Export subsidies comprise all those kinds of assistance to the exporters which help them in reducing their costs and add to their competitive strength in international markets. Subsidies can assume various forms:
Direct Subsidies:
This category represents different forms of open assistance to exporters. Conventionally, export subsidies are taken to mean direct assistance to exporters in two main forms which are:
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(i) Direct cash payments, and
(ii) Tax relief.
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International forums and organisations disapprove direct cash payments. But they do not object to exempting exports from all kinds of indirect taxes. In case such taxes have already been collected, they can be refunded.
Indirect Subsidies:
Governments are finding ever-new methods of assisting exports with indirect or hidden subsidies. They include, for example, the following:
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(i) Subsidised inputs, including duty-free or subsidised imported raw inputs, technology, machinery and capital equipment and projects, etc.
(ii) Easy and low-cost credit, including credit for financing sale transactions.
(iii) Schemes for guaranteeing specified levels of income to the producers of export items.
(iv) Post-export tax concessions so as to raise the post-tax income of exporters.
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(v) Relaxing labour laws and other legal provisions for enabling the exporters to cut costs.
(vi) Creating Special Economic Zones, Export Zones, and the like with assured and low priced infrastructure, inputs, tax concessions and the like.
(vii) Identifying thrust-areas for exports (that is, items which have a high export potential) and develop their export markets.
(vii) Constituting special bodies like export councils for certain groups of items so that they can assist the exporters in developing trade contacts, simplifying procedures and other formalities, etc.
(viii) Negotiating, on behalf of domestic exporters, with foreign governments for removal of import duties and other trade restrictions.
(ix) Devaluing domestic currency so as to increase the profit margin of exporters.