Individual firms obtain subsidies in a wide variety of ways, some more complex and less transparent than others. These include government grants, corporate tax concessions (especially common in high-tech sectors), debt and equity financing provided on below-market terms, and subsidised energy inputs (especially common in heavy industries). Multinationals can also obtain subsidies from the different jurisdictions in which they operate.
Industrial subsidies
While subsidies can be helpful policy tools to address emergencies or market failures, they can also distort trade and competition depending on their design and target. The OECD is at the forefront of global efforts to identify, quantify, and analyse industrial subsidies and their impacts on markets.
Key messages
State enterprises are not only relatively large recipients of government support, but they can also provide support. This is, for example, the case where state banks offer industrial companies loans at below-market terms and conditions, or where state utilities provide companies with energy inputs at below-market prices. This can in turn tilt the playing field downstream in favour of those companies that are able to benefit from the lower prices charged by certain state enterprises.
Government disclosure of subsidies is often partial and limited, if existent at all. This lack of transparency hinders global efforts to better discipline the most trade-distorting forms of support. It has also led the OECD to employ a granular firm-level approach to investigate the support that governments provide to major industrial groups. The resulting database offers a unique perspective on the scope and scale of industrial subsidies from the ground up.
Context
Industrial subsidies tend to favour certain sectors and companies
Sectors in which firms have obtained the most support relative to their size are the production of solar photovoltaic modules, semiconductors, and heavy industries such as aluminium smelting, shipbuilding, steelmaking, and cement. The analysis has also found enterprises with at least 25% government ownership to have received two to three times more support relative to their size than competitors with less government ownership. This increases to ten times more when looking only at government grants and below-market borrowings.
