A C T A U N I V E R S I T A T I S L O D Z I E N S I S FO LIA OECONOM ICA 17, 1982
Teresa Ratow ska *
EX PO RT PR OM OTIO N IN TH E CONTEXT O F TH E „N EW ” PR O TEC TIO N ISM
(S hort M acro-Econom ic C om m ent in th e F ra m e w o rk of D iscussion on D istrib u tio n System s)
1. SOME R EM A R K S ON PR O T EC T IO N AT TH E END O F TH E 70’S The p o stw ar tre n d in in te rn a tio n a l tra d e w as to w a rd s an in cre a singly m ore lib e ral system . H ow ever, m an y co u n tries have b een r e -ce n tly d e m o n stra tin g a sh ift in th e opposite direction. T his sh ift aw ay from liberalizatio n is a cause of serious concern.
The gen eral a rg u m e n t a g ain st p ro te c tio n ist tra d e m easu res is th a t th e y provide no rea l solution to th e u n d e rly in g problem s of th e p ro -tec ted in d u stry — an d th a t th e y ignore m ore crucial reaso n s — w h y th is or th a t b ran c h of th e dom estic in d u stry is „losing g ro u n d ” to fo-reign com petitors. P ro te c tio n en su res special tre a tm e n t fo r th e dom estic p ro d u cers of th e im p o rt com peting goods. T his m ay act to stim u la -te dom estic sales and p ro -te c t th e sh are of these in d u strie s in th e do-m estic do-m ark et. In tu rn , this b enefits lab o u r edo-m ployed in th e p ro tected in d u stry by p rev e n tin g layoffs and by m ain ta in in g th e w age level at an a rtificia lly high level. This a rg u m e n t for p ro te c tio n is a pow erful one connected w ith such socio-econom ic problem s as unem ploym ent. P ro tectio n m eans th a t re la tiv e ly in efficien t in d u strie s a re able to hold or a ttr a c t new resources, w hile th e econom y foregoes th e h ig h e r level of incom e and em ploym ent th a t w ould have gone to m ore e fficien t in d u strie s in th e absence of protection. T he m ost d iffic u lt problem w hich re su lts is th a t p ro tectiv e m easures once adopted ten d to beco-m e e n tre n ch e d as th e sectors th a t b e n e fit develop a vested in te re s t in p re v e n tin g th e ir rem oval.
* D r, I n s titu te of M ark etin g , U n iv ersity of Łódź (Poland).
T he system of p ro tection has also d ire c t adverse effects on th e ex p o rtin g co u ntry. I t reduces access to foreign m ark e ts so th a t e x p o r-te rs can n o t sh a re fu lly in th e b enefits of in r-te rn a tio n a l trade. W hile various ty p es of re stric tiv e tra d e actions have been ta k e n by a larg e n u m b er of countries, th e m ost im p o rta n t is w h a t has been going in the p rincipal in d u stria l nations, w hich a re th e w orld m ajo r tra d e rs: C ana-da, the EEC, J a p a n and the U nited S ta te s collectively rep re se n t about 60 p e r cent of to ta l w orld im ports. A stu d y 1 conducted on tra d e m easu -res adopted re c e n tly by m ajo r in d u stria l co u n tries show ed th a t such pro tectio n m easures have ten d e d to be co n c en tra te d in c e rtain in d u -stria l sectors: tex tiles, clothing, footw ear, steel, consum er goods, elec-tric al products, shipbuilding, c e rtain a g ric u ltu ra l and food p ro ducts (in p a rtic u la r — beef).
The tra d e actions adopted have affected th e sectors in w hich m a n j developing and p rim a ry goods producing co u n tries have an a ctu al or po ten tial com parative ad v antage and w h ere th e restric tio n s can se-riously affect th e ir scope for e x p o rt expansion and economic grow th. V arious ty p es of tra d e actions have been used recen tly , b u t w h a t is to be noticed is th e decreasing role of ta riffs (well know n as a classic in stru m e n t of protection), th e increasing re so rt to escape clause actions and c o u n terv ailin g d u ty and th e use of* n o n ta riff b a rriers.
