agreement on vaccine supply chain resilience that would include novel and enforceable disciplines for export restrictions, provisions to trigger coordinated subsidies across countries to jointly scale up vaccine output and input production capacity, and market surveillance initiatives on supply chain transparency.

Impact of WTO’s Trade Liberalisation on Selected Food Crops in Pakistan

There is a great potential in Pakistan for production of all types of food commodities due to vast natural resource base, covering various ecological and climatic zones. Most of the agricultural commodities produced in the country are consumed by the local population while the rest is exported in the form of primary products and some value added products. Previously, Pakistani products had a good market overseas with no restrictions of quality and quantity but under the changing environment affected by WTO, it is expected that Pakistan will face a strong competition in the agriculture sector from its competitors in the world market. According to the neoclassical trade theory, trade flows and pattern will develop along the lines of comparative advantage and competitiveness that can act as indicators of trade potential and direction. There has been extensive government involvement in the determination of the overall structure of agriculture and its patterns of production, employment and trade. Pakistani government has been intervening in agriculture sector in the past in order to support agricultural production, income supports, ensure food security, improve the balance of trade, reduce consumer prices, address environmental and regional concerns and to pursue sanitary and phyto-sanitary objectives [Hassan (1995)]. Pakistan is a founding member of the General Agreement on Tariffs and Trade (GATT) since its creation. Following the Uruguay Round negotiations, all agricultural products were brought under multinational trade rules by WTO, under the Agreement on Agriculture. This established a framework to begin liberalising agricultural trade through the reduction of import duties (tariffs), trade-distorting production subsidies and export subsidies. Prior to the Uruguay Round, trade in agriculture was highly distorted. Market access for agricultural products was limited as most markets were restricted by physical import barriers. The presence of massive domestic subsidies led to overproduction of temperate crops in the developed countries that led to excess supply, and export subsidies were used to dump the surplus agricultural output in international markets. This resulted in depressed market prices and, in spite of being low-cost producers of agricultural products; developing countries could not compete with the subsidised exports from developed countries.

The effects of freer trade on global agriculture

AbstractIntransigency among developed and developing countries to reduce trade‐distortive policies—domestic subsidies, export subsidies, and import tariffs—created deadlock in the Doha Round negotiations. Because of this impasse, many countries continue to heavily subsidize their agricultural production and high import tariffs continue to persist in the world market. This study empirically quantifies the benefits of a global free trade agreement utilizing a large‐scale computable general equilibrium model. The results show that a global trade agreement increases welfare by $60 billion as commodity production and consumption adjust to reflect their comparative advantage patterns, accentuating the benefits of completing a global free trade agreement.

The Discussion on Disciplining Global Trade Distorting Domestic Support in the WTO and Its Implications

In preparation for the 12ᵗʰ WTO Ministerial Conference (MC12), the Chairperson of the Committee on Agriculture-Special Session (CoASS) proposed a draft text (July 2021) and its amendment (November 2021) in order to derive tangible results in the field of domestic subsidy. It aims to cap and reduce the sum of current global agricultural trade-distorting support (TDDS) entitlements to 50% by 2030. As a result of the simulation using domestic support notification data from 2001 to 2020 of 102 WTO member countries, based on the Chair’s texts, two main policy goals are achieved; Proportionality that reduces more in member countries with a larger TDDS entitlements, Progressivity that alleviates the concentration of TDDS on specific countries. However, the entitlements of developed countries decreased by 48.5% while developing countries decreased by 52.6%, indicating that the latter ones are relatively disadvantaged. In case of the Republic of Korea, the basic cap of entitlements in the base year is reduced by only 12.1% in the 8th year of implementation (new cap). Furthermore, the difference between the entitlements and the expenditure will not change significantly. Therefore, the impact of the Chairperson’s proposal on domestic agricultural policy is expected to be limited.

INFLUENCE OF THE WTO'S AGREEMENT ON AGRICULTURE (AOA) POLICY ON INDONESIAN COFFEE IMPORTS 2007-2013

As one of the policies issued by the World Trade Organization (WTO), the Agreement on Agriculture is an agricultural commodity agreement that binds all WTO member countries. As the fourth largest coffee producer globally, Indonesia must accept this policy as the exit to Indonesian coffee to various countries around the world. The study's findings get three things that influence agreement on agriculture (AoA) on Indonesian coffee imports. First, the opening of market access; Second, the reduction of domestic subsidies; Third, the removal of export subsidies. The method used in this study is qualitative-transcribed.

