Question

An export subsidy is a. a fee that is charged to a country that ships goods to the U.S. b. a limit on the quantity of a good or service that can be sold abroad. c. a payment to a firm or individual that ships a good abroad. d. a payment made to a foreign government in return for preferential trade treatment. e. illegal in the U.S. but is fairly common in the rest of the world.

Answer 1

Answer:

c. a payment to a firm or individual that ships a good abroad

Explanation:

Export subsidy is a payment to a firm or individual that ships a good abroad. The aim of export subsidy is to encourage export. Thus, it increases the amount of goods and services that can be sold abroad.

I hope my answer helps you

Answer 2

Answer:

C) a payment to a firm or individual that ships a good abroad.

Explanation:

There are several types of export subsidies and direct payments to exporting firms is probably the least common one since the World Trade Organization forbids them.

Theoretically such a payment would be considered an export subsidy, but it would be too direct, they are usually camouflaged as indirect export subsidies to avoid sanctions by the WTO:

• low cost loans: in the US, the EXIM Bank provides low cost loans to American exporters, and low interest rate to buyers of American products. Besides the low interest rate, it also finances up to 85% of the total purchase. Low cost loans are one of the most common export subsidies because they are legal. All developed economies have a similar bank or institution, e.g. Export Finance and Insurance Corporation in Australia, European Investment Bank, Japan Bank for International Cooperation, etc.
• tax reductions: exporters in the US can get tax deductions when they operate as an Interest Charge Domestic International Sales Corporation (IC-DISC) which is a type of corporation for export companies only. Again, the same happens in most developed economies.
• guaranteed minimum prices: when domestic producers are guaranteed minimum prices, the government must subsidize excess production exported at low costs, e.g. Japan exports rice, Netherlands exports dairy products,etc.

In 2015, the WTO decided to eliminate all direct subsidies to agricultural exports by 2018, that is why have to get creative.