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Trade policy, productivityand learning: Evidence inSouth AfricaImraan Valodia aa Research Fellow, School of DevelopmentStudies , University of NatalPublished online: 27 Feb 2008.
To cite this article: Imraan Valodia (1999) Trade policy, productivity andlearning: Evidence in South Africa, Development Southern Africa, 16:3, 531-546,DOI: 10.1080/03768359908440097
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Development Southern Africa Vol 16, No 3, Spring 1999
Development Debate and Practice
Trade policy, productivity andlearning: evidence in South Africa
Imraan Valodia1
The theoretical argument in support of trade liberalisation is based, in part, on exportsthat foster dynamic efficiency gains primarily through learning and technological up-grading. Using data collected in the motor vehicle components industry, the article ex-plores whether there is any evidence in the South African manufacturing sector to supportthis hypothesis. Although the conclusions are tentative, the author finds no unambiguousempirical support for the argument that, in the South African context, trade liberalisationfosters learning and innovation at the level of the firm.
1. INTRODUCTIONIt is often argued in recent development literature that countries which followoutward-oriented trade policies generally perform better economically thancountries that pursue inward-oriented trade policies because, in part, the formerenhance productivity growth. This argument has gained popularity in debates onSouth African economic policy. The Industrial Strategy Project (Joffe et al,1995) has, for example, argued as follows:
In addition to the obvious advantage of increased foreign exchangeearnings, enhancing the export orientation of industry can lead to amore efficient allocation of resources, promote the acquisition of moreleading-edge technologies and enhance productivity growth. Apartfrom benefits to the export-oriented firm, there are potential spilloversin marketing and information, which may serve to enhance productiv-ity in the rest of the economy.
This article is based on research that was conducted as part of the KwaZulu-Natal Industrial Restructuring Project. It analyses whether the view that an ex-port-oriented trade regime will foster productivity growth in South Africa is sup-ported by sound economic theory, and whether it can be empirically validated.The next section begins with a brief discussion on the theoretical argumentslinking trade policy and productivity. This is followed by a review of the find-
1 Research Fellow, School of Development Studies, University of Natal. Thanks to col-leagues on the project, especially Justin Barnes. Thanks also to Vishnu Padayachee forcomments and to Trade and Industrial Policy Secretariat for assistance with funding.
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dings of various studies that have explored this issue empirically in a developingcountry context. The author then discusses some preliminary findings of a studythat explores one aspect of the trade policy-productivity link, ie that exporting isassociated with learning. The conclusion reached is that the relationship betweentrade policy and productivity in the South African manufacturing sector is, on thebasis of existing evidence, not unambiguous.
2. THEORETICAL ARGUMENTS
The theoretical arguments within the paradigm of neo-classical economics whichsupport the view that export-oriented trade policies enhance productivity aresummarised in Tybout (1992) and Rodrik (1992, 1995b). Broadly speaking, threearguments are most commonly advanced:
• The first, which is based largely on X-efficiency,2 relies on the contention thatunder a protected trade regime, local entrepreneurs' resource allocations willbe based on satisficing rather than optimising behaviour, and they will suc-cumb to 'the quiet life of the monopolist' (Rodrik, 1992: 157).
• The second argument is based on the existence of economies of scale. It is ar-gued that in export-oriented trade regimes, domestic firms are able to achievehigher levels of production by engaging in global markets. This enables themto reduce costs.
• The third argument is based on macroeconomic factors. It is argued that in-ward-oriented trade regimes, being prone to foreign exchange bottlenecks,produce macroeconomic instability which in turn results in low growth in pro-ductivity.
Rodrik (1992) shows that all these theoretical arguments are questionable. Re-garding X-efficiency, he argues that the larger market guaranteed to local firmsas a consequence of trade restriction is likely to spur, not retard, technologicaleffort. Taking the economies of scale argument, for example, he shows that ifscale economies are located in import-competing sectors, as they tend to be indeveloping countries, trade liberalisation may lead to a contraction of these ac-tivities. The macroeconomic argument, he contends, says nothing about tradepolicy per se.
More recent, and perhaps more robust, endogenous growth-based literature haslinked innovation, learning, technology and externality issues to trade policy. Itis argued that productivity growth should be viewed as a process of learning andinnovation, rather than an orderly shift in technology. Trade orientation affectsthis process of productivity growth by, inter alia, providing an impetus for tech-nological learning and innovation. The emergence of endogenous growth models
2 X-efficiency is the part of overall efficiency which consists of getting the maximumoutput technically possible from any given inputs. It implies the complete absence ofslackness in production.
