What is export subsidy? Export subsidy assessment

Export subsidies, also known as export allowances, are cash subsidies or financial preferential treatments given by a government to exporters when exporting certain goods in order to reduce the price of exported goods and increase their competitiveness in the international market. There are many ways for the government to provide subsidies for export goods, but there are two basic forms: direct subsidies and indirect subsidies.

Basic form

(1) Direct subsidies. Direct subsidies refer to cash subsidies paid directly by the government to exporters when goods are exported. The purpose is to make up for the losses caused by the international market price of exported goods being lower than the domestic market price. Sometimes, the amount of subsidies may be much higher than the actual price difference, which already contains the meaning of export incentives. This type of subsidy is most typical of the EU's export subsidies for agricultural products. According to statistics, in 1994, the EU's subsidies to farmers totaled as much as 80 billion US dollars.

(2) Indirect subsidies. Indirect subsidies refer to the government's financial benefits for the export of certain goods. For example, refunding or reducing domestic taxes such as sales tax, consumption tax, value-added tax, income tax, etc. paid on exported goods, temporarily exempting imported raw materials or semi-finished products from tax or refunding the paid import tax for processing and re-export, exempting export taxes, postponing tax payments for exported goods, reducing freight, providing low-interest loans, implementing preferential exchange rates, and providing subsidies to enterprises to open up export markets. The purpose is still to reduce the cost of goods and improve international competitiveness.