Domestic Subsidy

Summary of Domestic Subsidy

An economic grant provided by a governmental authority to a domestic manufacturer, grower, or producer to increase industrial activity or stimulate output of desired products. Economic incentives may come in the form of direct payments, tax relief, low-interest financing, wage subsidies, or in many other forms. A domestic subsidy is designed as an impetus to the local economy, whereas an export subsidy is oriented toward the production and sale of goods for foreign consumption. Most nations feel that export subsidies serve to cheapen foreign products, giving them an unfair price advantage over domestic merchandise, and most nations seek to impede the effectiveness of such subsidies by imposing Countervailing Duties (for more details visit the resource).

See Subsidies Code.

(Main Author: William J. Miller)

Domestic Subsidy and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Domestic Subsidy: Government aid to a domestic manufacturer, grower, or producer to ” maintain or increase production. Common incentives include direct payments, tax relief, and low-interest loans. As distinguished from an export subsidy, a domestic subsidy is not explicitly or solely directed at exports, although it may nonetheless have a significant trade impact GATT Article 16 establishes substantive obligations or disciplines only regarding the use of export subsidies, not domestic subsidies. The GATT Subsidies Code recognized that domestic subsidies are widely used for the promotion of social and economic policy objectives, but requires signatories applying them to “seek to avoid” creating adverse affects on the trade interests of other signatories.