The „new -com ers” in th e system of foreign tra d e control used in m a rk e t o rien ted econom ies a re various ty p es of b ila te ra l a rra n g e m e n ts th a t q u a n tita tiv e ly lim it tra d e and often rem a in outside th e fra m e -w o rk of ex isting in te rn a tio n a l ru le s 2, b u t a t th e sam e tim e, effectively elim inate risk. (This tre n d w as begun in th e te x tile sector in th e e a rly 60’s w ith th e A greem ent on C ontrol of T rad e in C otton Textiles). E xpe-rien ce w ith th e o p eration of b ila te ra l re s tra in t a rra n g e m e n ts — e ith e r u n d e r a m u ltila te ra l fra m ew o rk or on a p u re ly ad hoc b ila te ra l basis — suggests th a t such re s tra in ts m ay p erh ap s intro d u ce an elem ent of c e ta in ty in tra d e rela tio n s in th e sh o rt term . A ntidum ping and c o u n te vailing d u ty p rocedures a re considered as a form of pro tectiv e c o u n te r-action, a response to m easures tak e n b y ex p o rtin g countries. (These m easures are ta k e n ag ain st e x p o rts th a t m ay be subsidized or sold b e-low dom estic prices or cost). B ut because it is v e ry difficu lt to prove this — or even if so th en to calculate th e level of subsidy th e re is u su ally no equivalence b etw een prom otional e x p o rt actions and p ro te c -tive co u n teractio n s as th e la tte r a re usu ally m uch stro n g e r in th e ir
1 T h e R ise in P rotectionism , „ In te rn a tio n a l M on etary F u n d P a m p h le t S eries”, No. 71, W ashington D.C., J u ly 1978.
effect. M oreover, th e re a re no gen eral ru le s a n d /o r c rite ria d e te rm i-ning degree of du m p in g and subsidization.
A t th e end of th e 70’s th e issue of p ro tectio n m u st be considered as an in te g ral elem en t of th e w orld and n ational econom y. A n analysis of p ro tection m u st tak e into account a m u ltip lic ity of fac to rs — econo-mic, social, and political. In p a rtic u la r, re c e n t ex p erien ce suggests th a t p erh ap s th e m ost crucial facto r — and th e one m ost lik ely to in flu en ce policy choices to w ard pro tectio n — is th e e x te n t and d u ra tio n of u n e m -p loym ent in develo-ped countries. One of th e m ost fre q u e n tly cited arg u m e n ts is re la te d to im p o rt p e n e tra tio n — th a t is im p o rts as a p roportion of dom estic consum ption. If th is ratio rises suddenly, it m ay be considered as so-called m a rk e t d isru p tio n , in ju rin g do-m estic in d u stry . B ut th e n arises the n e x t ido-m p o rta n t probledo-m of e stablishing conditions of „ m a rk e t d isru p tio n ” and „dom estic in ju r y ” in th e im porting country. A nd once proved, if th e re a re to be safe- •guards for th e im p o rtin g co u n try , w h a t are th e d iffe re n t effects of p ro tectio n via suspension of a ta riff concession, th e im position of q u a n tita tiv e re stric tio n s or th e in stitu tio n of „ v o lu n ta ry e x p o rt r e -s tr a in t” ? W hat relevance doe-s th e p rin cip le of „non -d e-scrim in atio n ” have? Do th e legislative term s of „ o rd e rly m a rk e tin g ”, „ fa ir s h a re ”, „eq u itab le s h a re ” have a n y econom ic m eaning? T here a re m an y m ore such questions. T he w orld tra d e a t th e end of th e 70’s is in need of ab so lu tely new „code of good b e h a v io u r”. R ules and prin cip les w orked o ut 30 y ears ago can no lo nger be a p p ro p ria te now. T h a t is th e reason w h y th e re have been so m an y escape clause actions a n d exceptions to th e ru le s over rec e n t years. T he need to stre n g th e n th e G A TT fra m e -w o rk has com e to be in creasin g ly recognized, and has b een a tte m p te d in th e discussions of th e „ fra m e w o rk ” group in th e co n te x t of th e r e -c e n tly -con-cluded m u ltila te ra l tra d e negotiations. T h ere is a trem en d o u s conflict b etw een sh o rt-te rm in te re s t of tra d in g natio n s and th e b ro ad er objectives of prom oting g ro w th of th e w orld tra d e a n d income.
A nother problem is w h e th e r th e prin cip les of n o n d iscrim ination and recip ro city (on w hich th e w orld tra d in g system is fo rm a lly based) can w ith sta n d th e grow ing p ressu res of protectionism . A nd if so, w h a t is th e rea l base of rec ip ro c ity u n d e r th ese conditions?