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Trade policy, productivity and learning: evidence in South Africa
(Pack, 1994) which emphasise the importance of innovation and imperfect com-petition, has provided theoretical rigour to the link between export orientationand productivity growth. These models stress 'how learning [and] purposeful[research and development] activity drive economic growth through the creationof new products and the improvement in the quality of existing ones' (Rodrik,1995b: 2954). In these models, trade policy matters because market size encour-ages innovation. Further, in deciding whether to develop new products, firmstake into consideration potential substitute products. This, in turn, is dependenton their exposure to international markets and the degree to which knowledgeexternalities occur. Although this strand of the literature offers exciting avenuesfor exploring the links between trade policy and productivity growth, endoge-nous growth models can generate outcomes where integration into the globaleconomy impedes learning and technological advancement. For example, iftechnological spillovers are geographically concentrated, increased integrationwith a technologically advanced country could bring about a reduction in inno-vative activity in a technologically disadvantaged country (see Grossman &Helpman, 1991; Pio, 1994). More generally, Rodrik (1995b: 2956) concludesthat:
There is one robust feature in the types of models considered here, andthat is the following: the more asymmetric the trading countries are —in terms of size, extent of a headstart, or static comparative advantage- the more likely that growth effects will be asymmetric also. Thisraises the danger that developing countries may end up with the shortend of the stick, as could happen when comparative advantage and/ormarket-size effects lead to a crowding out of their innovative sectors.
3. TRADE POLICY AND PRODUCTIVITY: EMPIRICAL STUDIES
Having discussed briefly the theoretical literature linking trade policy with pro-ductivity, we consider below the findings of a number of studies that have ex-plored this issue empirically.
Nishimizu & Robinson (1984) test whether export-promoting or import-substituting trade regimes are more successful in generating total factor produc-tivity (TFP) growth. They decompose output growth in terms of export expan-sion and import substitution for Korea, Turkey, Yugoslavia and Japan during theperiod 1955-73. They estimate the model,
TFPG = (3o + PeeXee + pisXis + ,
where TFPG, Xee and Xis are annual rates of TFP growth, output growth allo-cated to export expansion and output growth allocated to import substitution re-spectively, and s is a random disturbance term. The authors use multiple regres-sions for different industries of the manufacturing sector in each of the countries.Of the 28 cases where statistically significant elasticities with respect to exportexpansion are estimated, only two estimates have negative coefficients. On the
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other hand, of the 21 statistically significant elasticities with respect to importsubstitution, 13 are negative. These results support the hypothesis that exportpromotion leads to higher TFP growth and increased import substitution leads tolower TFP growth.
A study by Krueger & Tuncer (1982) of 18 manufacturing industries in Turkeyduring the period 1963-76 found that there was 'no systematic tendency formore protected firms or industries to have had higher total factor productivitygrowth than less protected firms and industries' (reported in Riedel, 1990: 136).Interestingly, Bhagwati (1988: 39) reports the conclusions of this study as 'lowproductivity growth roughly occurred during periods ... [when] ... the IS [importsubstitution] strategy was being accentuated. The overall rate of productivitygrowth was also low throughout the period when Turkey pursued an IS strategy'.
Adopting a production function equation, Kavoussi (1984) investigates the rela-tionship between exports and TFP growth through an intercountry regressionanalysis. He finds that growth in exports has a positive impact on growth in TFP.Moreover, the impact of exports on growth in TFP is significant in the case ofboth low- and middle-income countries, but more so in the case of the latter.Kavoussi argues that this possibly indicates that manufactured exports have agreater impact on TFP growth than is the case for exports of primary goods.
In analysing the impact of liberalisation and growth, Greenaway & Sapsford(1994) adopt a production function approach similar to that of Feder (1983).They distinguish between two possible ways in which liberalisation of the traderegime may impact on growth. Firstly, liberalisation could lead to an increase inthe magnitude of exports. Secondly, and more importantly in the context of therelationship between exports and productivity growth, liberalisation could influ-ence the export-growth relationship, such that exports have a greater impact ongrowth than was previously the case. Using time series data, these authors findlittle evidence that liberalisation affects the export-growth relationship.
