The Effectiveness of the Foreign-Trade Zone as an Export Promotion Program: Policy Issues and Alternatives

Abstract

Foreign-trade zones (FTZs) are used by international marketers to gain savings and increase) operational efficiencies. From a public policy viewpoint, FTZs are a part of governmental export promotion strategies, which are designed to stimulate exports and reexports. U.S. data indicate that new FTZs do not have a strong influence on increasing exports, although increased exports do result in the formation of new FTZs. Similarly, while new FTZs do affect reexports, U.S. reexports exert a much stronger influence on the formation of new FTZs. The evidence suggests that some FTZs may be formed primarily to capture certain financial benefits, related to their use, for already existing exports and reexports. The implications are that the FTZ aspect of the U.S. export promotion program is not achieving desired results. Ten export promotion alternatives to the FTZ are discussed; these hold the poten1tial to'r7 realizing export-promotion policy goals.

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