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An export subsidy reduces the price paid by foreign importers, which means domestic consumers pay more than foreign consumers. The World Trade Organization (WTO) prohibits most subsidies directly linked to the volume of exports, except for LDCs. [1] Incentives are given by the government of a country to exporters to encourage export of goods.
That is, developed countries will treat developing countries differently. In the Uruguay Round Agreement on Agriculture, for example, developing countries are given longer time periods to phase in export subsidy and tariff reductions than the more industrialized countries. The least developed countries are exempt from any reduction commitments.
In 2019 France was the biggest beneficiary of the policy by 17.3%, ... For dairy products, export subsidies rose in 2009 after having been stopped in 2008. In 2009 ...
Export subsidies are the third pillar. The 1995 Agreement on Agriculture required developed countries to reduce export subsidies by at least 36% (by value) or by 21% (by volume) over six years. For developing countries, the agreement required cuts were 24% (by value) and 14% (by volume) over ten years.
The EU agreed to reduce the amount of subsidized sugar exports by 21%, and to reduce the amount spent on subsidies by 36%. These reductions did not apply to the C-sugar exports or the white sugar export that was equivalent to the raw sugar import from ACP countries under preferential agreements. [8]
These included, for example, increased tariffs on imported foreign manufactured goods, export subsidies, reduced tariffs on imported raw materials used for manufactured goods and the abolition of export duties on most manufactured goods. Thus, the UK was the first country to pursue a strategy of large-scale infant-industry development.
Another method is to export a batch of goods to a foreign country but the same goods will be re-imported by the same trader via a circuitous route and changing the product description so as to obscure their origin. Thus the trader benefits from the export subsidy without creating real trade value to the economy. Export subsidy as such can ...
Strategic use of export subsidies, import tariffs and subsidies to R&D or investment for firms facing global competition can have strategic effects to their development in the international market. Since intervention by more than one government can lead to cases resembling the Prisoner’s dilemma , the theory emphasizes the importance of trade ...