DEADLOCK IN GENEVA: THE BATTLE OVER EXPORT SUBSIDIES IN AGRICULTURE

This article provides a systematic game-theoretic analysis of retaliatory export subsidies where each country's government is driven by political -economy considerations. The model provides a powerful explanation of both the grain wars of the 1980s and the difficulties facing the post-Uruguay Round negotiations in Geneva over further reductions in agricultural export subsidies. While an initial round of cuts in export subsidies can be designed to confer political-economy benefits on both the US and EU governments, subsequent reductions need not be mutually beneficial for the two governments. The EU's current intransigence over export subsidies, therefore, appears to have a solid political-economy basis. [F13, Q17]