4.1 Increased Export Demand
The motivation for particular industry policies is sometimes couched in terms of an objective of increasing export demand. For example, this scenario looks at the long run economy-wide impacts of a 10% increase in demand for exports across all export sectors. Policies such as supporting better branding, pursuing free trade agreements, or investing more in offshore representation could have such an impact. Alternatively, this increase in demand might arise from factors that are external to New Zealand policy settings such as an increase of the size of the international market from middle income growth in large developing markets such as China and India.
Increasing exports is generally considered to be beneficial to the economy. It increases production and GDP, and (all else remaining the same) improves the balance of trade. However, the increase in production will increase demand for inputs which may have negative effects on other sectors; and the increase in exports could cause the exchange rate to appreciate. These economy-wide effects may partially (or even completely) cancel out the beneficial effects of the increase in exports. This scenario looks at the aggregate impact of these various different effects.
