Question

The whole issue of trade is very complex. Should governments offer export subsidies while imposing import taxes to boost the trade surplus? What is the likely outcome of such activity?

Answer 1

Governments all aroud the world are offering export subsidies while imposing import taxes to boost the trade surplus. This has also seem to be having a significant impact in improving trade surplus. Outcome of such measure are;

1. Export subsidies promote domestic producers to sell their products outside thus improving consumer suprlus and income of domestic industries.

2. Export of goods bring foreign currency in the country thus helping expand forrign exchange reserves.

3. Export of goods gives boost to domestic industries thus boosting job opportunities in the country.

4. However, trade barriers including import taxes have distrupted the free trade in the globe thus had brought disorder in under developed and developing nations as their poorly prepared market is not able to cope with developed nation market thus impacting domestic industries badly.