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Sagot :
Subsidies make those goods cheaper to produce than in foreign markets.
A subsidy is any financial assistance provided by the government to a producer or seller of a good or service in order to increase the competitiveness of a specific industry firm or industry as a whole.
Export subsidies reduce consumer surplus while increasing producer surplus in the exporter market. An export subsidy increases producer surplus in the export market while decreasing surplus in the import country market. Subsidies act as a trade barrier in such cases by distorting the competitive relationships that naturally develop in a free trading system. Exports of subsidized products may harm the domestic industry in the importing country that produces the same product.
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