Pack (1992: 30-2) analyses the relationship between TFP growth and the tradepolicy regime for different industries of the manufacturing sector in the UnitedStates, Japan, Argentina, Chile, South Korea, India and Singapore. Of all thecountries, only South Korea performs consistently well in terms of TFP growth.Pack argues that studies have found that, in the case of South Korea, increasingutilisation of capacity was the major source of TFP growth, rather than the ex-port-promoting trade regime.
In a number of the case studies that contributed to WIDER's Trade and Industri-alisation Reconsidered Project (Helleiner, 1995), the issues of trade policy andproductivity growth were explored. In six of the case studies, the sources of in-terindustry variations in TFPG were investigated econometrically. As Table 1shows, scale and growth of output were the main sources of differences in pro-ductivity.
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1 able 1: Concomitants of industry-level TFP growth in manufacturing inthe 1970s and 1980s
Brazil (1970-80)
Columbia (periods from 1967-89)
Peru (periods from 1976-87)
India (1959-80 and 1981-8)
Korea (1967-88)
Output
growth
+
+
+
+
+
Import
protec-
tion
+
-
-
Import
penetra-
tion
-
Export
orienta-
tion
+
-
Indus-
trial
concen-
tration
+
+
+
Source: Helleiner (1995: 26).
Havrylyshyn (1990) provides an overview of the empirical literature linkingtrade policy and productivity in developing countries. He comes to the conclu-sion that 'most (studies) do conclude that outward orientation leads to productiv-ity gains, though the results are not always consistent or statistically significant'(ibid, 19). He distinguishes three methodologies that have been used to investi-gate the trade policy-productivity issue:
• The first methodology tests the effect of increased imports on market power.These studies find that import competition reduces market power in developedcountries, but not in developing countries.
• The second methodology tests whether outward orientation improves effi-ciency at the firm or industry level. Most studies conclude that outward orien-tation improves efficiency.
• The third methodology uses computable general equilibrium models to test forefficiency gains. These studies also find evidence that outward orientation im-proves efficiency.
Havrylyshyn also finds that there are instances where protectionist trade policiesimprove efficiency. He concludes that 'the evidence from studies of TFP is weakand ambiguous' (ibid, 10).
Explaining the growth performance of the successful, newly industrialised EastAsian countries, and the linkages between exports and growth in these econo-mies, forms a large portion of the empirical literature on the trade policy-productivity-growth nexus. Explaining the success of these economies, theWorld Bank (1993: 18) argues that the growth of exports in these economies hasresulted in 'numerous benefits, including more efficient allocation, increasedacquisition of foreign technology, and more rapid productivity growth'. Simi-larly, Pack & Page (1994) find that export growth was an important source ofproductivity growth in these economies. They conclude that 'on the basis of bothcross-country evidence and a more detailed examination of Korea and Taiwan ...rapid productivity change was partly a result of superior manufactured exports
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performance' (ibid, 229). Rodrik (1995a: 97), however, maintains that 'viewingexport orientation as the clue to the growth puzzle misses the mark by a widemargin'. He finds that the timing of the export booms in these economies is notconsistent with their growth experiences. He argues instead that investment, ac-cess to capital equipment and government intervention to correct coordinationfailures are important factors in explaining the growth experience of theseeconomies. Wade (1990) and Amsden (1989) interpret growth in these econo-mies along similar lines. Further, Young (1994a) points out that there are somefatal data problems in the studies of the World Bank (1993) and Pack & Page(1994), which cast doubt on their empirical validity. Young (1994b) finds thatproductivity growth in the East Asian economies has not been extraordinarilyhigh, and the growth that has occurred can be explained by factor accumulation.
Aw & Hwang (1995) conducted a study at firm level to determine whether therewere any significant productivity differences between exporting and non-exporting firms in the Taiwanese electronics industry. They distinguish betweenresource-level differences (eg firm size) and productivity differences in explain-ing output differences between these firms. They found that the differences in themean value added of exporting and non-exporting firms are explained largely bydifferences in inputs. In three of the four products that they examined, however,they found that productivity differences between exporting and non-exportingfirms are significant. In their study, productivity differences contribute between 3and 20 per cent of the difference in value added between exporting and non-exporting firms. Importantly, Aw and Hwang note that their study does not allowfor making any inferences about the direction of causality. '... That more pro-ductive firms did more exporting is just as likely as the reverse, that higher ex-ports led to higher productivity' (ibid, 316).
