Special economic zones, duty drawbacks and subsidies have often been used as part of an export orientated development strategy. This combined with the recent use of domestic subsidies by the USA to re-shore production of computer chips, has re-opened the debate about whether developing countries should be more proactive in managing exports.
a. The WTO considers export subsidies to be one of the two types of "unfair trading practices". What is the other? Explain. (2 marks)
b. The USA and the EU have used domestic subsidies to support their agricultural sector for decades. Explain, using graphs, how US and EU subsidies have resulted in lower prices on agricultural goods, hurting other, primarily developing country, exporters? (6 marks)
c. Compare and contrast the use of domestic subsidies and export subsidies on trade and welfare using graphs. (8 marks)
d. Firms in special economic zones usually receive duty drawbacks and export subsidies. What are some other potential sources of gains to exporters from special economic zones? (2 marks)
e. What development strategies would you suggest to a developing country? Why? (4 marks)
