Economics Trade Barriers Questions
A subsidy is a financial assistance or support given by the government to domestic producers or industries. It aims to lower production costs, increase competitiveness, and promote domestic production. However, subsidies can act as trade barriers when they distort international trade by giving domestic producers an unfair advantage over foreign competitors. This can lead to reduced imports and increased exports, creating an imbalance in trade. Subsidies can also result in overproduction and dumping of goods in foreign markets at lower prices, which can harm domestic industries in other countries. Overall, subsidies can hinder free and fair trade by distorting market forces and creating an uneven playing field for international competitors.