Incidence of domestic subsidies vs. export taxes: An equilibrium displacement model of log and lumber markets in Oregon

Governments have used policies such as taxes on the exports of unprocessed wood products and subsidies to domestic manufacturers to improve the competitiveness of domestic industries with the goal of supporting economic activities especially in rural areas. Newer motivations for policy interventions come in the form of climate change mitigation targets whereby improved forest management and increased use of wood products provide a long-term solution to enhance carbon sequestration. We compare three different policies in terms of their welfare incidence, impacts on economic activity and carbon storage. To analyze the policy scenarios, we extend an equilibrium displacement model to include subsidies and calibrate it to represent Oregon's harvesting and lumber manufacturing sectors. The three hypothetical policies we study are an ad valorem log export tax, an ad valorem input subsidy received by Oregon mills, and an ad valorem subsidy received by Oregon lumber consumers. Our results show that the three alternative policies differ in terms of their impacts on economic returns, employment, and carbon storage, and none of the policy alternatives is superior along all these dimensions.

MAKROEKONOMSKE DETERMINANTE PROIZVODNJE VINA U EUROPSKOJ UNIJI

This paper focuses on the determinants of wine production in the European wine industry. In the last two decades, the European wine industry has undergone many changes due to the entry of new countries into the world wine market. Although increasing competitiveness became the priority of the European Common Agricultural Policy, wine production and consumption in the EU have decreased in the last two decades, and therefore the aim of this research is to analyse and identify the macroeconomic determinants of wine production, i.e. what factors besides the price influence wine production in selected EU countries and in how they can be controlled. Empirical research was conducted using data for EU member states traditionally engaged in wine production. Panel data on wine production, wine consumption, average wine price, wine imports, wine exports and EU support to the wine sector were collected from secondary sources for 15 wine-producing EU countries and for the period 2009-2018. We estimated the econometric model using pooled OLS, as diagnostic tests indicated that this estimator was the best fit for our data. Our results suggest that domestic demand and domestic (EU) subsidies are the main drivers of wine production. To keep up with New World wine producers, even more emphasis should be placed on promoting the wine drinking culture.

Subsidy Control - Designing a New Approach for the UK – Response to Public Consultations

This is an answer to the consultation organised by UK's Department for Business, Energy, and Industrial Strategy on designing a new domestic subsidy control regime reflecting UK's strategic interests and national circumstances. We argue that The UK economy would certainly benefit from a stable, effective subsidy regime that creates clear expectations for economic actors with minimal bureaucracy. We provide our detailed opinion on the way in which the notion of subsidy needs to be defined, as well as our view on how to design a robust system for subsidy control respectful to the rule of law and UK's international obligations.

Регуляторная автономия Великобритании: проблемы и перспективы

Sovereignty does not imply regulatory autonomy. After Brexit, the UK should align its regulatory policy with European norms, if it is interested in close partnership with the EU. Compromises must be made by both sides in order to ensure stability of the partnership. The EU will have to acknowledge the UK’s right to diverge from European rules. Britain will have to partly accept the jurisdiction of the European Court of Justice. The structure of dispute settlement mechanism which will be created under the partnership agreement should be a product of a compromise. The present study shows that optimal structure of dispute settlement mechanism must include two different procedures: one for political issues and the other for commercial issues. The central role for the European Court of Justice must be envisaged as a part of politically oriented procedure. There must be no role for the European Court of Justice or any Union to set the pace of political communication. The latter reflects the interest of Great Britain to simplify economic relations, which means that, firstly, disputes are resolved by independent arbiters; secondly, the EU acknowledges the UK’s right to diverge from European regulations; and thirdly, the UK accepts the EU’s right to impose countervailing duties to compensate for adverse effects of divergence on competition. This article also examines the main problems of future British regulatory policy, especially in the field of state aid. Boris Johnson’s government has decided not to form a full-fledged regulatory regime in the area of state aid. Its stance is politically appropriate since Conservative party manifesto for the 2019 general election promised to support local industries without limitations. But that decision created a great deal of economic risk. Firstly, the absence of a domestic subsidy control regulator can cause chaos within regulation system because workable norms and rules can only be sustained by a tight enforcement mechanism. Secondly, the EU can cite lack of subsidy control as an obstacle for British business to have unrestricted access to the European market.

WTO 개혁 쟁점 연구: 국영기업, 산업보조금, 통보 (The Way Forward for WTO Reform: SOEs, Industrial Subsidies, and Notifications)

WTO 개혁 쟁점 연구: 국영기업, 산업보조금, 통보 (The Way Forward for WTO Reform: SOEs, Industrial Subsidies, and Notifications)

Rethinking international subsidy rules

AbstractGeo‐economic tensions, notably associated with the rise of China, and global collective action problems—climate change and the COVID‐19pandemic—call for international cooperation to revise and develop rules to guide both the use of domestic subsidies and responses by governments to cross‐border competition spillover effects. Current WTO rules dividing all subsidies into prohibited or actionable categories are no longer fit for purpose. Piecemeal efforts in preferential trade agreements and bi‐ or trilateral configurations offer a basis on which to build but are too narrow in scope. Addressing spillover effects of subsidies could start with G20 countries launching a work programme to mobilise an epistemic community concerned with subsidy policies, tasked with building a more solid evidence base on the magnitude, purpose and effects of subsidy policies. The need for such cooperation has become even more pressing by the COVID‐19 pandemic and associated increase in the use of subsidy programmes in major economies.

