Export Subsidies Advantages And Disadvantages
a) Export subsidies – a payment made by a government to local producers which enables the latter to sell their goods more cheaply or more profitably abroad, thus stimulating a country’s exports.
Advantages: Export subsidies aid a country in achieving an export expansion and diversifies the national economy towards the manufacturing of goods. Export subsidies provide agricultural support to local producers because they can sell their goods more cheaply to overseas markets. Export subsidies help alleviate poverty amongst local producers. The government provides these subsidies to increase their foreign exchange reserves
Disadvantages: Because every country wants what is best for itself, if the domestic country imposes export subsidies, the foreign country counteracts that action by imposing its own set of subsidies which further complicates trade and leads to trade disputes amongst countries. Export subsidies is discouraged by
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Advantages: Import tariffs are introduced for the protection of the local economy/industry. This puts foreign producers at a competitive disadvantage because people often prefer to buy cheaper alternatives. The protection of the local industry helps in the reduction of unemployment as well. Import tariffs can also be used to protect the country’s foreign exchange reserves.
Disadvantages: Import tariffs limits the domestic country’s competitiveness due to the protectionism of the local industry. Import tariffs has a negative effect on the consumer in that local producers can charge high prices for goods. They also raise trade disputes because high import tariffs imposed on foreign countries allow them to do the same to the domestic country.
c) Globalisation - The worldwide movement toward economic, financial, trade, and communications
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