TheMarketForIdeas

As an economist, I share the belief that, when it comes to realistic alternative systems of social organization, we always choose between the state and the market, between coercion and private property, bureaucratism and entrepreneurship. Thus, depending on the criterion of property rights – the most important, after all –, economic systems can only be either the free market (or the system of private ownership of the means of production), or socialism (or the system of public, state, “non-private” ownership of the means of production), or interventionism (the system in which certain sectors – or certain options for the use/allocation of scarce resources – are managed in the private sector, while others in the public one)[1]

On the other hand, I do not think that there can be any doubt that the globalized world in which we live hypostasizes, in essence, the system of state interventionism in the economy. And this is because – as a rich tradition of classical liberal / libertarian thought shows – the essence of the modern state is that it is a territorial monopoly on government intervention through regulations and the legitimate use of violence, or rather coercion. It also presupposes by its nature the existence of the coercive instrument of taxation[2]

I must confess that I am one of those who consider that such an order of economic and social affairs, typical for present times, is unsound and harmful. It is based on disregard for the person and private property; thus, two evil corollaries stem from this: the enormous waste of resources and the degradation of civic and moral values. But the fact is that the contemporary world works this way, the activity of economic actors being forced to pursue and achieve their interests in such arrangements and regulations of an interventionist nature.

And the mechanisms and tools for stimulating exports – the central topic of the book reviewed here – fall naturally into what this interventionism means. It is not my intention to open through this review a theoretical debate on the beneficial or harmful nature of the use of such mechanisms and tools. I say it again: this is how the contemporary economy works, and this is the context in which economic operators must identify and follow those directions of action that bring them the best results.

In the following, I will attempt to highlight, to the best of my abilities, the extent to which the author’s competence in the field and the quality and rigour of his analyses can provide entrepreneurs – who want to enter the market or who want to strengthen their market position – a viable and useful action guide for the existing circumstances.

Adrian Constantinescu is, without a doubt, one of the most valuable specialists in our country in public policies regarding foreign trade activities. He is recommended in this sense both by his rich and long activity as a scientific researcher focused on the problems of this field, and, especially, by his proven ability to apply in practice his theoretical knowledge. Perhaps the most convincing evidence of this is his proven skills as a negotiator in the field of trade policies and international trade regulation. I have in mind, in particular, his involvement, as one of the senior officials of our country, both in the international multilateral trade negotiations, known as the Uruguay Round (after which Romania became a founding member of the World Trade Organization) and in support of the negotiations for Romania’s association agreement with the European Economic Community (EEC), a key moment for the country after 1989, as far as its position in the international trade system is concerned.

In this regard, two other official positions held throughout his career as a negotiator must be mentioned: that of minister-counsellor, Chief Negotiator resident at GATT / WTO in Geneva (early 1990s), and that of minister-counsellor, head of the economic office, at the Romanian Embassy in Washington (towards the end of the 1990s).

I share the opinion formulated by Mugur Isărescu in the “Argument” that prefaces Adrian Constantinescu’s work, according to which the content of this book (analysis of mechanisms and instruments to stimulate exports) highlights the essence of the author’s concerns for promoting foreign trade, as a driving force of national economies of the contemporary world. Moreover, on a broader level, it can be said that our author focuses his argument developed in his book on the idea that, gradually, international trade has become the strongest link that can keep the world at peace and prosperity.

The background on which the author develops his analysis of export stimulation policies is that of a global economic landscape engaged in a series of substantial changes, among others, by expanding and deepening the integration processes on a global scale. The book emphasizes the continuous emergence of new economic clusters and the expansion of existing ones based on the growth and diversification of international trade in goods and services. The speed of innovation processes has increased exponentially, a trend that also operates in terms of the structure of supply and demand in the global market. The author highlights the sharpening, in this globalist context, of competition in foreign markets. Under such conditions, the encouragement of exports continued to be, he argues, a central element of the economic development strategies implemented by the vast majority of the world’s states. The avoidance of unfair competition in the field has raised concerns for the implementation at the multilateral level of some agreements aiming at ordering and disciplining the use of export incentive mechanisms.

