ABSTRACT
Model approaches of market oriented economic theories show that subsidies are interventions with the mechanism of free adjustment of the allocation of resources in an economy by the play of market prices. There are situations of an economy where economists admit that the use of subsidies may be a valid consideration. Production as well as export subsidies are considered to be necessary tools for bridging the gap between short-term weakness and long-term competitiveness. The Subsidies Code recognizes that such subsidies "may play a large role in promoting economic growth and development". The American attitude has proved to be a major obstacle to the adherence of developing countries to the Subsidies Code. General Agreement on Tariffs and Trade aims at "the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce". Subsidies can also distort international competition by making goods cheaper on foreign markets than they would be without them.
