Many
export-based models have been formulated to present a macro-dynamic view of how
an economy’s economic growth can be determined by export expansion.
The classical trade theorists
namely: Adam Smith, David Ricardo and John Staut Mill maintained that foreign
trade excepts strong beneficial effect on trading countries. Adam Smith
maintains that the existence of the use of excess resources to produce a
surplus of goods for exports thereby renting a surplus productive capacity that
would otherwise be unused therefore, trade promotes efficiencies in
international allocation of resources (Myoung, 2005).
Most of less developed countries are
shifting to an outward looking policies of export promotion. This is as a
result of the numerous problems and defects of the import-substitution process
and in the context of implementing International Monetary Fund (IMF), World
Bank Economic Reform Programmes. Export promotion activities have been pursued
in order to diversify the economy, generate employment, accelerate economic
growth and increase the foreign exchange earnings.
An export-promotion strategy is an
industrialization and trade strategy, which encourages production for export.
It connotes a policy that is neutral in its bias between production for export
and that of domestic consumption. Export-promotion implies a regime in which
incentives for exports an import substation activities are equalized. Export
oriented strategies are based on concepts of economic emergency and
competitiveness in the world market. The policy most closely associated with an
export-oriented as part of the monetary policies, trade and payment policies
wages policies and exchange rate policies, tariff reforms and export-promotion
policies. Trade policy, one of the policy instruments of the World Bank–IMF’s
Structural Adjustment Programme (SAP) is trade liberalization. By trade
liberalization, we mean the gradual removal of restriction on trade (Gbosi,
2001).
These emphasises on liberalization
of foreign and domestic trade, while removal of produce and consumer subsidies
are considered essential to help in the efficient reallocation of society’s
resources, flexible as opposed to minimum wages and benefit are normal
components of labour policy with respect to exchange rate policies, fairly
realistic exchange rate are emphasized rates for exports to that of import is
unity. Real exchange rate is essential to export promotion. The rationale
behind export promotion is to enhance the country’s balance of payment position
(Gbosi, 2005).