A Model of Regional Growth —Rate Differences on Kaldorian Lines. We now turn our attention to the experience of Pakistan with each of the two mentioned trade strategies. In actual practice, the high degree of protection lowers efficiency and is not conducive to optimum use and allocation of resources. While this is true, 10 Bashir, Z. On the basis of his empirical findings about the export-potential of the Indian economy, he concluded that it was not easy to meet the increase in import requirements in raising the rate of economic growth by any other means but export promotion. Strategic business development helps in improving the trade practices, and reduces deficits in the trading activities.
This pragmatic view is not dependent on the theoretical validity or otherwise of the liberalisation argument. Imports also offer more competition for local goods, keeping local producers on their toes. This is particularly important for many developing countries that are both very poor and small. The import- licensing was used so as to regulate the quantities of some essential goods and raw materials that could be imported and accordingly licences for import quotas were issued by the Government. In Latin American Adjustment: How Much Has Happened? Import-Substitution: For at least up to 1980, India adopted a trade strategy of import substitution.
It is also worth mentioning that the expansion in exports of developing countries which have used export-promotion as a strategy of growth has not been confined to primary products such as fuel and agricultural products food, agricultural raw materials. Above all, several studies have found a highly positive relation between growth of national income and expansion in export. These units will quality for all benefits applicable for special economic zones. The Journal of Economic Perspectives, 6 1 , 69-85. Given the inelasticity of import basket, only viable option available for the government is to diversify exports. The widespread abandonment of import-substitution policies in recent decades should, therefore, not be surprising. Why at times countries adopted different strategies of international trade? The foreign trade multiplier, developed by Roy Harrod, indicates that net exports have a positive effect on the level of activity.
Second, policy of import substitution underestimated the import-intensity of import substitution process itself. Tandon made a large number of recommendations for export-promotion in January 1991. It is more than pure investment, however, as the foreign component of this investment traditionally brings with it not only scarce capital but also a transfer of technology, management skills, organisational skills, and entry into highly competitive international markets. As shown in Table 26. As a matter of fact, there has been significant change in the composition of exports of developing countries towards manufacturers. Structural Change and Economic Dynamics 11: 95-109 2.
Unfortunately, Pakistan has never had a consistent, coherent and well-articulated trade policy. Protectionist barriers were erected mainly to help support domestic industries but also to help some firms which enjoy high profits by being insulated from outside competition. There is also ample evidence that producers in these respond favourably to economic incentives. Exim scripts entitled exporters to import a certain amount of materials and machinery for expanding exports. Industry and Trade in Some Developing Countries: A Comparative Study. The net impact of the mentioned reforms was inadequate as disparaging anti-export bias in the face of export taxes persisted Fig 2 and the terms of trade eventually declined in the later part of the decade Fig. It primarily demonstrates the usefulness of the input-output I-O matrix method, which is widely used as one of the operations research application methods, in such estimation.
The Duty Drawback Scheme: In this important scheme of providing incentives to exporters customs duty and excise duty paid on inputs which are used for production of exports are reimbursed to exporters. It has been estimated that above two schemes would not involve much loss of revenue for the government. What Washington Means by Policy Reform. For the process of creative destruction to work, there must be destruction as well as creation. Similar variations are also seen in the efficiency and integrity of their governments, official agencies, their financial systems, and so on. The new foreign trade policy has taken important measures to diversify our export market and offset the inherent disadvantage for our exporters in the emerging markets of Africa, Latin America, Oceania such as credit risk, higher transaction costs etc.
These measures proved successful as manufactured exports increased at a compound growth rate of 26 percent per annum in current rupee term in early 1970s. Domestic producers would rather not face competition from imports, so they would prefer a trade policy that outlaws imports. However there are a number of respects in which his arguments is naive, incomplete, or goes to far and his analogy with what doctors do is misplaced. International trade means that people in developing countries have access to products that might not otherwise be available. First, the policy makers- underestimated the possibilities of expansion in exports.
Birth rates in the poorest counties are higher, so poor economies must produce double to simply keep up with the growing population. In any event, the resources used in these activities could have been devoted to productive enterprises and hence represent additional economic waste over and above the usual deadweight loss of protection. The annual growth in exports and imports during these two years has been 13 percent and 27 percent, respectively. The main reason for this is that, the expansion of labour-intensive exports generates employment opportunities, while import-substitution policies often result in capital-intensive production processes that displace labour. Comparison of the Two Strategies : 1.