There are also a number of industry case studies that have explored the exports,productivity and learning issue. Hobday (1994, 1995), for example, in a study of'latecomer' electronics firms in East Asia, states that customers in the exportmarket drove the pace of learning and acted as conduits for technology assimila-tion, adaptation and innovation. Further, he argues that successful exporters areimitated by more latecomers, thereby generating external learning gains. Egan &Mody (1992) describe how buying agents from developed countries act as con-duits of information about production, markets, design and quality to exportfirms in developing countries, thereby providing a basis for these firms to aug-ment basic capabilities. Further, these agents are able to provide access to widerindustry networks in developed countries. Magaziner & Patinkin (1989) providesome evidence that the export market was critical to providing South Koreanfirms with the information and incentives to 'learn' about, and later dominate,the microwave oven industry. There are, however, numerous examples of theinfant-industry argument where protection provides firms with the opportunity tolearn and then to move into export markets. Kaplinsky & Mhlongo (1997) pro-vide a pertinent South African example in their study of Bell Equipment. They
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Trade policy, productivity and learning: evidence in South Africa
argue that infant-industry policies account for much of the present success ofBell Equipment, one of South Africa's most impressive exporters.
The empirical studies that have been discussed here reach contrasting conclu-sions about the empirical evidence for theoretical relationships between exportsand TFP growth. Importantly, even in cases which show support for the positiverelationship between exports and TFP growth, it may be possible that export ex-pansion was caused by TFP growth, rather than the other way around.
Later sections of this article address the learning-by-exporting issue in SouthAfrica. The literature on this specific issue is limited, with one recent study beingthe only example of an empirical examination of it. Addressing specifically thelearning-by-exporting issue, Clerides et al (1996) test whether exporting leads tolearning. They use firm level data for Colombia, Mexico and Morocco and con-clude that 'surprisingly, despite many anecdotes in the literature ... we find scantevidence [that exporting leads to learning]' (ibid, 29). Instead, they find that theassociation between exporting and efficiency is explained by efficient firmschoosing to become exporters. Further, they find that, on balance, the presence ofexporters does not seem to reduce the cost structure of other firms, thereby cast-ing doubt on the argument that exporting generates externality benefits whichaccrue to non-exporting firms.
In summary, the theoretical and empirical literature covered in this article showthat there is no clear relationship between trade policy and productivity growth.The conclusion reached by Rodrik (1992: 172) on the issues explored seems par-ticularly appropriate:
Until more evidence becomes available, then, a healthy scepticism isin order. In the meantime, if truth-in-advertising were to apply to pol-icy advice, each prescription for trade liberalization would be accom-panied by a disclaimer: Warning! Trade liberalization cannot beshown to enhance technical efficiency; nor has it been empiricallydemonstrated to do so.
4. EXPORT, PRODUCTIVITY AND LEARNING IN SOUTH AFRICA
There are, to the author's knowledge, two studies that explore the trade policy-productivity issue in the South African context. These studies have reached op-posing conclusions. Adopting an approach similar to that of Nishimizu & Robin-son (1984), Belli et al (1993) find that there is a statistically significant associa-tion between TFPG and export expansion in the manufacturing industry over theperiod 1972-83 and 1983-90. Valodia (1995), using a model similar to that ofFeder (1983), shows that there is no statistically significant relationship betweenTFPG and export growth for the same periods. For the period 1983—90, Valodia(1995) finds a negative relationship between TFPG and export growth. Thisstudy also finds that there is no evidence to suggest that exports in South Africanmanufacturing are associated with positive externality effects.
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This section of the article presents the initial findings of research that aims toexplore one aspect of the trade policy-productivity issue at the level of the firm,ie that exporting is associated with learning. The research project investigates thelearning-by-exporting argument in the South African automobile industrythrough interviews conducted in 32 firms in KwaZulu-Natal that are involvedwith motor vehicle component manufacturing. It should be noted that the re-search being conducted is in its initial phases. Consequently, only some initialimpressions and ideas are presented.
4.1 Exports in the automobile industry
The South African automobile industry developed with very high levels of pro-tection. Since the late 1980s, government policy has attempted to encourage ex-port orientation in the industry. The Motor Industry Development Plan (MIDP),introduced in 1995, is the latest in a series of policies that have sought to inte-grate the local industry into the international economy. In terms of the MIDP,exports in the industry are being encouraged through a combination of a reduc-tion in tariffs and a number of export incentives (an import-export complemen-tation scheme and duty-free allowances). For a comprehensive overview of de-velopments in the automobile industry, see Black (1994) and Barnes (1997).
