How Export Promotion Programs Influence Trade

There is a well-developed theory of how domestic and export markets interact so as to determine prices and the volume of trade. The concepts of excess supply and excess demand are the key to understanding these interactions. Shifts in excess supply are caused by shifts in supply and/or demand in the exporting country. Shifts in excess demand are caused by shifts in demand and/or supply in the importing country. Patterns of prices and volumes of exports in the late 1960s and 1970s suggest that shifts in excess demand have been especially important in determining the volume of exports of rough lumber. Shifts in excess supply have been especially important in determining the volume of exports of dressed lumber and softwood plywood. There are various ways to shift excess supply and excess demand by promotion programs. Not enough information is available on interactions of domestic and export markets to evaluate the effectiveness of alternative programs to promote exports through shifts in excess supply and excess demand.

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