Topic 7.

Export Promotion and Stimulation Policy

Export

Promotion and Stimulation Policy comprises the amount of measures and regulations adopted by the state and enterprises that regard the boosting of exports of the respective country Types of measures 1. promotion 2. stimulation Promotion policy The main objective is to influence the potential foreign buyers to purchase some products that are or will be available shortly for export. Macroeconomic measures: 5 forms 1. Negotiation and signing of trade and navigation treaties, commercial and payments agreements & international economic cooperation agreements or other economic conventions (MFN or NTC) They create the legislative bases of trade flows Ensures the continuity and stability of trade flows. 2. Taking part at international fairs and exhibitions and organizing such events in its own country, with international participation. This leads to a better knowledge and more information regarding partners from different countries (the needs of customers and the level of competition) 3. Commercial representation in partner countries: opening commercial agencies and representations abroad 4. Offering information and orientation services for foreign clients, offering consultancy and specialized assistance for clients. 5. Different types of external advertising in order to advertise the export products. Export stimulation policy Objectives: the competitiveness of exported goods Increasing the degree of interest of exporters and producers (stimulating) Global increase of exports (structure and geographical distribution) Stimulating and promoting new exports Increasing the existing exports 4 categories of Export Stimulation measures 1) budgetary; 2)fiscal; 3)financial-banking; 4)currency. Budgetary measures Direct export subsidies Direct export bonuses (bounties) Indirect export subsidies 1.1 Direct export subsidies

 Are the amounts of money given by the state to firms to encourage their exports , in case when their production costs nearly equal the prices for the products on the international market or are even higher than these. Are given selectively: For the branches of national interest for the national economy (strategic, top and infant branches, or br. In recession): To prevent loosing export markets internal socio-economic disequilibrium in DC, are subsidized declining branches that are sensitive to foreign competition agriculture = the most subsidized sector contradictions between USA, EU, Latin America, Australia Exp. Subsidies produce direct and indirect effects on trade balance and the structure of the national production In short run: increase of export incomes Trade balance and balance of payments equilibrium In the long run Positive effects: on the structure of the national production, if the subsidies were directed towards modern and dynamic branches incorporating technological progress Negative effects: if there were subsidized the branches in recession. 1.2 Direct export bonuses Are amounts of money given by the state to the exporters: For big export volumes or for the export of products of high importance for the national economy. The goal of export bonuses is not the increase of the productivity, but the increase of the volumes of exports on specific markets (influences the structure and the geographical distribution of exp.) 1.3 Indirect export subsidies refer mostly to small and medium enterprises. They can be in the form of: Informational facilities given by the state, Specialized technical assistance given to the exporters, Marketing researches and surveys for firms ( free or at low prices), Offering facilities for participating at international fairs and exhibitions, Organizing advertising campaigns abroad for exported products, The state covers a part or all of these expenditures and indirectly influences positively the export of some firms (reducing the costs) Fiscal stimulation measures Objectives: the competitiveness of exports as a result of reducing the taxes and duties for exports Increasing the net gains of the exporters 2 Forms 2.1 Fiscal facilities given for the exported goods In the form of exemption, reduction or returning of duties applied on goods circulation. Are given selectively importance of the export for the: Improving the structure of the exports Creating new work places Are directly related to the degree of processing of exported goods. 2

 ex: imports that will be incorporated in goods that are to be exported will be exempted from customs duties DRAW BACK 2.2 Fiscal facilities given to the exporters can be exemption or reduction of income tax from exports in the forms of: Exemption/reduction of the tax payments; Reduction of the taxable income (reduction of the base of taxation); Non-taxable funds Financial-banking export stimulation measures 3.1. Export Credits Stimulate the exports of high value and big quantities 4 forms 3.2. Export credit guaranty and insurance An instrument of determining the exporters to sell on credit 2 forms 3.1.1. Buyers credit Is given directly to the importer by a financial-banking institution from the exporters country Due to high crediting capacity of banks, they are very spread. 3.1.2. Suppliers credit Given directly to the importer by the exporter Used in the case of low value exports and on short terms. 3.1.3. Credit lines Is a complex form of buyers credits. It can be opened by a financial institution from the exporters country in the favour of a bank, financial institution from the importers country. Are based on intergovernmental agreements between exporting and importing countries. Governments engage to guarantee the credits given to the importers. Are issued for long periods of time, The value of the contract should be higher than a minimum established limit. (issued in installments) 3.1.4. Assistance credits Are given by some governmental agencies from developed countries To developing countries, that constitute an economic, political or military interest for the crediting country For long periods of time and in favorable conditions (low or zero interest rate) Are based on agreements signed between crediting and debiting countries, that stipulate: Credits would be used (wholly or partially) to buy goods and services from the crediting country. 3.2.1. Credit insurance For the suppliers credit Covers the risk of the exporter of not receiving the payment at the due date (maturity). The insurance is made by a banking institution from the exporters country. 3.2.2. Credit guarantee Is done for buyers credit By a banking institution from the importers country, that assumes the responsibility to pay the merchandise to the crediting bank from the exporters country in case if the importer will not be able to pay it. 4. Currency export stimulation measures

 By the means of these measures is increased the export competitiveness by reducing the foreign prices, and also by increasing the income of exporters expressed in national currency. Have an immediate efficiency. 2 Forms: 4.1. Currency bonuses Indirect bonuses given at the exchange of foreign currency in national one at a better exchange rate than the official exchange rate (bonus exchange rate) Are given selectively: depending on type of merchandise, geographical zones or countries. 4.2. National currency depreciation Stimulates to a certain extent, the export of merchandise when the decrease of the exchange rate of the national currency is made at a higher speed than the decrease of the internal purchasing power of this (meaning the inflation rate). Is an artificial way of increasing the competitiveness of exports. Offer the possibility for exporters to reduce the prices on the international market without decreasing the gains in national currency, currency dumping. These measures are efficient only in the short-run and when the demand for the exported products is elastic.