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Export-oriented industrialization

Development strategy based on global trade / From Wikipedia, the free encyclopedia

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Export-oriented industrialization (EOI), sometimes called export substitution industrialization (ESI), export-led industrialization (ELI), or export-led growth, is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage. Export-led growth implies opening domestic markets to foreign competition in exchange for market access in other countries.

However, that may not be true of all domestic markets, as governments may aim to protect specific nascent industries so that they grow and can exploit their future comparative advantage, and in practice, the converse can occur. For example, many East Asian countries had strong barriers on imports from the 1960s to the 1980s.

Reduced tariff barriers, a fixed exchange rate (a devaluation of national currency is often employed to facilitate exports), and government support for exporting sectors are all an example of policies adopted to promote EOI and ultimately economic development. Export-oriented industrialization was particularly characteristic of the development of the national economies of the developed East Asian Tigers: Hong Kong, Singapore, South Korea, and Taiwan in the post-World War II period.

Export-led growth is an economic strategy used by some developing countries. The strategy seeks to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets. By implementing that strategy, countries hope to gain enough hard currency to import commodities manufactured more cheaply elsewhere.[1] Export Agencies are formed in the process.

In addition, a recent mathematical study shows that export-led growth has wage growth being repressed and linked to the productivity growth of nontradable goods in a country with undervalued currency. In such a country, the productivity growth of export goods is greater than the proportional wage growth and the productivity growth of nontradable goods. Thus, export price decreases in the export-led growth country and makes it more competitive in international trade.[2][3]

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