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Export Led Growth

In: Business and Management

Submitted By energywellspent
Words 694
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Limitatations of export led growth
Export-oriented Industrialization (EOI) sometimes called export substitution industrialization (ESI) or export led industrialization (ELI) 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 this may not be true of all domestic markets, as governments may aim to protect specific nascent industries so they grow and are able to exploit their future comparative advantage and in practise 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 floating 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 Asian Tigers: Hong Kong, South Korea, Taiwan, and Singapore in the post-World War II period.
[edit] Limitations
Despite its support in mainstream economic circles, its success has been increasingly challenged over recent years due a growing number of examples in which it has not yielded the expected results. EOI increases market sensitivity to exogenous factors, and is partially responsible for the damage done by the 1998 economic crisis to the economies of countries who used export-oriented industrialization. It is also criticized for its lack of product diversity as economies pursue their comparative advantage, which makes the economies potentially unstable if demand for their specialization falls; this is

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