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Table of Contents

  1. Topic pack - Development economics - introduction
  2. 4.1 Economic development (notes)
  3. 4.1 Economic development (questions)
  4. 4.2 Measuring Economic Development (notes)
  5. 4.2 Measuring development (questions)
  6. 4.3 The role of domestic factors in economic development (notes)
  7. 4.3 The role of domestic factors in economic development (questions)
  8. 4.4 The role of international trade (notes)
    1. Role of international trade - introduction
    2. Trade problems (LDCs)
    3. Problems - over-dependence on primary products
    4. Price volatility of primary products
    5. Consequences of price volatility
    6. Price increases can also be problematic!
    7. Price volatility case study - tomatoes
    8. Price volatility case study - copper
    9. Trade strategies for growth and development
    10. Import substitution
    11. Import substitution case study - sorghum
    12. Export promotion
    13. Export promotion case study - Thai toy industry
    14. Trade liberalization
    15. The role of the World Trade Organization
    16. Background information
    17. The Doha round
    18. Case study - trade sanctions
    19. Bilateral and regional preferential trade agreements
    20. Case study of a bilateral preferential trade agreement
    21. Case study of a multilateral preferential trade agreement
    22. Some background reading
    23. Diversification
    24. Case study - diversification
    25. Diversification in Malawi - video
    26. Some background reading
  9. 4.4 The role of international trade (questions)
  10. 4.5 The role of Foreign Direct Investment (FDI) (notes)
  11. 4.5 The role of foreign direct investment (questions)
  12. 4.6 The role of foreign aid and multilaterial development assistance (notes)
  13. 4.6 The role of foreign aid and multilateral development assistance (questions)
  14. 4.7 The role of international debt (notes)
  15. 4.7 The role of international debt (questions)
  16. 4.8 The balance between markets and intervention (notes)
  17. 4.8 The balance between markets and intervention (questions)
  18. Print View

Syllabus: With reference to specific examples, evaluate each of the following as a means of achieving economic growth and economic development.

(b) Export promotion

S:\pictures\economics_business\coal3.jpgThe majority of trade generated by the less developed economies goes to the developed world.

Less developed countries seldom trade with other less developed countries (they are probably trying to sell the same things). Exporting to the more sophisticated markets of the developed world, forces them to satisfy higher quality and health and safety standards to ensure their goods are internationally competitive.

Trade encourages information and technology transfers from more developed to less developed economies, resulting in higher productivity in less developed countries.

Being involved in export trade also promotes the ending of domestic protectionist policies.

Domestic industry are forced to become competitive and not hide behind protectionist barriers. Resources will flow to those industries that have a comparative advantage. These tend to be labour intensive and low technology industries. In the early stage of diversification, government can offer incentives to business to switch away from commodity exports and into manufactured goods (cf Dilma´s incentives for foreign companies to locate factories in the North of Brazil).

Export-led demand can be an important source of growth for developing countries in the early stages of their development, particularly given their reliance on primary exports (see earlier in this section). However, countries may also try to export manufactured goods as a growth strategy. This is often termed an outward-oriented strategy.

Much of the growth and development associated with the Asian Tiger economies was fuelled by export promotion, which had a number of benefits:

  • Comparative advantage - resources are used more efficiently by replacing imports with domestic goods.
  • Increased investment - outward-oriented policies may help encourage inward investment and therefore improve domestic productivity.
  • Economies of scale - the increased sale of exports may help raise the domestic level of production and enable the country to gain from economies of scale and lower their costs of production.(Check-out Infant Industries argument)
  • Increased employment - increased production should help boost the domestic level of employment.
  • Greater equality of income distribution - increased demand for labour will help boost wages in a developing economy and this should help to make income distribution more even.
  • Increased competition - an outward-oriented strategy will expose the country to the full weight of international competition. Domestic producers may struggle initially to compete, but productivity will rise much faster than if import substitution policies are followed.

However, the governments of less developed countries may regard these outward-oriented policies as too risky for their own industries and prefer to erect protectionist barriers, especially if opening up markets to foreign competition is deeply unpopular with the population. Countries adopting outward-oriented policies have often face civil unrest as a result.

Note the command word EVALUATE included in the syllabus statement so a Data Response Qd could be about this

For example:

Nov 2011

Using information from the text/data and your knowledge of economics, evaluate China’s export-oriented growth and development strategy.                                                                            [8 Marks]