The Rewards and Challenges of Export-Led Strategies

Abstract

Abstract. The economic achievements of post- WWII Japan and Germany, the success of the Asian Four Tigers in the 1970s and 1980s, and the impressive growth of China, after adopting an export-led strategy in 1978, have caused many nations to view the export-ledmodel as the fastestroute to economic growth and financial stability. As a result, many governments started to promote and protect their countries’ exports,and mix politics, diplomacy and trade as well as seek greater access to friendly countries’ markets. Export-led development strategies, however, carry some risks, such as increased dependence on foreign markets and political forces that are beyond the exporters’ control. Global market forces, at times, cause export-dependent countries to have a sudden decline in their export revenues as the oil exporting countries have been experiencing as a result of a sharp decline in the world price of crude oil since 2014. This paper examines the main benefits, costs, and risks associated with export-led strategies, particularly as adopted by developing countries. It further explores the motives and risks faced by individual companies as they sell some of their products outside their home markets.

Keywords. Import substitution, Trade liberalization, Infant industries, Export promotion, Foreign investment, Export infrastructure.

JEL. F10, F16, F17, F41.