This paper presents a theory of government intervention which provides an explanation for "industrial strategy … incentive to try to capture a greater share of rent-earning industries using subsidies, but the subsidy-ridden international …

the amount of duty to the amount of the subsidy. This paper examines a generalized model of imperfect competition with … capital subsidies and shows the conditions under which a countervailing duty will offset the effect of the subsidy on exports …. In addition, the paper considers whether profit shifting motives for a subsidy still exist even when this maximum duty is …

Second is the effect of tariffs and quotas on domestic market …

The primary predictions of strategic-trade theory are not restricted to imperfectly-competitive markets. Indeed, these … predictions emerge in a natural three-country extension of the traditional theory of trade policy in competitive markets, once the … theory is augmented to allow for politically-motivated governments, so that the sign of export policy may be converted from …

in the low-quality country and a subsidy in the high-quality country …

intervention in order to influence the government's choice of subsidy. In the event commitment to free trade may be desirable even …

also serve to shift rents to foreign firms supplying an intermediate good, weakening the incentive for the subsidy. By … final and intermediate good firms can strengthen the argument for an export subsidy if intermediate good firms are domestic …. The domestic welfare implications of alternative rent-shifting policies (a production subsidy and an import tariff) at the …

policy in the presence of oligopoly. The key point is that strategic relationships between firms introduce additional motives …