Export Subsidy – A Trade Economic Term

One way to get domestic producers to export more products is through state-granted subsidies, but what consequences do they lead to for the rest of the world? In this article we share everything you need to know about export subsidies.

What are export subsidies?

Export subsidies are a form of trade economic tool used to promote domestic production and export of a certain product. In practice, it means that the state provides some form of financial support to producers to sell the product cheaper abroad. The reason for this is usually the existence of a product surplus in combination with domestic prices being higher than the global market price.

What consequences do export subsidies lead to?

Though export subsidies can benefit the economy of the exporting country in some aspects, it often leads to negative consequences for both the exporting country and competing countries. Inside the exporting country, prices for the product in question will increase, because it’s more profitable for the producers to export than to sell domestically. For importing countries, export subsidies can lead to lower prices for consumers, but it means that competing businesses domestically need to lower their prices too in order compete.

Export with PostNord

Are you expanding your business and plan to trade with countries outside of the EU? No matter if you will import or export, PostNord can help you from start to finish. The first step is to become an agreement customer with us, completely free of charge, to get access to all business tools in Portal Business. In the portal you can, among other things, schedule and track deliveries, fill out relevant customs forms, view statistics regarding your business, and much more.

Want to learn more about Portal Business? Click here.

More articles related to export and import can be found on our Customs page.

Frequently asked questions about export subsidies

What are the disadvantages of export subsidies?

Export subsidies lead to higher prices for domestic consumers, and the production in other countries is hurt as they must increase their prices to compete.

Are export subsidies used today?

Yes, the EU’s farming subsidy can be considered an indirect export subsidy.

What does it mean that an export subsidy is ad valorem?

Ad valorem means that the export subsidy applies to an entire sector, not just a specific product.

What is the effect of export subsidies?

Export subsidies are beneficial to a country’s export, but also affect other countries negatively when they must compete with foreign producers who receive subsidies.