How to make domestic production more competive
There are many ways to improve domestic competitivity. In this article, we'll focus on fiscal measures:
1: more duties or taxes on importations from foreign nations: it's basic and can be efficient if used carefully, and if you improve the structure of your domestic production at the same time. Yet, WTO bans such taxes.
2: have a weak currency, so that foreign products seem to be very expensive to the local population. As the first solution, it can be efficient if used carefully: DEMONETIZE vital importations (for example, if you have no copper and product a lot of milk, sign a contract with a country producing a lot of copper and needing milk). This demonetization makes sure local population will not suffer from weak national currency.
How to weaken national currency Many possibilities: the best one (for the state), is to emit currency progressively and to use this money to build public infrastructures and a social security system, the best one (for the banks) is to liberalize and make credit easy by very low central bank rates.
3. more subtle : suppose VAT is 20% and social charges 25%: a foreign product enters the country at the price of100$: it will be sold 120$ (20% VAT), whereas a less competitive domestic product, whose production's cost is 110 (=35$ raw materials+60$ salary +60*0.25 social charges), will be sold 110*1.2 = 132$, 10% more than foreign product.
Now suppose the state suppresses all social charges 0% , and at the same time, to balance its payments, change VAT from 20% to 30%.
Imported product price becomes 130 $, whereas local product's price becomes (35+65)*1.3 = 123,5 $
Local production become more competitiveby using at the same time VAT/social charges.
One may point out that a rise of prices occurs: the less expensive product is 120 $ in the first case (foreign product), whereas it is 123.5 $ in the second case (domestic product). This 3% rise i...