Evaluating the Case for Export Subsidies
Now that import-substitution policies have failed and been discredited, there has been a shift in favor of interventions on behalf of export interests. The author argues that close scrutiny reveals these arguments to be as flawed as the old argumen...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2000/01/438961/evaluating-case-export-subsidies http://hdl.handle.net/10986/22282 |
| Summary: | Now that import-substitution policies
have failed and been discredited, there has been a shift in
favor of interventions on behalf of export interests. The
author argues that close scrutiny reveals these arguments to
be as flawed as the old arguments for import substitution.
Among other things, the author concludes that: 1) Under
perfect competition, a country trying to retaliate against a
trading partners export subsidies by instituting its own
export subsidies, will only hurt itself. 2) The argument
that export subsidies may be useful for neutralizing import
tariffs, is spurious. In most practical situations, this is
not possible. Removal of tariffs is a far superior policy.
3) In principle, a case can be made for protecting infant
export industries in the presence of externalities. But the
empirical relevance of externalities remains as illusory for
export industries as it was for import-substituting
industries. 4) Adverse selection and moral hazard can lead
to the thinning of the market for credit insurance, but that
is not a case for government intervention. 5) India's
experience shows export subsidies to have little impact on
exports. Brazil and Mexico's experience shows export
subsidies to be a costly instrument of export
diversification. 6) Those who argue that pro-export
interventions were important in East Asia have not provided
convincing evidence of a casual relationship between the
interventions and growth. |
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