There is no universal recipe for increasing exports. What most affects exporting to a distant destination is experience. What can help is bringing companies together in order to share their experiences with certain markets. Industry associations and conferences can boost exports. These are the claims made by academics from INSEAD on the knowledge.insead.edu website.
Does distance still matter?
Despite the extravagant annual claims about the death of distance as a barrier, usually followed by a buzz on social media, column inches in the press and eventually TED talks, the reality is not so bright. Nonetheless, such claims continue to appear. George Orwell noticed something similar even at the beginning of the last century. However, distance has not become irrelevant yet.
In fact, the data shows that for trade the distance matters just as it did 40 years ago. Distance is still a relevant barrier for both physical and digital goods (even if the latter do not need to be shipped!). Very important are ties in the sense of sharing a common language and legal system.
It is true that trans-border trade has been sky-rocketing. The positive effect of various free trade agreements can be seen. But it is important to realise that altogether 75 percent of the growth of world trade has been triggered by countries that have had a mutual history of trade since 1948.
The Gravity of Experience
The concept of “gravity of experience” works surprisingly well in explanations of trade flows. In a metaphor based on Newton’s law of universal gravitation, when size is replaced by GDP and distance is that measured between the largest cities, it is possible to explain many of the existing trade routes. And there is another factor: the longer two states trade with each other, the more volume their trade achieves, thanks to their business experience and mutual knowledge.
The experience aspect provides an understanding of the wide gap between trade volume among existing partners on the one hand and partners that are relatively new on the other.
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