Figure 1: Imports and exports - motor vehicles and components in 1993
Source: IDC (1996).
Figure 1 shows that over the last 12 years there has been a substantial increase inthe level of exports in the South African automobile industry, although this has
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Trade policy, productivity and learning: evidence in South Africa
occurred from a very low base. As the figure shows, however, these exports oc-curred at a time when imports also increased rapidly.
4.2 Initial research findings
The project team interviewed and collected extensive data on 32 automobilecomponent manufacturing firms in KwaZulu-Natal. All but one of the firms inthe sample produced only for the internal market before 1990. By 1996, eight ofthe 32 firms (25 per cent) were producing for both the local and the export mar-kets. Table 2 shows the extent of these firms' exports in 1996.
Table 2: Exporting firms — extent of exports, 1996
Exports as a percentage of production
10-20%21-30%31-40%
Number of firms
6
1
1
The brief analysis that follows explores whether the firms that shifted into theexport market show any characteristics which differ from those of the firms thatremain exclusively focused on the local market, or whether firms that havemoved into the export market have 'learnt' from exporting.
The research team compared trends in the turnover of the firms during the period1991-5. Table 3 shows these turnover trends for firms that exported a portion oftheir production (exporters), and those that remained entirely focused on the do-mestic market (non-exporters).
Table 3: Average turnover, 1991-5 (R'000)
Year
1991
1992
1993
1994
1995
Exporters
60 372
67 734
78 803
92 117
116 045
Non-exporters
53 477
57 219
58 025
65 774
76 148
Table 3 shows that whereas in 1991 the average turnover for exporting and non-exporting firms is fairly similar, turnover growth is significantly higher in theexport market than in the domestic market. The turnover growth for exportingfirms is driven largely by increases in the volume of sales, whereas that for non-exporters is largely the result of price changes.
Table 4 compares average employment figures for exporters and non-exporters.The figures show that large firms (firms with a larger number of employees) tendto be the ones that move into export markets. For the period 1991-5, employ-
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ment tended to grow in exporting firms while it remained static in non-exportingfirms.
Table 4: Average employment, 1991-5
Year
1991
1992
1993
1994
1995
Exporters
464
480
491
557
650
Non-exporters
238
231220
222
229
We asked firms whether their profits increased over the period 1990-5. Six ofthe eight exporting firms (75 per cent) reported in the affirmative while onlytwelve of the 24 non-exporting firms (50 per cent) reported that their profits hadincreased. This suggests that firms which are in the export market tend to bemore profitable.
Firms were asked a number of questions to gauge their key drivers of innovation.Interestingly, most firms, including exporting firms, reported that the most im-portant force driving them to introduce new products onto the market was de-mand from domestic customers. While demand from international customers wasidentified as a factor that drove innovation in exporting firms, this was secondaryto demand from domestic customers.
International literature on the automobile industry stresses the importance ofrelationships between suppliers and customers for efficiency gains. It is arguedthat successful automobile firms have close relationships and cooperate on prod-uct design, quality and stock maintenance. We tried to assess whether South Af-rican firms that export perform better in this regard than those who do not. Firmswere asked whether they consulted with their suppliers when designing newproducts and whether their customers assisted them in improving quality. Tables5 and 6 report their responses.
Table 5: Consultation with suppliers when designing new products
Yes
No
Exporters
71
Non-exporters
21
3
Table 6: Assistance in quality control by important customers
Yes
No
Exporters
8
0
Non-exporters
22
2
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Trade policy, productivity and learning: evidence in South Africa
Tables 5 and 6 show that there are no significant differences between exportersand non-exporters as far as relationships between firms are concerned. Mostfirms in the sample seem to cooperate with their suppliers and customers on is-sues of product development and quality, irrespective of their decisions regard-ing exports. Interestingly, the only two firms that do not cooperate with theircustomers on issues of quality are non-exporting firms.
Table 7 shows the average firm's expenditure on research and development as apercentage of sales. Exporting firms tend to spend significantly larger amountson this aspect.
Table 7: Average expenditure on research and development as a percentageof sales
Exporters
Non-exporters
2,55%
0,95%
The international automobile industry has been experiencing pronouncedchanges in production techniques. The last two decades have witnessed a shiftaway from the old Fordist-type production techniques to more flexible forms.Many authors (eg Black, 1994) have argued that, due in part to the protectedtrade regime, South African firms have been slow to adopt these more efficientproduction techniques.
