Low price elasticity meant that any efforts by developing countries themselves to expand exports through increased investment or enhanced productivity would lead to a sharp decline in primary product prices, resulting in reduced export revenues.
Calculations by Larry Westphal show that when the economy-wide implications of all interventions are considered, the policy regime exhibited a slight bias in favor of exports relative to what would have prevailed under free trade.
Over the same period, the share of manufactures exports in the total exports rose from 21.9 percent to 62.3 percent.
Because primary product exports performed poorly during the early 1960s, total exports also give the misleading impression that exports were unimportant to the shift in the growth rate beginning in 1963.
The pull effect of export incentives works not just on exports but on domestic sales of export products as well.
Second, as Bhagwati has pointed out, improved export incentives such as duty-free entry of inputs used in exports, exemption from indirect taxes, and elimination of overvaluation of the exchange rate enhance the profitability of not just existing export products but also potential export products.
Sufficiently large export incentives may turn many nontraded but tradable products - and even imported products - into export products.
https://www.cato.org/publications/economic-development-bulletin/debunking-protectionist-myths-free-trade-developing-world
Calculations by Larry Westphal show that when the economy-wide implications of all interventions are considered, the policy regime exhibited a slight bias in favor of exports relative to what would have prevailed under free trade.
Over the same period, the share of manufactures exports in the total exports rose from 21.9 percent to 62.3 percent.
Because primary product exports performed poorly during the early 1960s, total exports also give the misleading impression that exports were unimportant to the shift in the growth rate beginning in 1963.
The pull effect of export incentives works not just on exports but on domestic sales of export products as well.
Second, as Bhagwati has pointed out, improved export incentives such as duty-free entry of inputs used in exports, exemption from indirect taxes, and elimination of overvaluation of the exchange rate enhance the profitability of not just existing export products but also potential export products.
Sufficiently large export incentives may turn many nontraded but tradable products - and even imported products - into export products.
https://www.cato.org/publications/economic-development-bulletin/debunking-protectionist-myths-free-trade-developing-world
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