What is an export subsidy?

An export subsidy refers to financial assistance provided by the government to encourage the export of goods and services. This financial support can take various forms, including direct cash payments, tax incentives, or other forms of financial assistance that lower the cost of exporting for domestic producers.

The rationale behind export subsidies is to promote national industries in the global market, making their products more competitive against foreign goods. By reducing the effective price of exports, these subsidies can help domestic companies expand their market share internationally, create jobs, and stimulate economic growth.

For example, a government might offer a subsidy to farmers who export agricultural products, thereby making their goods cheaper for foreign buyers. This practice can lead to increased export volumes and is often used by countries to support specific industries that they want to nurture.