Advantages And Disadvantages Of Export Subsidies

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QUESTION1
EXPORT SUBSIDIES
Export subsidy reduce the price paid by foreign importers, which means domestic consumers pay more than foreign consumers. Export subsidies are government policies to encourage the outflow of goods and services from a domestic economy to the international market and discourage the sale of goods and services on the domestic market through direct payments, tax relief for exporters.
Advantages of export subsidies
 infant industries
Export subsidies protect small or developing countries so that they can benefit from economies of scale, as a result the production cost of infant industries will be low.
 National security
Domestic production of goods that are found to be harmful to the security of the nation are encouraged
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Consumers will be encouraged to buy local products because they are more affordable
Revenue generation
Revenue tariffs are most collected on imports.Developing countries collect taxes on cross border transactions.
Maintenance of foreign exchange reserves
Government imposes import tariffs in order to limit imports which results in the conservation of foreign reserves.(
Disadvantages

GLOBALISATION
Globalisation refers to the integration of markets in the global economy. Markets where globalisation is common include financial markets such as capital markets.
Advantages
Access to market
Availability of larger markets means that firms may experience an increased rate in the demand for their product.as well and benefit from economies of scale which leads to a reduction in the average production cost.

Availability of resources
Globalisation enables worldwide access to sources of cheap raw materials and this enables firms to be cost competitive their own markets and in overseas markets. Seeking out the cheapest material from around the world is called global sourcing because of cost reductions and increased revenue globalisation can generate increased profits for shareholders.
Revenue
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• Further liberalisation will result in Lower prices. The removal of tariff barriers can lead to lower prices for consumers. For example removing food tariffs in South Africa will help reduce the global price of agricultural commodities such as maize, milk, rice and grains.This would benefit South Africa since it’s a developing country which is largely dependent on the agricultural sector and benefit foreign countries who are importers of these agricultural commodities.
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