DEFINITION of Export Incentives
Export incentives are regulatory, legal, monetary or tax programs designed to encourage businesses to export certain types of goods or services.
BREAKING DOWN Export Incentives
Export incentives are a form of assistance that governments provide to firms or industries within the national economy, in order to help them secure foreign markets. A government providing export incentives often does so in order to keep domestic products competitive in the global market.
Export Incentives, How They Work
Export incentives make domestic exports competitive by providing a sort of kickback to the exporter. The government collects less tax in order to deflate the exported good's price, so the increased competitiveness of the product in the global market ensures that domestic goods have a wider reach. Generally, this means that domestic consumers pay more than foreign consumers.
Sometimes, governments will encourage export when internal price supports (measures used to keep the price of a good higher than the equilibrium level), generate surplus production of a good. Instead of wasting the good, governments will often offer export incentives.
Export Incentives and the World Trade Organization
This level of government involvement can also lead to international disputes that may be settled by the World Trade Organization (WTO). As a broad policy, the WTO prohibits most subsidies, except for those implemented by lesser-developed countries (LDCs).