Export promotion: the role of transportation subsidies

An important objective of recent General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) rounds of trade negotiations has been to urge member countries to adopt trade policies that are more transparent in their effects. One example in this regard has been the move towards tariffication of non-tariff barriers in an effort to make the price effects of trade barriers more readily discernible. This goal remains largely unfulfilled, as many countries continue to implement barriers that are often complicated and “disguised” in their effects. Instead of adopting direct export subsidies, for example, some countries subsidize the use of a specialized input into the production of a final product. While the effect of this subsidization is similar to a direct export subsidy, the effects are not transparent in that the subsidy applies to an input and the effect that the subsidy has on trade depends on the importance of the input in the cost of producing the final product. Furthermore, there is often no way of calculating the effects of these disguised barriers in a straightforward manner.