For instance, it is likely that sharp losses in competitiveness, stemming from exchange rate changes or excessive earnings growth domestically, could adversely impact on the traded goods sectors and cause damage that could take a long time to undo, through losses in market shares and the closure of firms. One has to distinguish this concern, however, from a concern about longer term developments.
Over a longer perspective, it is productivity growth that matters. By moving from the production of lowvalued-added and low-productivity activities to higher value-added higher-productivity ones, facilitated by flexible markets and appropriate policies, an economy can increase its export earnings and its command over internationally traded goods and services. It can also benefit from the increased efficiency of production of non-traded goods and services.