the price in the exporting country rises from Pw to Ps, the price in the importing country falls frome Pw to P*s, inthe expoting country, consumers are hurt, producers gain, and the government loses because it must expend money on the subsidy. the consumers loss is the area a + b; the producer gain is the area a+b+c; the government subsidy is the area b+c+d+e+f+g. the net welfare loss the areas b+c+d+e+f+g. b and d represent consumption and production distortion losses of the same kind that a tariff produces. the export subsidy worsens the terms of trade by lowering the price of the export in the foreign market from Pw to P*s. terms of trade loss e+f+g, equal to Pw-P*s times the quantity exported with the subsidy. so an export subsidy unambiguously leads to costs that exceed its benefits.