Domenica, 19 Settembre 2010 13:06

Brics export

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Export orientation is one of the most important strategy in the economical politic system of a country. From exportations depend the increasing of GPL and the economic growth. Also we have to consider a second important point on this paper: export orientation could improve the growth of a country only if the Government has implemented many reforms in different ways: economy, laws, fiscal, politic and social system. Why we can affirm that a politic centered in exports could increase the country's growth? There are many answer to this question and we have observed many of them also during our studing about the Brics.

Many countries, like China, do not have a sufficient domestic consumption. So they can find in exportations a way of success. China is a country with high population density but is not able to absorb and consume its whole production. So the Government has focused on exports, as we can understand in the text and figure below [for references see referrals after the figure 9]

“The low age dependency ratio and a large rural population in China imply a small domestic market. Accordingly, the excess-supplied manufacturing goods have to sell abroad. This process was accelerated after China joined in the WTO and fully integrated itself in the world economy. This is clear in Figure 9 that presents China’s export and import data for the period 1950-2007.”


[Source: Labor, Demography, and the Export-Oriented Growth Model in China Yang Yao1, Miaojie Yu2 - National School of Development (NSD) & China Center for Economic Research (CCER) Peking University, China, July 31, 2009 page 13]

Instead, Brazil has a population of 160 million people and is able to concentrate more and distribute their production has therefore more likely to develop an engine for domestic consumption. An export policy allows a country to go outside its boundaries and to focus on products that boast a level of competitiveness and efficiency as to gain market share.

In this way a state can obtain a price leadership or product in a market. Following the economic theory of comparative advantage, it can be argued that state A specializing in the production of cars and a state B specializing in rice cultivation, can earn from a focused export policy considerable economic success. State A can enhance the excellence as a leader in the production of tecnology without investing in self-cultivation of rice that it can acquire from B. 

These comments show another strong point to support the view that exports are a source of growth for a country: an intelligent policy can ensure the development of best practice production, expansion of the production potential is also high standards of living for the population (higher is the gross domestic product, the greater the guarantee of welfare, employment and wages.


[Source: International economics. Andreas Freytag and Sebastian Voll, “Combat Protectionism – the only chance for emerging economies to become a major player”, page 99]

The increase in current assets and gross domestic product determined by exports has two consequences: an increased entry of foreign capital both for the purchase of exported goods and for investment in the territory and the opportunity for local companies to expand with new offices abroad. See the example of China focused on export: the Chinese acquires foreign firms already technologically structured because it does not have the technology in-house (just to cite one case, remember the acquisition of Volvo and Hammer in automotive industry). 

Another factor is the encouragement of local businesses which, thanks to funds earned from exports can grow and develop. In this way it is possible to create new start up in the country and to test new business ideas. The growth through foreign trade, however, may not be in a "spontaneous" way only but must be considered the result of internal and external factors that affect the territory.

The internal means are all measures taken by the government so that economic growth will find fertile ground on which to take root. The path of laws, reforms (tax, legal, economic, social and political) that have characterized all the BRICS countries, to prepare the country to the introduction of the free market were crucial.  

But encouraging the development of foreign trade have also contributed external factors such as the conventions. Brazil and Argentina have created Mercosur to promote exports with the neighboring regions (Paraguay and Uruguay). Another important system is represented by the WTO which sets rules to boost exports. As we saw in the case of China, access to the WTO, preceded by many internal reforms, has allowed exports to grow due to the specific policy on trading, currency, etc.  

The agreements between states are both a cause both an effect of an export policy. This is an effect because the states have a strong incentive to initiate arrangements for international trade and to ensure the rules but also the benefits to member countries. The agreements are necessarily a cause because the states that apply a policy-oriented exports should have reached a minimum stage of development for adhering to international conventions. The presence on the territory of a path of economic growth, regulatory, legislative, fiscal and social is the essential step to set an economic policy geared to export products, both to determine substantial growth. Therefore if the Government has created a path of radical reforms, has already built a solid foundation for anchoring economic policy options beneficial.

TB 3 Marzo 2010

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