Firms in the present study were asked a number of questions to assess whetherexporting firms were more efficient than non-exporting firms in terms of theirproduction techniques. Tables 8 and 9 show average 'lead times' and average'throughput times' for exporters and non-exporters. Lead time is an indicator of afirm's responsiveness to its customers, and measures the time taken from theplacement of an order to the delivery. Throughput time is an indicator of the effi-ciency of the production process, and measures the time lapse from the momentan item enters the production process to the time that it moves into final storagefor delivery to the customer. Contrary to expectations, these tables show thatexporters' production efficiency is significantly poorer than that of non-exporters, particularly in respect of lead times.
Table 8:
Year
1994
1995
1996
Average lead time in days
Exporters
82
80
80
Non-exporters
25
24
21
A key aspect of the new production techniques is more efficient management ofinventories. Tables 10 to 12 provide some indicators of whether exporting firms
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manage their inventories more efficiently than non-exporting firms. Tables 10and 11 show inventories of days of raw materials and work in progress respec-tively, while Table 12 shows inventories of days of finished goods. Interestingly,while non-exporters seem to be more efficient at inventory management duringthe production process, Table 12 reveals that exporters manage finished goodsinventories more efficiently, despite being further away from their markets.
Table 9: Average throughput time in days
Year
1994
1995
1996
Exporters
9
9
8
Non-exporters
555
Table 10: Days of raw materials inventory
Year
1994
1995
1996
Exporters
45
37
42
Non-exporters
26
28
25
Table 11: Days of work-in-progress inventory
Year
1994
1995
1996
Exporters
15
13
15
Non-exporters
13
12
13
Table 12: Days of finished goods inventory
Year
1994
1995
1996
Exporters
15
14
17
Non-exporters
22
21
23
This section has presented some initial findings of research that seeks to explorewhether exporting is associated with learning. Based on the information providedin this article, it is possible to make a few tentative remarks on the learning-by-exporting hypothesis in as far as it applies to the automobile component industryin KwaZulu-Natal.
The data presented show that exporting firms have been able to increase theirturnovers, employment levels and profitability at a faster rate than non-exportingfirms. This may be an indication that exporting firms are learning from the pro-
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cess and consequently are more successful. At this stage, however, we cannotconclusively state that exporting leads to success. It may be the case that success-ful, growing firms are those firms that have been able to penetrate export mar-kets, so that success locally leads to exports.
The information presented above indicates that the key factor driving the inno-vation process in the sample of firms is domestic demand, rather than exposureto international markets. This may be the case because, as Black (1996) argues,South African automobile firms have become very proficient at producing inSouth African conditions which are characterised by low volumes and large va-rieties. Firms that excel at this have then been able to enter international marketsin specific niches where low volumes and high varieties are an advantage. Thus,local demand has remained the key factor driving product development and otherinnovation.
Surprisingly, the information on production efficiencies presented earlier indi-cates that non-exporting firms are significantly more efficient. This may, how-ever, be hiding a number of issues. It may be the case that given the history ofprotection in the South African automobile industry, there are, at least in theshort term, costs associated with exporting. For example, South African export-ing firms may need to hold on to large amounts of stock so that they can ensurethat orders are met on time and conform to specifications. These costs may alsobe a factor of geographical distance from major international markets, whichmay explain the significantly higher lead times for exporters. Another factor thatcould explain these differences is that exporting firms may be producing tech-nologically advanced products, which require longer throughput times and leadtimes, and force firms to hold larger quantities of inventories.
5. CONCLUDING REMARKSThis article presented, briefly, the theoretical arguments linking trade policy andproductivity. It was argued that the theoretical arguments, despite recent devel-opments in the theory, are weak. The overview of empirical studies that haveexamined the trade policy-productivity links shows that there are sufficientgrounds for caution in interpreting the relationship between trade policy and pro-ductivity.
At this stage of the research that has been reported on in this article, it is not clearwhether exporting in the automobile component manufacturing industry inKwaZulu-Natal is associated with learning and productivity growth. Hopefully,as this research project progresses, answers to some of the important issuesraised may become clearer. This article is based on an initial examination of thedata. More sophisticated econometric analysis will hopefully provide answers toa number of the theoretical issues raised earlier in the article.
The second phase of this research project will explore the issue of learning-by-exporting in the clothing industry, which is a labour-intensive and low technol-
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ogy industry. Comparing the research findings for these industries will hopefullyprovide further insights into the learning-by-exporting question.
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