생산물 차별화하 전략적 무역정책: 정책효과가 동등한 국내정책의 방향

생산물 차별화하 전략적 무역정책: 정책효과가 동등한 국내정책의 방향

The Economy-Wide Impact of Subsidy Reform: A CGE Analysis

AbstractOil prices fell from around $US110 per barrel in 2014 to less than $US50per barrel at the start of 2017. This put enormous pressure on government budgets within the Gulf Cooperation Council (GCC) region. The focus of GCC economic policies quickly shifted to fiscal reform, including the removal of domestic subsidies on energy products. In this paper, we use a dynamic Computable General Equilibrium (CGE) model to investigate the economic impact of the gradual removal of subsidies on refined petroleum and electricity, with specific reference to the Kingdom of Saudi Arabia (KSA).Our study shows that removing subsidies eliminates a large distortion in the economy. This improves the efficiency of resource use, so that even though employment and capital in most years fall relative to baseline levels, real GDP rises. In addition, we show that fully-funded compensation payments offset the increases in energy prices, leaving economic welfare of the Saudi-national population little affected. Removing the energy subsidies leads to an improvement in the net volume of trade, while leading to a mixed outcome for industries.

The characteristics of the Third Sector in Ukraine. Increases and decreases in the activity of particular organizations and the policy of the ruling elite

The main subject of this article is the activity of non-governmental organizations in Ukraine and their role in the life democratization. The article includes methods of financing non-governmental organizations and the influence of domestic and foreign subsidies for their work. Moreover, it raises a question about ethical behaviour of people, that finance these organizations and reveals the political aspects of the decisions which were made.
 It depicts the development dynamics of NGOs during several years. Furthermore, it emphasizes the increase of activity of all members of the NGOs during the Orange Revolution and the stagnation caused by the political crisis in 2007. This work indicates what is the stimulus for the development of Ukrainian NGOs.

Rethinking International Subsidy Rules

Geo-economic tensions, notably associated with the rise of China, and global collective action problems – climate change; the COVID-19 pandemic – call for international cooperation to revise and develop rules to guide both the use of domestic subsidies and responses by governments to cross-border competition spillover effects. Current WTO rules dividing all subsidies into prohibited or actionable categories are no longer fit for purpose. Piecemeal efforts in preferential trade agreements and bi- or trilateral configurations offer a basis on which to build but are too narrow in scope. Addressing spillover effects of subsidies could start with G20 countries launching a work program to mobilize an epistemic community concerned with subsidy policies, tasked with building a more solid evidence base on the magnitude, purpose and effects of subsidy policies. The need for such cooperation has become even more pressing by the COVID-19 pandemic and the associated increase in the use of subsidy programs in major economies.

Modeling the Impacts of Agricultural Support Policies on Emissions From Agriculture

To understand the impacts of support programs on global emissions, this paper considers the impacts of domestic subsidies, price distortions at the border, and investments in emission-reducing technologies on global greenhouse gas (GHG) emissions from agriculture. In a step towards a full evaluation of the impacts, it uses a counterfactual global model scenario showing how much emissions from agricultural production would change if agricultural support were abolished worldwide. The analysis indicates that, without subsidies paid directly to farmers, output of some emission-intensive activities and agricultural emissions would be smaller. Without agricultural trade protection, however, emissions would be higher. This is partly because protection reduces global demand more than it increases global agricultural supply, and partly because some countries that currently tax agriculture have high emission intensities. Policies that directly reduce emission intensities yield much larger reductions in emissions than those that reduce emission intensities by increasing overall productivity because overall productivity growth creates a rebound effect by reducing product prices and expanding output. A key challenge is designing policy reforms that effectively reduce emissions without jeopardizing other key goals such as improving nutrition and reducing poverty. While the scenario analysis in this paper does not propose any particular policy reform, it does provide an important building block towards a full understanding the impacts of repurposed agricultural support measures on mitigation of greenhouse gas emissions and adaptation to climate change. That full analysis is being undertaken in subsequent work, which will also take account of land-use change and alternative forms of agricultural policy support to align objectives of food security, farmers’ income security, production efficiency and resilience, and environmental protection.