Export subsidy

Export subsidies are government benefits for exports to other not to make competitive products on the world market competitive. It is a foreign trade instrument. In connection with the export subsidies of the EU one speaks of export aid.

Alternative definition

Export subsidies are government subsidies to domestic companies or individuals that deliver a commodity to foreign countries. The aim is to enable cheaper exports. Thus, the exporters are put in a position that they can occur more competitive compared to its competitors on the export markets. Such subsidies are often linked to the economic aim to stimulate domestic production and employment or to obtain. Such subsidies violate international competition rules of the GATT ( General Agreement on Tariffs and Trade).

The term export refunds referred to an export subsidy for certain agricultural goods within the EU market regulation law.

Effects of an export subsidy on the terms of trade

There are certain patterns of behavior observed that States have a preference for domestic goods. The U.S. spends about 90 percent of their income on domestic goods and only about 10 percent of imports. Such behaviors are caused by trade barriers. The two most important artificial barriers to trade are import tariffs and export subsidies. The key is that they are to where goods are traded on the world market, a difference between the market price at home ( domestic prices, internal prices ) and the price of produce ( external prices, external prices). Thus, a careful definition of the terms of trade must take place. Measure the terms of trade to the rate at which the domestic can exchange goods with other countries. Therefore, measured at the outside, - not according to the internal prices. So it goes in the analysis of export subsidies by the effect of the relative supply as a function of external prices.

Subsidies are often equated with similar duties as political action, because both help the domestic producers. However, both instruments have opposing effects on the terms of trade. Suppose the domestic pays a subsidy of 30 percent on textile exports. Thus, the relative price of clothing to foods in Germany increased by 30 percent. This leads producers in Germany to produce more cloth and to produce less food. In domestic consumers replace clothing through food.

The figure shows that a subsidy increases ' decreases and the relative world demand for clothing (from RD to RD the world relative supply of clothes (from RS to RS ) '). An export subsidy thus deteriorating the domestic terms of trade and improves from abroad.

Theory of an export subsidy

Through a provided by the State of export subsidy, the good export the provider until its domestic price exceeds the foreign price. A subsidy can be determined either by volume or by value. What effect brings an export subsidy with him highlights the following figure.

In the export market, the price of PW increases to horsepower and the importing country, he falls from PW on PS '. Thus, the price increase is significantly lower than the subsidy. Consumers are worse off in the exporting country, winning the producers, however, and the state is clearly the loser, since he must pay for the subsidy. An export subsidy, therefore, shows that they have a welfare loss generated (area b d e f g ) and the costs for consumers, the benefits far exceed.

International regulations

A number of international agreements limit the capacity of states to grant export subsidies. Above all, we GATT mentioned. The Uruguay Round resulted in a significant reduction of export subsidies.

Export subsidies in the EU

The export promotion policy in the foreign trade area is part of the common commercial policy in the context of Art \, become 133 EC after Member States have an obligation to unify the export aid systems of the EC Treaty in the transitional period ( until 1970 ) is not fulfilled. The central instrument of export subsidies, the EU export refunds.

The agricultural policy of the European Union

A highly controversial issue (see the buzzword agricultural dumping ) is the Common Agricultural Policy of the European Union (CAP ) (see the agricultural markets ). Today the EU 's trade policy is of great importance. She has one hand, abolished all customs barriers and on the other hand grew up in the field of agriculture to a huge export subsidy project. This project was born after the 1970s, as produced by the Brussels' minimum prices, more agricultural products than consumers were willing to buy. Thus, the EC bought large quantities of food, and thus the stock levels were not too high, the European Union subsidized the export of these goods.

The following figure shows that the minimum price above the world market price is and above the price that would prevail in the absence imports from supply and demand. Thus, the surplus generated is exported, an export subsidy is granted. This compensates for the difference between the European and world market price. However, the subsidized exports have a negative effect on the world price and the subsidy to rise again.

Scope and refund

The payment of refunds is done by the member countries and their specific in their export refund regulations authorities. In Germany this is the customs administration, or the Main Customs Office Hamburg -Jonas.

In 2009, export refunds in the amount of € 51,939,437 was paid by that customs office. Some € 20.7 million was accounted for by milk and milk products.

Export subsidies for sugar

Another core element of subsidy is the European sugar regime. Today, the sugar regime can not survive without export subsidies, however. In 2004 /05 the production quotas fell off and it came to important reforms in this area. The sugar factories have been restructured since the sugar production was reduced in the EU. Also granted you a price support of 36 percent in a period of over 4 years. Farmers were given a compensation of 64.2 percent of the price cut. Fund have been sold to weed production shares. The EU agricultural Kommissionar Franz Fischler (1995-2004) has agreed to eliminate all export subsidies by 2013, so that these enormous costs. Nevertheless, the European protection for the sugar market is high. The tariff should be reduced to 36 percent, but still is on a con-siderable height. Thus, the developing countries (especially the ACP ( Asia, Caribbean, Pacific ) ) a competitive advantage in trade with the EU and other developing countries (for example, Brazil is the world 's largest sugar exporter) can achieve, there is a " Everything but Arms " agreement ( Everything But Arms ) with the European Union. You will receive a tax-free amount and the reduction of import duties, subsidies of existing trade preferences for ACP countries are reduced.

Other Sectors

Other areas would be the food exports such as beef, pork or poultry. Other industries include shipbuilding, steel industry and high-technology sectors ( examples include microelectronics, genetic engineering and communication technologies )

In the U.S.

There are also extensive in the U.S. export subsidies, especially for agricultural products. The most important export subsidy program of the United States is the Export Enhancement Program (EEP ) and the Dairy Export Incentive Program ( DEIP ) with a volume of over one billion U.S. dollars.