ARMS EXPORT CONTROLS, SUBSIDIES AND THE WTO EXEMPTION

Authors: del Carmen García-Alonso, María¹; Levine, Paul²

Source: Scottish Journal of Political Economy, Volume 52, Number 2, May 2005 , pp. 305-322(18)

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Abstract:

Owing to the World Trade Organization (WTO) exemption that allows governments to subsidize arms exports, the arms trade is one of the few remaining areas of trade where we observe export subsidies. This paper examines the effect of arms controls, in the form of licensing delays, on the incentives to subsidize arms exports and conversely the effect of the WTO arms trade exemption on the incentives to break arms control agreements. Our main result is that arms controls and free trade commitments re-enforce each other. Licensing delays reduce the incentive to subsidise and free trade without subsidies reduces the benefits of a unilateral abrogation of arms controls. Transparency actually worsens the Nash inefficiencies at play in that incomplete information leads to lower subsidies and lower arms exports.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.0036-9292.2005.00346.x

Affiliations: 1: University of Kent 2: University of Surrey

Publication date: 2005-05-01