Advantages of Export Promotion

Advantages of Export Promotion

• No limitation on production due to the large world market
• Increased domestic production, leading to export-led economic growth
• Creation of employment opportunities and increased income and standards of living
• Cost and efficiency considerations based on comparative advantage

Disadvantages of Export Promotion

• Lack of competition due to incentives and subsidies, leading to unsustainable businesses
• Retaliation from other countries with tariffs and quotas
• Hiding the real cost of production, making it difficult for firms to compete in an open market
• Possibility of being seen as dumping, leading to higher tariffs and reduced exports

Import Substitution

• A trade policy that encourages the replacement of imports with locally produced goods and services
• Methods include:
  • Tariffs (custom duties)
  • Quotas (limiting the number of goods and services that can be imported)
  • Subsidies (reducing costs of production for local producers)
  • Exchange control (limiting foreign exchange available to importers)
  • Physical control (banning or specifying quality control standards for imported goods)

A Desirable Mixture of Trade Policies

• Countries often use a mixture of trade policies to achieve a balance between imports and exports
• Examples include:
  • Export promotion vs import substitution
  • Protectionism vs free trade
  • Regional trade blocs, such as Custom Unions, that combine free trade and protectionism

Globalization and Economic Integration

• Globalization aims to increase world production through free trade
• Examples of economic integration include:
  • Free Trade Areas (e.g. Custom Unions, Common markets, and Economic and Monetary Unions)
  • Preferential Trade Agreements (e.g. WTO, AGOA)

South Africa's Trade Protocols

• South African Customs Union (SACU)
  • Members include Botswana, Lesotho, Namibia, South Africa, and Swaziland
  • Negotiate jointly on Free Trade Areas (FTA) with the rest of the world
• Multilateral Monetary Area (MMA)
  • A form of monetary union between South Africa, Botswana, Lesotho, and Swaziland
  • Namibia joined the monetary union, replacing the Common Monetary Area (CMA)
• South African Development Community (SADC)
  • Aims to develop the region into an economic and monetary union
  • 97% of imports from SADC qualify for duty-free access to SA
• African Union (AU)
  • Aims to develop the continent into an economic and monetary union
  • Nepad (New Partnership for Africa's Development) is the implementation unit of the AU
  • First phase is to develop 5 regional Free Trade Areas (FTA)
• European Union (EU)
  • The European-SA Free Trade Area (FTA) entails the freeing of tariffs
  • Trade, Development and Cooperation Agreement was implemented in 2000
• Mercosur-SA
  • A Framework Agreement was signed in 2000 to expand trade and create a free trade area
  • The agreement will eventually include all SACU members
• African Growth and Opportunity Act (AGOA)
  • The USA implemented the Act in 2001, granting duty-free exports to the USA from some African countries
  • The Act was reviewed in 2015 and will be further reviewed in 2025
• Japan-South Africa's Partnership Forum
  • Bilateral trade between Japan and South Africa has been expanding since 1992
  • Japanese investments in South Africa are mostly in the automotive, metals, and chemicals sectors
• BRICS (Brazil, Russia, India, China, and South Africa)
  • SA joined as a full member in 2011, joining four of the seven biggest economies in the world
  • BRICS comprises countries that will be the pivot of the global economy in the coming decades

Learn about the benefits of promoting exports, including increased domestic production, employment opportunities, and no limitations on production. The quiz covers the reasons for export promotion and its impact on a country's economy.