Regarding the case of Romania, the author places state intervention at the heart of what can and cannot be done when it comes to supporting export policies through appropriate measures without losing credibility before the international community (as an EU Member State or WTO member, for example). Insisting on the importance of relocating everything that can promote efficient trade on the matrix of the new world that is forming before our eyes, Adrian Constantinescu argues that exports have thus become the main “engine” of the country’s economic development. However, in order to function as well as possible, that “engine” must be supplied with the necessary inputs (raw materials, materials, parts and subassemblies, as well as various services) not always available internally in the required assortments, quantities and qualities, which is why, along with exports, imports are also increasing. Obviously, this leads to increasing negative balances of the current account and, further, to the increase of the external debt, which deteriorates the country's international financial position. Therefore, following this line of thinking, the author concludes that the imperative of the further development of exports is strongly affirmed through appropriate measures taken by the state.

Much of his analytical-argumentative line is devoted to the idea that export development strategies involve the use of appropriate mechanisms and tools, which often differ depending on the degree of openness of national economies (especially those whose progress depends to a large extent on the opportunities offered by the global market). Thus, the various policies, mechanisms and tools used remain – on the whole – the same, and will eventually be adapted to the new conditions (e.g., free movement of goods, services and capital, as a consequence of expanding and deepening economic integration, or efforts to protect intellectual property rights etc.), focused on preserving free and fair competition in markets.

In such conditions, in Adrian Constantinescu’s opinion, it is essential to review the Romanian policy and practice in the matter to ensure their alignment with those allowed and practised internationally so that they contribute as much as possible to stimulate sales of goods and services abroad.

The key message that, in my opinion, the author wants to highlight can be briefly formulated as follows: even if the export of Romanian goods and services are on a strong upward curve, there is still enough creative spirit and space to improve the system of incentives granted especially in order to regain some of the traditional markets (outside the EU), as well as to increase and diversify the Romanian export offer on the respective markets.

I do not want to conclude this brief evaluation of the merits of Adrian Constantinescu’s book without mentioning, among its other merits, the author's original contributions to the ongoing debate. In my understanding, his main contributions consist in (1) his analysis of the correlations between import substitution and export development strategies and (2) on the distinction with which the author operates between export promotion and export stimulation mechanisms.

Concerning the first issue, I would like to point out that our author departs from the predominant views in the literature and considers that import substitution and export development are not necessarily successive or alternative strategies. Instead, he presents the two as complementary strategies for the involvement in international trade in the process of global economic development. The complementarity of the two types of strategies becomes obvious, according to Adrian Constantinescu, if we take into account the fact that, on the one hand, the development of exports implies the existence of a dynamic economy, which involves, to a large extent, the creation of import substitution sectors, and that, on the other hand, in order to generate the funds necessary for the construction of productive capacities to replace imports, it is necessary to maintain exports at an appropriate level.

As to the second issue, the author introduces a distinction that is missing in the literature: between the mechanisms of export promotion and those of stimulating them. The first refers to the tools and ways to persuade potential external customers to purchase certain products that are already or may be available for purchase (this category includes mainly the various ways of advertising and participation in international fairs and exhibitions). On the other hand, incentive mechanisms aim at influencing exporting producers and exporters, their interest in developing sales abroad and strengthening their competitive position in relation to external competition (it is essentially about facilitating – by using various economic levers – the conditions under which production for export takes place and, on the other hand, about influencing the way the effective marketing of exports on the international market is carried out).

All of the above are, in my opinion, convincing arguments for considering the latest book written by Adrian Constantinescu as a “textbook for today and tomorrow on international trade with its entire system of geoeconomic and geopolitical interactions” (Mugur Isărescu, in “Argument”).

To this, I would add, a valuable guide for economic operators who, in the conditions of present-day state interventionism – which is increasingly insinuated in almost all areas of economic activity – are seeking to identify and follow those lines of action that promise to bring, in the given circumstances, the highest possible gain. 

Notes:

[1] And, following the arguments developed in this regard by the libertarian economist Mihai-Vladimir Topan, it should be noted that “the interventionist system is not a <>; for, if we judge the problem in terms of allocation principles, there are only two: either the decision of last resort belongs to the legitimate private owner (free market) or not (socialism), the third being excluded. Therefore, interventionism does not propose a third principle of allocation, but only the combination, in various proportions, of the two principles mentioned above”.

[2] And, in the words of the same Mihai-Vladimir Topan “...it must be understood immediately, however, that this is not about defensive violence: the idea of a regulatory monopoly and that of taxation consonate only with the possibility of institutionalized aggression (i.e., the state is the only one allowed to initiate violence for reasons that can be called <>, for example)”.