Right time to rethink the policy on exports

09:49, April 22, 2010      

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The Ministry of Commerce has released a report on China's foreign trade prospects, setting the goal of doubling its foreign trade volume by 2020.

Such an ambitious target is certainly welcome if it does promote the country's overall economic and social well-being.

It could also be feasible given China's still competitive production costs and manufacturing prowess.

As we all know, exports can create jobs and boost the wealth of the nation as a whole through gaining value added from selling goods. But if not properly dealt with, exports could also produce some externalities, such as environmental damage and excessive resource consumption.

There have been an increasing number of experts and rising voices in the country reminding policymakers of the fact that China's low-priced export products have been made without taking into full account the environmental and resource costs. In other words, environmental pollution and resource consumption have not been fully included in the pricing of exported goods.

It is not rare, for example, to see that pollution is getting worse in some regions that are manufacturing bases for exports.

Obviously, it is not exports alone that have spurred those problems. It is the management strategy of the sector that makes the difference.

As a transitional economy, China has attached great importance to exports, which has been proven right in boosting national economic strength over the past three decades.

But during that process, it seems to have paid more attention to the quantity rather than the quality of exports.

What China has exported are mainly low-end products, which are of good quality but with low value added. It is said that Chinese manufacturers only pocket $1 from making a Barbie doll, which sells for at least $10 on the US market.

Meanwhile, to remain competitive, Chinese manufacturers have kept the salaries of their workers low to save costs. The recent labor shortage in the coastal regions - also China's export base - could be a market correction.

While China's export policy has constituted a de facto subsidy for its export destination countries, the US has, ironically, led some countries to accuse it of using "unfair" means to push exports, citing its trade deficit with China.

It is high time China revamped its foreign trade policy. Whether its foreign trade volume doubles or not in the coming decade is no longer important. A must-do strategy is to make prices match costs and, equally important, produce more products with high value added.



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