CHAPTER 9 - The Regulation of Imports

Abstract

This chapter discusses the regulation of imports. A surplus on the current account may be regarded as excessive because it implies an outflow of capital. Such a situation can in principle easily be remedied by increasing the growth rate of national expenditure through fiscal and/or monetary policy. This is bound to raise the demand for imports and for exportable, including services as well as goods, thereby reducing the positive current account balance. A current account deficit means the absorption of resources from abroad and thus the creation of international debt or of foreign investments in the economy, with the attendant financial obligations for the future. An improvement may be effected by a reduction of national expenditure, or a reduction of its growth rate, through fiscal and/or monetary policy, but this medicine is rather unpleasant. It entails the unemployment of productive resources and a loss of output, which may be a multiple in value of the current account deficit to be corrected. The quantitative licensing of imports represents detailed administrative intervention in the economy. It means the handing out by the state to private firms of opportunities to earn monopoly profits. To reduce the element of arbitrariness, import licenses are usually distributed in proportion to the imports handled by each firm in a period immediately preceding the introduction of licensing. This practice tends to preserve the distribution of imports among importing firms and to some extent also among countries of origin, among foreign exporters and among commodities, as it happened to be during the base period.