ABSTRACT
Despite the theoretical difficulty of defining ‘subsidies’ and deter mining their effects, it has been generally accepted that an un constrained use of subsidies tends to be harmful to the economic interests of trading nations - if harm is defined broadly in the narrow context of nations’ economic interests. For example, the first reaction to foreign government subsidies was in the late nineteenth century by the US, when countervailing duties were imposed on Russian imports. However, the Russians had subsidised their sugar to offset the distortive effects of American tariffs on sugar imports. So it is not clear whose economic interests were harmed, in what way, and what the harmful effects of subsidies were in that context.1
