Chapter 2: Where and how to start?
2.1 Planning to Export
An exporter should make proper guidelines to make things run smoothly. She/he must be well aware of the following things:
- Purpose of exporting
- Activities to be taken care of before exporting can start
As an exporter, one must never think that he or she is alone. An exporter gets complete and earnest support from the Government of the country. Wondering how? Below we have listed the policies followed by the Governments of various countries to support Exports.
2.2 Ways in which the government of the country tries to boost exports
Every country aims to reduce its trade deficit. To achieve the target, countries use a policy called Protectionism.
2.3 What is Protectionism?
To speak in simple words, the way or process of protecting the native domestic industries of a country from foreign competitors by levying (charging) taxes on imports.
The process is generally followed by increasing the import tariffs on foreign goods and subsidizing the domestic goods to increase their demand in the domestic market. What could be the problem with this policy then?
The problem with this policy is that, when one country follows this method, the other countries do the same. As a result, the final result becomes ineffective and we reach a situation called the Trade War. What is Trade War?
An economic dispute between two or more countries arising due to extreme protectionism. Trade Wars are not good for the economy and hampers economic growth.
Unlike other wars, Trade wars do not have the use of missiles or tanks but they can be equally destructive.
To stop wars, treaties are signed between countries. To stop Trade Wars, Trade agreements are made. What are Trade agreements?
2.4 Trade Agreements
Governments of the two countries undertake agreements to boost the economic exchange between countries called Trade agreements. For a long time, countries have believed in Bi-lateral Agreements (agreements between two countries) only.
In 2015, the Obama Government had developed the Trans-Pacific Agreement to boost business between more than one country. However, the Trump Government bailed out of it in 2017 and the agreement was signed without the United States as a partner.
2.5 Lowering the value of the currency
Lowering the currency value makes export prices to importing countries comparatively low. This is done primarily with the help of Central Banks by lowering the interest rates. However, this step is not well received by the importing country and may lead to a Currency War. Again what exactly is Currency War?
2.6 Currency War
Countries that follow the policy of reducing the valuation of their currency to gain a trade advantage over importing countries by dropping the exchange rate of their currency is said to be in the situation of a currency war with the importing countries.
To keep all the unfriendly situations in control and draw up agreements to facilitating export, many institutions have been set up.