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Abstract With the rapid international trade liberalization,there appear restrictions on various subsidies in international trade agreements . But in the real world,governments have not renounced their intervention in the market,especially in terms of R&D subsidizing .At the same time,strategic trade barriers may easily lead to retaliation from other countries .In order to avoid the trade war,continual adjustments have been made to the subsidy and the countervailing terms of international trade agreements . The current agreement,Agreement on Subsidies and Countervailing Measures (SCM Agreement),divides subsidies into the following three types : prohibited subsidies,actionable subsidies and non-actionable subsidies . If a trade policy in question is found to be a prohibited subsidy,the panel shall rule that the subsidizing Member withdraw the subsidy within90 days;and if a trade policy in question is found to be an actionable subsidy,the Member granting or maintaining such a subsidy may not have to withdraw the subsidy,but shall take appropriate steps to remove the adverse effects . Taking this issue as an object analysis,we discuss the effects of WTO's anti-subsidy measures in an open economy on the optimal R&D policies of a country,the possibility of eliminating the subsidies under the SCM Agreement,and the adjustment of a country's R&D policies under this credible threat . Integrating the anti-subsidy measures into the R&D policies framework,we advance the ″R &D Cournot competition model″with anti-subsidy restrictions . Nash's equilibrium shows that the anti-subsidy agreement can effectively reduce the government incentive to intervene in the market without entirely withdrawing its subsidies . The optimal policy of the government is determined by the efficiency of the anti-subsidy measures,i .e .,when the efficiency is lower than the floor level of the critical interval,the governments in the model will fall into the R&D subsidy dilemma;when the efficiency is higher than the upper limit of the critical interval,the governments will not intervene in the market;and when the efficiency is in the critical interval,the home government can use the subsidies to transfer the profit andincrease the domestic welfare without falling into the R&Ddilemma .Taking full advantage of this interval in the real economic world can help accelerate the domestic economic growth under the restrictions of international trade agreements . The implication of the equilibrium is that in the real economic world,international trade plays an important role in the economy of China,the world's largest developing country . This paper suggests that the government should provide proper subsidies to industrial R&D without violating international trade agreements . On the one hand,the R&D subsidy will enhance the international competitive advantage of the home firms,thus improving the national welfare;on the other hand,the government's effective guidance will accelerate the technological progress,thus fostering and maintaining the growth of the advantage industries owing to the universality of the technological progress effects of scale economy on the real economy . In one word,to consolidate China's position in the world economy,the government should make full use of the above two factors and adopt positive industrial policies so as to better integrate China into the world economic system .
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2013, Vol. 43 
