This study suggests issues regarding multilateral subsidy negotiations under the General Agreements of Tariffs and Trade (GATT) system, and reviews Korean industrial and trade policies to propose methods to improve them.
Import control inevitably results in reductions in trade volume, and worsens the trade conditions of the trading partner. Export subsidy provided by a country can create effects equivalent to providing a trading partner with economic aid by expanding trade or worsening the partner country's trade conditions.
Export subsidy in a developing country is often used to offset effects of discouraging export caused by import control and overestimation of the country's currency. If GATT allows developing countries to utilize export subsidy, global welfare would improve significantly. However, GATT allows developing countries to utilize import control, but strictly prohibits them from using export subsidy. One of the main reasons for this is that it is likely for a subsidized export item to make local companies go bankrupt, before increasing its market share or providing a monopolistic price. As a result, in the ongoing subsidy negotiation of the Uruguay Round, developed countries are interested in strengthening rules on subsidy use, while developing countries are interested in preventing abuse of countervailing measures.
Under these circumstances, this study suggests the following:
First, export subsidy can be considerably effective at least in the early stages of developing countries' policy shift to internationalization, demonstrated by Korea's recent history. Therefore, developing countries might propose the use of export subsidies to a certain extent. For example, they can propose negotiation agendas to discuss allowing export subsidies applied at a certain rate to all exports when a country is running a trade deficit. This potential proposal would not impact Korea.
Second, GATT should clarify rules regarding domestic subsidy.
Third, the criteria that determine “actual damage”, the most important technical factor that allows for abuse of countervailing measures, have almost the same effects as the result from loss of competitive advantages.
Finally, disputes have been resolved bilaterally. However, some of the developed countries' countervailing measures are recognized as vested interests, even though they are not consistent with GATT regulations. These should be corrected. More procedures for dispute resolution should also be introduced multilaterally.
These points can be put up for the Uruguay Round negotiation as main agenda.
갓트체제하에서의 보조금문제와 한국의 산업 및 무역정책(Subsidy issues under GATT system and Korean industrial and trade policies)
|Series Title; No||정책연구시리즈 / 88-10|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KDI; KDI School|