The technical ingred ien ts ex ist fo r fu tu re changes in th e s tru c tu re of th e w orld tra d e com parable to a new in te rn a tio n a l in d u stria l rev o -lution. B ut it w ill be a te s t of effective in te rn a tio n a l policy w h e th e r or n ot th is p o ten tial w ill be r e a liz e d 3. The objective is to appro ach an optim al (or at least a second-best) correspondence b e tw e en optim al
tra d in g conditions and th e use of effective dom estic policy in str um ents. C onsidering th e possibilities of im p lem en tatio n of e x p o rto rie n te d s tr a -tegy, we m u st tak e into account th e situ a tio n (p resen t and p o tential) in developing countries.
A sig n ifican t new d evelopm ent is th e diversificatio n of th e e x p o rt base of developing co u n tries and th e challenge th a t th e y p re se n t in a n u m b er of new in d u stria l sectors.
T his developm ent has some no tab le fea tu re s:
— som e in d u strie s (steel, ships, electronics) have been b u ilt up in developing co u n tries m ain ly for e x p o rt m ark e t;
— th e incredible flow of m an u fa ctu red ex p o rts from developing co u ntries w as a consequence of e a rlie r in v estm en ts in th e in d u stria l sp h ere w ith th e financial, technical and m an ag erial enco u rag em en t of in d u stria l c o u n tries (unforeseen effect);
— th e g ro w th of e x p o rt capacity in developing co u n tries has also m ea n t th e g ro w th of th e ir im p o rt capacity.
M any developing co u n tries h ave been changing to a so-called ex p o rt su b stitu tio n stra te g y (prom otion of n o n -tra d itio n a l exports). A lready th e y a re able to e x p o rt a v a rie ty of p ro d u cts: th e tra d itio n a l labour in tensive goods (textiles, footw ear); im p o rt su b stitu te s tu rn e d e x p o rts (autom obile p a rts, bicycles, m otors); processed p rim a ry p ro d u cts (food- staffs); new lab o u r intensive goods (plastic articles, fu rn itu re ); in te r -m ediate p ro d u cts and co-m ponents (electronics, tools, co-m ponents of engi-nes, p a rts for m achinery, tra n s p o rt equipm ent) 4. A lthough te x tile s and clothing rem a in th e la rg e st single p ro d u ct group of exports, th e share of o th er m a n u fa c tu re d ex p o rts is increasing.
Besides re la tiv e facto r endow em ents, a n o th e r ex p la n a tio n of com -p a ra tiv e ad v antage — th e -p ro d u ct cycle — also suggests th a t th e list of goods w hich developing co u n tries can exp ect to m an u fa ctu re and e x p o rt on a com petitive basis w ill be c o n tin u ally expanding. The im p o rt of m an u fa ctu res from developing countries has been one of th e m ost d y nam ic e lem en ts in the w orld trade.
2. U.S. TRA D E POLICY V ERSUS PRO M O TIO N OF P O L IS H E X PO R T S U nited S ta te s tra d e policy is a good exam ple of sev eral of th e aspects of p rotectionism discussed in th e preceding section for various reasons:
— it includes m an y ty p es of p ro tectiv e m easu res and procedures;
— th e U.S. m a rk e t is r a th e r im p o rta n t fo r P olish exports, as th e U.S. is one of P o la n d ’s m ain tra d in g p a rtn e rs;
— tra d e policy in th e U.S. is r a th e r com plicated b u t still an open proced u re as ev e ry th in g is officially published. C rucial p rinciples and ru le of U.S. tra d e policy a re based on th e 1974 T rad e A ct w hich can be considered as a kind of codification of ex isting rules.
T h ere a re tw o elem en ts of th e U.S. tra d e policy w hich a re of g rea t in te re s t for Polish ex p o rts and th e ir prom otion: an ti-d u m p in g p ro cedu-re s and m a rk e t d isru p tio n clauses.
A ccording to A m erican opinion 5 Polish e x p o rte rs h av e som e d ifficu lties in recognizing these new p ro tectiv e devices and in u n d e rs ta n -ding re le v a n t legislation. And it happ en s th a t e x p o rte rs pay too m uch a tte n tio n to high level policy instead of observing w h a t is going on at th e firm level. V ery often Polish ex p o rts a re considered to cre a te u n fair com petition because of go v ern m en t subsidies and such ex p o rts a re m et w ith cou n terv ailin g d u ties and pro tectiv e m easures.
