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The increase of production and exports may also be due to the following policies implemented by the government in 1998: selective reduction of taxes on imported inputs, authorization of the importation of wrapping materials on a temporary admission regime, and liberalization of maritime freight.
Many of them, however, depend on imported inputs and involve considerable repatriation of profits.
Manufacturing costs generally remained high, and factories were overly dependent on imported inputs of all kinds (including foreign capital), but advances were not limited to consumer goods production.
Manufacturers that rely on imported inputs may resist higher tariffs because they push up the prices of those inputs, making domestic industry less competitive.Governments using tariffs as trade weapons now have to calculate the consequences far more carefully.
One interesting point about this export surge is that in a way it was value-added production, like the exports of modern developing economies that rely on imported inputs – except that in Denmark's case it was imports of animal feed from North America that helped provide a crucial edge.
It also invented some of the tricks and contrivances now associated with East Asia's aggressive export promotion, such as allowing exporters to reclaim duties paid on imported inputs.Mr Chang argues that neoliberals have either forgotten or rewritten this "secret history".
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The scheme was established to meet the needs of exporters of agricultural and fishery products that rely on a large quantity of imported inputs, especially packaging materials.
The within-firm churning of imported inputs, however, played a sizeable role.
The rationale is that domestic inputs are taxed when their producer sells them (similar to a value-added tax) so imported inputs have not been taxed yet.
In the same year, the CACM governments agreed to reduce the tariff on crucial imported inputs to cigarette manufacturing: 'Following discussions, CACM governments have agreed to reduce import duties for raw materials from 5% to 1% including cigarette paper, tipping [the paper surrounding a cigarette filter], tow, etc'[ 48].
Although the food industry is affected by the negative effective rate of protection, food exports are less affected by the high tariff on inputs because imported inputs are tariff exempted.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com