Export trade is very important for all the countries but there are many ways by which it contributes very significantly to the economic growth of today’s developing nations. Some of the important beneficial effects that export trade can have on economic development are mentioned below:
- Exports can lead to the full utilization of otherwise underutilized domestic resources because the demands of the export trade would provide the outlet for the potential surplus of agricultural commodities and raw materials. This has in fact taken place in many developing countries in South East Asia and West Africa.
- Expansion in export trade makes possible division of labor and economics of scale. The expansion in the production of light manufacturers in small economic units in Taiwan, Hong Kong and Singapore is the well-known example of it.
- Export trade contributes greatly in the transmission of new ideas, new technology, and new managerial and other skills.
- Export also stimulate and facilitate the international flow of capital from developed to developing nations because in case of direct foreign collaboration and investments, the foreign capital generally accompanies foreign skilled personnel to operate it.
- The importations of new manufactured products have stimulated domestic demand until efficient domestic production of these goods became possible. This has actually happened in several large developing nations such as Brazil, India and Pakistan.
Export trade has proved an excellent anti-monopoly weapon because it stimulates great efficiency by domestic producers to meet foreign competition. This is particularly important for keeping low the cost and price of the intermediate or semi-finished products used as inputs in the domestic production of other commodities.