The export marketing strategies that you will put in place will almost certainly differ depending on whether the target country/market is oriented towards a free market system or whether there is considerable government intervention in the target country’s economy.
Under a free market system, the volumes and values of goods and services are determined by the forces of supply and demand. Proponents of a free market system or free trade thus emphasis the capacity of the competitive market system to automatically allocate resources efficiently, i.e. goods should be able to move freely, without any manipulation of their market-related prices or the exchange rates involved. If Taiwan, for example, can produce an article more cheaply than the United States, the US consumer should be able to purchase that article at the lower price.
Proponents of such a system argue that trade restrictions such as tariffs, which make imported items relatively more expensive, serve only to protect the more inefficient local industries, thereby removing the element of competition. Free market economies are thus highly competitive with a strong emphasis on value for money. Product quality is of prime importance.
| A tariff is a schedule of customs duties levied on traded goods or commodities as they pass over a national boundary. |
Without foreign competition, local producers are not as motivated to improve the efficiency of their operations. In general, free traders hold that government decision-making is bureaucratic, inefficient and harmful, and that centralised government control interferes with people’s freedom.
In the past, centrally planned economies tended to emphasise self-sufficiency and regarded international trade as a necessary evil to obtain the goods and services they could not provide for themselves. In practice, much of the trade conducted by centrally planned economies was (and in some cases still is) on an ad hoc basis – goods were imported to meet unexpected shortages or specific requirements, while exports were the result of unplanned surpluses or the need to earn foreign exchange.
The radical changes that have taken place in eastern Europe and the former USSR, for example, were prompted by the economic hardship resulting from the strict centralised control of factors of production and trading relationships. The current move towards the creation of free market systems in many African countries is also indicative of a growing awareness of the need for less government intervention in all spheres of economic activity.
Today, no country practices entirely free trade, nor is there any one country whose trade is entirely controlled by the state. Nearly all countries impose some limited restrictions on the free flow of international trade. Besides tariffs, countries can impose a number of non-tariff barriers as a way of restricting trade, e.g. quotas, (i.e. direct quantitative restrictions on the amount of an item allowed to be imported or exported), foreign exchange controls – as is the case in South Africa – and health, technical and safety regulations. The extent and nature of these restrictions depend largely on whether a country is orientated towards a free market or a centrally planned economy.
The World Trade Organisation (WTO) came into existence on 1 January 1995 as a result of the Uruguay Round of Trading Negotiations (under the auspices of GATT). Most of the World’s trading nations belong to it. The notable exception is China. It is a rules-based system designed to promote the expansion of trade. These rules give enterprises certain rights – exporters, in some cases, have the right to defend their foreign markets and countries have fewer opportunities to impose restrictions.