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Export Competitiveness: Incentive Framework

A fundamental requirement for export competitiveness is a sound incentive framework which ensures that domestic resources are channeled to areas where they have the best comparative advantage. Such an incentive framework should ensure that land, labor, capital and technology are moving to: (a) sectors in which the country has a long-term capacity to compete, (b) to the most productive firms within sectors. This necessitates a clear understanding of how trade, tax, exchange rate and labor market policies interact to affect investment, output and trade decisions.
Conventionally, the policy biases against exports have been estimated through tariff rates and quantitative restrictions. Added to these are the trade-restrictiveness imposed by presence of import-export monopolies and various administrative restraints. Also well covered is the relevance of the real exchange rate, misalignment of which can be detrimental to export growth.

Business taxes on investment also affect export orientation through its impact on investment decisions. Marginal effective tax rate (METR) on capital is a summary measure of the effective rate of tax imposed on the rate of return generated. The tax regime can impose biases against labor-intensive investments and against the small and medium enterprises.
How Far Did Africa's First Generation Trade Reforms Go? An Intermediate Methodology for Comparative Analysis of Trade Policies?
Author: Lawrence E. Hinkle, Alberto Herrou-Aragon, and Keiko Kubota
Source: Africa Region Working Paper Series No. 58a. June 2003
Exchange Rate Overvaluation and Trade Protection: Lessons from Experience
Author: Howard J. Shatz and David G. Tarr
Source: WB Policy Research Working Paper 2289
Toward an Outward-Oriented Development Strategy for Small States: Issues, Opportunities and Resilience Building
Author: Lino Briguglio, Bishnodat Persaud, and Richard Stern
Source: A Review of the Small States Agenda proposed in the Commonwealth/World Bank Joint Task Force Report, April 2000
An Analysis of Chile
Author: Lawrence E. Hinkle
Source: Africa Region Working Paper Series No. 71, 2003
An Analysis of Trade Regime in Bolivia in 2001: A Trade Policy Benchmark for Low Income Countries
Author: Francesca Castellani, Alberto Herrou-Aragon, Lawrence E. Hinkle
Source: Africa Region Working Paper Series No. 74, August 2004

Case Studies

Sector Studies of the Effective Tax Burden
Source: FIAS, 2006

South Africa

From Preferences to Global Competitiveness: Report of the Aid for Trade Mission
Source: World Bank International Trade Department, April 2006

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