Part 7 - Export promotion Flashcards
Historical development of Export Promotion Agencies (EPAs):
- Foundation of first EPA in Finland in 1919.
- Famous example: In 1985, the Bolivian President saw increased exporting activity and the establishment of an EPA as policy to stabilize the Bolivian economy, suffering from hyperinflation “export or die.”
- Today, EPAs in over 100 developing and developed countries.
Export promotion agencies (EPAs) usually offer:
export promotion programs, i.e., a set of activities to help firms overcome internationalization obstacles.
The main objective of EPAs is to
help exporters to understand and find foreign markets for their products.
Four broad categories of services:
- Country image building
- Export support services
- Marketing (e.g., trade fairs, exporter and importer missions, follow-up services offered by representatives abroad).
- Market research and publications
Example Country image building
(e.g., advertising and promotional events).
Example Export support services
(e.g., exporter training, technical assistance, capacity building, including regulatory compliance, information on trade finance, logistics, customs, packaging, pricing).
Example Marketing
(e.g., trade fairs, exporter and importer missions, follow-up services offered by representatives abroad).
Example Market research and publications
(general, sector, and firm level information, such as market surveys, on-line information on export markets, publications encouraging firms to export, importer and exporter contact data bases).
There are two main economic rationales for EPAs:
- EPAs assist domestic firms to overcome asymmetric information. Note that firms would not have an incentive to share costly gathered information about a foreign market with other competing firms (e.g., gather information, cultivating contacts, establish distribution chains).
- EPAs lower the fixed costs of entering a foreign market for domestic firms.
How governments use general economic diplomacy?
Governments use general economic diplomacy, relying on international relations through permanent foreign missions such as embassies and consulates or state visits in order to promote international trade abroad
Should state visits foster trade, what would we expect ?
we would expect a positive β4-coefficient(e.g., because firm and industry representatives join)
Main explanatory variable of interest:
Visit ijt is a dummy variable being one, if a head of state of country I has paid an official visit to country jin year t, or zero otherwise.
Conclusion of Visits by Heads of States (Nitsch, 2007)
- not all visits are alike, state visits are more formal and more likely to build bilateral relationships for trading
- overtime the oficial visits became more frequent
- some countries have more visits than others, for example France has more visits.
Rose (2007) - main explanatory variable of interest:
Embassies ij is the number of embassies, consulates and foreign missions that country I has in country j.
Data gathered by Rose on foreign missions:
• some countries have more missions abroad than other countries
Ferrguson and Forslid (2019) return to the trade-effect of embassies:
- It has a couple advantages over the other 2 studies. Best study in the area right now.
- Compare firm-level export activity of Swedish and Norwegian firms.
- Exploit opening and closure of embassies, which usually happens for budgetary reasons, geopolitical reasons and, to some extent, bilateral economic relationships.
- Sweden: 15% of staff employed with explicit task of export promotion.
What effect the studies tend to find regarding international trade? explain each study.
The studies on general economic diplomacy tend to find positive effects on international trade:
• Nitsch (2007): Official state visits are on average associated with higher exports between 8 and 10 percent.
• Rose (2007): The first embassy more than doubles exports and every additional embassy increases exports by 6 to 10 percent.
• Ferguson and Forslid (2019): The number of exporters increases by 4 to 6 percent due to a new embassy (except for first quartile of exporters, not for smallest exporters)
What Head and Reis study documents?
Head and Ries (2010) document that more important trading partners receive more often high-profile Canadian trade mission, but trade volumes are not further boosted by these visits (insignificant effect of the Canadian trade missions).
What can we conclude about general economic diplomacy based on the studies we analyzed?
There is at least a very robust positive co-relationship between these sources of General Economic Diplomacy and international trade for many of these sources of ecumenic diplomacy.
Are diplomatic means used to promote international trade?
It is not unusual that diplomatic means are also used to promote international trade.
Do embassies or state visits influence trade flows between countries?
Recall that embassies or state visits might influence the bilateral trade flows between countries.
When and for which case was that statement given?
“We will take corresponding measures to make the relevant countries realize their mistakes.”
Official press statement by a high Chinese public representative in the forerun of a potential reception of the Dalai Lama by U.S. President Obama in 2010.
Dalai Lama Background:
- The “Tibet Question” relates to the political status and potential independence of Tibet from China, which is perceived by China as an internal affair.
- The leader of the Tibetan community, the 14th Dalai Lama, travels frequently internationally.
- If a country grants the Dalai Lama an official meeting with a high representative, China clearly voices its displeasure about that.
Study about Dalai Lama Effect was done by:
Fuchs and Klann (2013)
