Trade Effects of Public Subsidies to Private Enterprise PDF
Preview Trade Effects of Public Subsidies to Private Enterprise
TRADE EFFECTS OF PUBLIC SUBSIDIES TO PRIVATE ENTERPRISE Also published for the Trade Policy Research Centre by Macmillan TOWARDS AN OPEN WORLD ECONOMY by Frank McFadzean eta/. WORLD AGRICULTURE IN DISARRAY by D. Gale Johnson THE ESSENTIALS OF ECONOMIC INTEGRATION by Victoria Curzon NEGOTIATING ON NON-TARIFF DISTORTIONS OF TRADE by Robert Middleton INVISIBLE BARRIERS TO INVISIBLE TRADE by Brian Griffiths Trade Effects of Public Subsidies to Private Enterprise by GEOFFREY DENTON SEAMUS O'CLEIREACAIN and SALLY ASH with a Foreword by HARRY G. JOHNSON for the Trade Policy Research Centre London ©Trade Policy Research Centre 1975 Softcover reprint of the hardcover 1st edition 1975 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First published 1975 by THE MACMILLAN PRESS LTD London and Basingstoke Associated companies in New Y ark Dublin Melbourne Johannesburg and Madras SBN 333 16706 6 ISBN 978-1-349-02264-9 ISBN 978-1-349-02262-5 (eBook) DOI 10.1007/978-1-349-02262-5 Typeset by PREFACE LTD Salisbury, Wilts. Trade Policy Research Centre The Trade Policy Research Centre in London was established in 1968 to promote independent analysis and public discus sion of commercial and other international economic policy issues. It is a privately sponsored non-profit organization and is essentially an entrepreneurial centre under the auspices of which a variety of activities are conducted. As such, the Centre provides a focal point for those in business, the universities and public affairs who are interested in inter national economic questions. The Centre is managed by a Council which is headed by Sir Frank McFadzean, Chairman of the 'Shell' Transport and SIR FRANK McFADZEAN Chairman PROFESSOR HARRY G. JOHNSON Vice-Chairman and Director of Studies PROFESSOR JOHN ASHTON FRANCO MATTEI SIR ALEC CAIRNCROSS PROFESSOR JAMES MEADE WILLIAM M. CLARKE ALAN F. PETERS JAMES A. CLAY T. M. RYBCZYNSKI W.M.CORDEN LORDSEEBOHM PROFESSOR GERARD CURZON HON. MAXWELL STAMP PROFESSOR HERBERT GIERSCH PROFESSOR LIONEL STOLERU SIR ALEXANDER GLEN PAUL STREETEN SIDNEY GOLT MAURICE ZINKIN HUGH CORBET Director Trading Company. Tht members of the Council, set out above. represent a wide range of experience and expertise. v vi Trade Policy Research Centre Having general terms of reference, the Centre does not represent any consensus of opinion. Intense international competition, technological advances in industry and agri culture and new and expanding markets, together with large-scale capital flows, are havmg profound and continuing effects on international production and trading patterns. With the increasing integration and interdependence of the world economy there is thus a growing necessity to increase public understanding of the problems now being posed and of the kind of solutions that will be required to overcome them. The principal function of the Centre is the sponsorship of research programmes on policy problems of national and international importance. Specialists in universities and private firms are commissioned to carry out the research and the results are published and circulated in academic, business and government circles throughout the European Community and in other countries. Meetings and seminars are also organized from time to time. Publications are presented as professionally competent studies worthy of public consideration. The interpretations and conclusions in them are those of their authors and do not purport to represent the views of the Council and others associated with the Centre. The Centre, which is registered in the United Kingdom as an educational trust under the Charities Act 1960, and its research programmes are financed by foundation grants, corporate donations and membership subscriptions. Contents Trade Policy Research Centre v Biographical Notes ix List of Tables xi Foreword by Harry G. Johnson xiii Preface xxxix Abbreviations xli INTRODUCTION xliii PART I NATURE OF THE PROBLEM 1 1 Trade, Domestic Distortions and Subsidies 3 2 Industrial Policy in the United Kingdom 23 PART II ANALYSIS OF THE ISSUES 49 3 Estimating the Subsidy Element in Public Expenditure 51 4 Effects of Subsidies on Resource Allocation 64 5 Determinants of Trade Flows and the Effects of Subsidies 75 6 Regional Subsidies and International Trade 96 7 Public Procurement and Technical Barriers 121 PART III TWO CASE STUDIES 149 8 Public Assistance to British Shipbuilding 151 9 Development of the British Aluminium Industry 201 PART IV POLICY PRESCRIPTIONS 233 10 Adjustment Assistance and Structural Support 235 11 Criteria for Public Subsidies to Industry 257 vii viii Contents APPENDICES 1 Computing the Grant Equivalent in Government Aid to Industry 277 2 Effects of Grants on Capital Costs 282 SELECTED BIBLIOGRAPHY 285 INDEX 291 Biographical Notes GEOFFREY DENTON is Reader in Economics at the University of Reading and since 1973 he has been Research Director of the Federal Trust for Education and Research in London. After graduating from the University of Oxford, Mr Denton was for several years on the staff of Political and Economic Planning (PEP). He taught in several universities before moving to Reading in 1965. Besides numerous papers, Mr Denton is the author of Growth in the British Economy (1960) and Planning in the EEC (1967); co-author of Economic Planning and Policies in Britain, France and Germany (1968); and editor of Economic Integration in Europe (1969). He was also co-author of the Thames Essay, Subsidy Issues in International Commerce (1972), which was a preliminary analysis for the present study. SEAMUS O'CLEIREACAIN is Assistant Professor of Eco nomics at the State University of New York. After graduating from University College, Dublin, he obtained his master's degree at the University of Detroit and his doctorate at the University of Michigan, where he also lectured. From 1971 to 1974 he was a Trade Policy Research Centre Fellow in the Department of Economics at the University of Reading. Dr O'Cleireacain was co-author of Subsidy Issues in Inter national Commerce (1972) and contributed to the TPRC report Towards an Open World Economy (1972). SALLY ASH graduated from the University of Reading in 1971. For two years Mrs Ash was a Trade Policy ~esearch Centre Fellow in the Department of Economics after which she joined the Urban and Regional Studies Section in the department. ix
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