V ery im p o rta n t p ro tectiv e in stru m e n ts of th e U.S. tra d e policy are quotas w hich th e U.S. applies m ostly a g ain st fibers, tex tile s, and clo-th in g u n d e r clo-th e in te rn a tio n a l M ultifib er A rran g em en t. N o n ta riff b a-r a-rie a-rs such as h e a lth and technical sta n d a a-rd s a a-re less of an obstacle for Polish ex p o rte rs w ho have m ore experience in th is field.
As far as d um ping is concerned, th e re a re some d efinitions em ployed by th e U.S. courts w hich m ay be consulted on: u n fa irly low prices, price discrim ination, and th e so-called L F T V (le ss-th a n -fa ir-v a lu e- -im ports). The la tte r m ust cause in ju ry to th e m ark e t d irectly affec-tin g the im p o rt—com peaffec-ting producers. This d efin itio n of d u m p in g is stric tly connected w ith prices and exchange ra te s in c e n tra lly p lanned economies. F o r Poland, th e re a re no problem s connected w ith th e ex p o rt of ra w m ate ria ls as Poland also sells a t w orld m ark e t prices, b u t th ere is a crucial problem w ith m a n u fa c tu re s (including such considerations as calculation of costs on th e im p o rt side, processing and v a lu a tio n of im ported com ponents).
F o r w h a t reasons m ay Polish p ractices be conseq u en tly considered as dum ping? (Again from th e A m erican point of view). The reasons b e-hin d th is a re sev eral and include:
— overcom ing of b a rrie rs to m a rk e t e n try ;
— overcom ing of o th e r possible form s of discrim ination; — fu lfilm e n t of e x p o rt plans;
— re su lt of b ila te ra l agreem ents.
s T hese re m a rk s a r e b ased on a le c tu re giv en by P ro fe sso r P a u l M a re r a t th e I n s titu te of M ark etin g , Łódź, U n iv ersity , 2 A p ril 1979.
W hat m ay be suggested in th is case if ex p o rt-o rien te d s tra te g y is to be the goal for th e P olish econom y in com ing years? F irs t of all, econo-mic decisions m u st be based on efficient and ratio n al choices — a com bi-nation of c e n tral p references plus economic calculus. F u rth e rm o re , o th er essential m easures should be adopted including th e following:
1) A t least a second-best level of exchange ra te m u st be used to lim it th e sp h ere of protection.
2) A w id er use m u st be m ade of th e so-called tran sactio n al prices. 3) M arketing and d istrib u tio n services m u st be m ade m o dern and dynam ic.
4) T h ere should be less fea r on th e p a rt of producers of risk and m a rk e t d isru p tio n 6.
5) P rod u cers should com pete on a non-price b u t q u a lity basis — m ostly because of m ark e t req u irem en ts.
6) T here should be b e tte r and m ore in d u stria l co-operation (lik-o th e exam ple of B um ar-H arvester).
F or various reasons th e com eback of tra d e liberalization m ay be only w ishful th in k in g in th e n ear fu tu re as depreseed econom ic condi-tions continue to be th e ru le in m arket-econom y countries. T he w orld econom y a t th e end of th e 70’s is a changed one and should be seen in th e lig h t of increased protectionism by those plannedeconom y co u n -tries, such as Poland, w ishing to in te g ra te them selves m ore fu lly into th e in te rn atio n a l tra d in g system .
T eresa R a to w ska
PR O M O C JA EK SPO R TU W K O N T E K ŚC IE „NOW EGO" PR O TEK C JO N IZM U
A rty k u ł dotyczy b ard z o a k tu aln e g o p ro b lem u całej g o sp o d ark i św iato w ej i ekonom ik poszczególnych k ra jó w — tzn. system ów p ro tek cji. W spółczesny p ro -tek cjo n izm n ie m a w iele w spólnego z jego w y d an iem klasycznym . Z m ieniły się bow iem sto so w an e in stru m e n ty i zasady postępow ania. N ie je st to już jeden z w a ria n tó w p o lity k i hand lo w ej, ale in te g ra ln y elem en t sy stem u k ie ro w a n ia go-sp o d ark ą. W a rty k u le p rze d staw io n o zagadnienia, k tó re m ogą m ieć isto tn e z n aczenie dla g o sp o d ark i polskiej w sy tu a cji re a liz a cji s tra te g ii intensyw nego, p ro -eksportow ego rozw oju.
“ A n ti-d u m p in g p ro ced u res a r e u n d e rta k e n u su a lly only a fte r 10 p e r c e n t of th e m a rk e t sh a re has been o b ta in ed by im p o rte rs, w hich is r a th e r exceptional.
