The question is:
Should governments take any steps to boost exports?
Aug 6th 2010 by R.A. | The Economist
What actions, if any, should countries with persistent current account deficits take to boost net exports? Is the use of any form of industrial policy ever justified?
Should governments take any steps to boost exports?
Aug 6th 2010 by R.A. | The Economist
What actions, if any, should countries with persistent current account deficits take to boost net exports? Is the use of any form of industrial policy ever justified?
No, they should focus on domestic efficiency
John Makin our guest wrote on Aug 6th 2010, 12:22 GMT
COUNTRIES with persistent current account deficits should not take overt policy steps to boost net exports short of broad measures to improve efficiency like lower marginal tax rates levied on a broader tax base—the opposite of current US policies. Of course a rapid slowing of US growth coupled with a weakening dollar will—given reduced US absorption—boost net exports provided that other countries—like China—do not intervene to keep their currencies from appreciating while using dollars purchased to finance purchases of US assets—thereby prolonging large current account deficits for the US.
Industrial policy per se is usually a euphemism for export subsides—a distortion of resource allocation that cuts economic efficiency and thereby is a negative sum game.
John Makin our guest wrote on Aug 6th 2010, 12:22 GMT
COUNTRIES with persistent current account deficits should not take overt policy steps to boost net exports short of broad measures to improve efficiency like lower marginal tax rates levied on a broader tax base—the opposite of current US policies. Of course a rapid slowing of US growth coupled with a weakening dollar will—given reduced US absorption—boost net exports provided that other countries—like China—do not intervene to keep their currencies from appreciating while using dollars purchased to finance purchases of US assets—thereby prolonging large current account deficits for the US.
Industrial policy per se is usually a euphemism for export subsides—a distortion of resource allocation that cuts economic efficiency and thereby is a negative sum game.
Comment