Export incentives are incentives provided by governments to increase the amount of exports that take place in a country. These incentives could come in the form of direct payments or they could come in the form of reduced taxes. Regardless of the type of incentive, the purpose of these export incentives is to make domestic products more affordable and competitive in the international market. In some cases, this type of incentive has led to disputes between countries because of differing opinions as to how much a country should help its products in the marketplace.
Many governments have offered export incentives over the years. A level of these incentives has varied from one situation to the next. In some cases, the incentives have amounted to huge subsidies by a federal government.
The most common form of export incentives is a lowering of taxes. In this situation, the government will lower the amount of taxes due from the exporter. This allows the exporter of a product to lower the price of these goods and still make the same amount of profit. When this happens, the goods from that country sell quicker and, in turn, it increases the overall sales of the goods. By doing this, the government is hoping to make the product more competitive on the world marketplace.
Some countries are set up better than others to produce certain goods. When a government is at a disadvantage in producing a product, it may try to make up for it in other ways. Export incentives is one way the country can make up for being at a natural disadvantage to another country.
When a government decides to issue export incentives, it can often lead to controversy between countries. One country might feel that another country helped out a little too much with its exports. In many cases, a smaller, developing country may not be able to compete with the subsidies provided by a larger nation. This puts the smaller country at a disadvantage and makes it more difficult for it to make its products competitive in the marketplace.
When a dispute like this arises, it is often taken to the World Trade Organization. The World Trade Organization will step in and hear the arguments from both countries. If it is determined that one of the countries is in the wrong, the World Trade Organization can issue suggestions or orders to that country.