Definition
- Subsidy to domestic producers
- A subsidy to domestic producers is a government payment to home firms that lowers their costs, so they can sell more cheaply and win sales from imports.
Example
Can you think of an example of subsidy to domestic producers?
The government pays British steelmakers £50 for every tonne they make. They cut their price and imported steel loses sales, with no tax on imports and no limit on their amount. Taxpayers, not buyers, pay for this protection.
Test yourself
Can you name the four forms of protectionism?