Research On Anti-subsidy Economic Effect And The Mechanism

At present,the foreign trade of China has entered the strategic development stage after five years of transition period from accession to the WTO. China is facing some challenges of abiding by the WTO rules, fulfilling the obligations of WTO and changing the economic growth mode rapidly etc. Along with intense competition in international trade, the trade fiction becomes various and has been under the condition of great pressure. Now China is still in the whirlpool center of international trade fiction, China has suffered the most anti-dumping investigation for 12 years, and in 2007 China suffered the most anti-subsidy investigations in the world. Anti-subsidy is more harmful and destructive to the export and the economic security of our country. T/fore, it is extremely urgent to do some research on anti-subsidy economic effect and the running mechanism.The purpose of anti-subsidy is to offset the subsidy which foreign government gives their export enterprises and to avoid the unfair competition, which is harmful to the development of the related national industry. There are two factions of economic theories regarding analyzing the subsidy and countervailing in view of economics, one is free trade theory, which stands by free trade and opposes the government intervention activities including subsidy; the other is the protectionism theory which advocates the state interference activities and implements the trade protecting policy. Of course, the two theories are not opposite from each other, actually they are the complementarities and amendments to the explanations of new trade phenomena. The relevant economic models are constructed under the traditional free trade theory, the models shows that countervailing will cause the national welfare losses for exporting countries and negative effect for consumers in importing countries but countervailing duty could be as a compensation for their government. The positive analysis shows that anti-subsidy do cause the drop in its domestic price and negative effect upon our country when the research object is the anti-subsidy economic effect against China copperplate paper. Of course, the different supply and demand flexibility will affect the strength of economic effects, for example, the smaller the importing demand flexibility, the weaker of the countervailing effects. Besides, when the importing supply flexibility is smaller than that of demand flexibility, anti-subsidy will accelerate the formation of the convergence cobweb model. When the importing supply flexibility is bigger than the demand flexibility, anti-subsidy will decelerate the formation of divergent cobweb model.Under the theory of trade protectionism, the strategic theory is taken as an example to construct the relevant economic models. The models show that anti-subsidy will change the cost of exporting manufacturers and depredate the strategic advantages. T/fore, countervailing will turn into strategic tariffs to some extent, which will deprive the foreign monopoly rental and cultivate its strategic advantages in local market. If the exporting manufacturers are numerous, the export prices will be very low. Then exporting country should carry out"export restrictions"to avoid cut-throat competition and the potential anti-subsidy lawsuits. The essential of above analyzing the economical effects is the result of game theory, which means that we put subsidy and anti-subsidy as rational two players of games. T/fore, in view of trade freedom and improving the global welfare, the development of anti-subsidy has to depend on international cooperation.Anti-subsidy belongs to legal trade barrier as one of three trade relief measures stipulated by WTO. The first anti-subsidy laws in the world was given birth in Belgium 1892 and the latest important international criterion of solving the international disputes on subsidies and countervailing is AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES (ASCM) achieved by Uruguay Round negotiations, which shows that the international anti-subsidy mechanism followed some changes from coarse to elaborate, from loose to strict in its development process. In one word, it will play a role in guiding and forecasting the new round of WTO negotiations by learning lessons and comparing the background, the concepts and the function of countervailing mechanisms of different stages. China need to learn the experience of anti-subsidy laws and mechanism from other countries around the world and at the same time has to be alert that the anti-subsidy will turn into a new tool of trade protectionism because some countries will abuse scalability and arbitrariness of countervailing. T/fore, China must improve the Subsidies and countervailing integrated environment and be ready for cope with anti-subsidy investigations from other countries and at the same time has to take some countervailing measures to safeguard China's economy.