Mouse-over a link for a quick definition or click to read more in-depth!
Subsidies are money given by the government to businesses.
- A government may decide to subsidize a business if
- That business is not competitive but the government wants it to remain open.
- This can give new businesses that are in the development stage time to become competitive.
- This can keep businesses afloat that might be lost as a result of international trade.
- It could keep businesses afloat that are important to national security.
- It wants to give its companies an advantage in international trade.
- It wants to support businesses that it thinks are being undercut by foreign competition, which does not play by the same rules.
- Chinese companies may be able to produce and sell steel cheaper because they do not have to meet the same environmental regulations as German companies. The German government may therefore give money to German steel companies so they can remain competitive with the Chinese, while maintaining the same environmental standards.