Subsidies include reduced taxation or rent, and cash payment. They are paid by the state to producers, allowing them to reduce the domestic or export price of their products. Subsidies can help prevent the decline of an industry, lower the price of a good, or encourage the industry to hire more labour. Subsidies can also be used to raise the incomes of a particular group of producers, such as farmers, improve the international competitiveness of exports or domestic products, or keep down the price of basic foodstuffs or drugs.
Publicly funded health services can be regarded as form of subsidy. They reduce the cost of staying healthy to individuals, but also provide a “hidden” subsidy to employers in the form of healthier and more productive workers. It is argued that subsidies distort the level playing field (a market place in which everyone competes equally). Others argue that specific subsidized support is a necessary part of development. The richest countries of the world, (some of which are pressing most strongly for the removal of developing countries' subsidies), heavily subsidize their own agricultural sectors, for example through the European Union's Common Agricultural Policy (CAP).
Where subsidies exist, neo-liberal advice is to eliminate or reduce them, or improve their targeting. A subsidy is often deemed unfair because it distorts the market in favour of the subsidized product. Hidden subsidies also distort the market and reduce free competition. The removal of subsidies is under discussion in negotiations in international trade agreements such as GATS.