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(i) You should show the impact of export subsidy (in a graph)
(a) when EU is a small exporter of the product; and
(b) when EU is a large exporter of the product.
(ii) You should focus on the impact of export subsidy on EU product -
where you should show and explain (graphically)
- the impact of export subsidy on EU producers, EU consumers, and the EU price of that product,
- impact on EU tax payers, EU administration and
- also impact on non-EU prices and production.
(iii) You should graphically show and explain the economic effect of export subsidy on non-EU importer's.
(a) In this situation, will non-EU producers impose tariff restrictions and retaliate?
(b) You may then want to see what if non-EU governments impose an equal amount of import tariff (which is equivalent to the export subsidy given by EU administration). For example, if EU gives 10% subsidy and the importing country impose same 10% tariff restriction on EU product, what will be the impact on non-EU price and production.
(iv) You should show the welfare effect of export subsidy, too.
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