Question

How would direct subsidies to key industries be preferable to tariffs or quotas?

Short answer

Direct subsidies to key industries are preferable to tariffs and quotas because:

1. They do not slow down international trade.
2. They do not put any kind of restriction on the products that consumers have easy access to.
3. They provide support or financial aid to various sectors, institutions, businesses, or individuals.
4. They are paid to farmers and agribusinesses along with income for managing the end-of-season supply of agricultural commodities.

Step-by-step solution

Step 1. Meaning of tariffs and quotas.

Tariffs and quotas are trade restrcitions imposed by the government to protect its domestic producers and consumers.

Step 2. Meaning of Direct subsidy.

Direct subsidies are the subsidies provided to individuals in the form of tax reduction or cash payment.

Step 3. Why are direct subsidies preferable?

Direct subsidies to key industries are preferable to tariffs and quotas because they are diverse in nature and help in numerous ways:

1. They do not slow down international trade.
2. They do not put any kind of restriction on the products that consumers have easy access to.
3. They provide support or financial aid to various sectors, institutions, businesses, or individuals.
4. They are paid to farmers and agribusinesses along with income for managing the end-of-season supply of agricultural commodities.