Question

A country's government wants to support its steel industry. It knows that

domestic steel producers have struggled to compete with cheaper steel
imported from other countries. The government decides to use tax money to
help domestic steel companies reduce their production costs and lower their
prices. This is an example of which barrier to trade?

Answer 1

Using tax money to aid domestic companies in reducing production costs is an example of subsidizing and constitutes a nontariff barrier to trade, being part of protectionist policies.

Step-by-step explanation:

When a country's government uses tax money to help domestic steel companies reduce their production costs and lower their prices, it is an example of subsidizing. This action falls under the category of nontariff barriers, which are measures that make importing products costlier or more difficult without imposing traditional tariffs. These nontariff barriers form part of broader protectionist policies, which aim to reduce or block imports to shield domestic industries from foreign competition. Such strategies are sometimes employed by governments eager to nurture and defend so-called 'infant industries' until they are robust enough to compete on the world stage.