Case Study 1 : Russia

Summary
Government uses export taxes as a tool in their industrial policy and so is Russian government. After the fall of Soviet Union when the undergoing inflation rate were about to get out of control, Russian govt. started using export taxes to support the economic growth and raise its GDP. This action turned into a successful one as Russian govt. gained some sort of control over their energy export. By the year 2000, their GDP doubled from 12% to 24% and the govt. earned high revenue from export tax source. However, most of the revenues earned through export taxes come from the tax imposed on energy products which is supporting the country to gain a balanced budget.

Problem Identification
The growing companies of Russia which is not still capable of mass production will get hold under a structured production process. As a result, growth of that company will be hampered and thus the company will not be able to support the countrys economy and the GDP as well.

Problem Solution
An effective solution to this problem can be the change in government policy for these growing companies. Export taxes for the other big companies should be followed as before but a change in export tax rate for these infant companies will support its growth and moreover it will motivate the companies to go global. Once the company gets to a highest peak position, higher export tax rate can again be imposed on them. Basically, the change in policy is to give the infant companies support to grow and add value to the countrys economy.

Justification
World Trade Organization (WTO) already discussed on one of their discussion paper that, export taxes can be justified on the basis of the infant industry argument. Companies those were not capable of dynamic production will be locked into a production structure that entails lower growth rates. For example, in 1978, due to the sharp increase in the export tax, log exports declined sharply after 1970. But as soon as the govt. of that country reduced their policy for the infant firms in terms of export duties, export rate increased and a sound growth was noticed.

Recommendation

1. Reduce export taxes for the infant firm. 2. Encourage the local firms to go global, thus earn more foreign currencies. 3. Encourage people in using local products. 4. Cut import costs to gain a balanced budget.

Case Study 1 : Russia

Submitted to Samy Ahmed Course Marketing 417 Sec: 01 Prepared by Mushfiqur rahman 073 608 030

Submission date: 13/02/2012