The consensus today is that import-substitution protectionist industrial policy has not served the developing countries' growth...

Solutions

Expert Solution

The import substitution strategy and export driven strategy are the two main strategies that countries adopt when they are into international trade relations with other countries.

The strategy of import substitution aims at reducing the amount of foreign goods. This is mainly done for giving an impetus to the new industries which has started operations. The strategy can be implemented in different ways. It can be done either by imposing a tariff or by giving a quota. Changing the exchange rate is also a method used for import substitution. As a result of import substitution thus new industries start to function in the country which also may give rise to the establishment of related industries. This will lead to economic growth.

On the contrary export driven strategy mainly aims to increase the export of goods and services to other countries. This strategy increases the competition and paves way for the improvement of production process as a result of the competition in the international market. It also creates more foreign exchange reserves.

As developing countries are concerned, import substitution policy is good at the initial stage and in the long run it is advisable to switch to export driven strategy. This is because in the short run import driven strategy can be instrumental in building a firm foundation for the budding industries. Once they are established they can switch to export driven strategy as it brings benefits in the long run. Once you adopt export driven strategy you will have to face the challenges and competition from the foreign markets. This will lead to the production of increased quality products and reasonable price. Moreover there will be continuous effort to increase the product by doing of research and development.

Thus, import substitution strategy is more effective in the short run than in the long run.

Rahul Sunny answered 4 months ago

Next > < Previous

Related Solutions

The consensus today is that import-substitution protectionist industrial policy has not served the developing countries' growth...

The consensus today is that import-substitution protectionist industrial policy has not served the developing countries' growth ambitions well. This fact proves that policies relying on export-driven growth are the "winning ticket" for these countries. Fully evaluate this statement. Please don't copy and paste from other websites. I can get those myself. Only answer if you have knowledge of the topic so we're not getting random answers that don't make sense.

Has industrial policy contributed significantly to countries’ economic growth? Discuss thoroughly by referring to the Japanese...

Has industrial policy contributed significantly to countries’ economic growth? Discuss thoroughly by referring to the Japanese experience.

It is argued that import substitution is a misguided trade policy if the intent is to...

It is argued that import substitution is a misguided trade policy if the intent is to promote long-term economic growth. explain the reasons underlying this argument

It is argued that import substitution is a misguided trade policy if the intent is to...

It is argued that import substitution is a misguided trade policy if the intent is to promote long-term economic growth. Explain the reasons underlying this argument and discuss this assertion using the following framework: Y↑ = C + I + G + (EXPORTS - ↓IMPORTS)

What were the effects of Import Substitution Industrialization on most countries of Latin America? Discuss 2...

What were the effects of Import Substitution Industrialization on most countries of Latin America? Discuss 2 benefits to some of the countries.

Is industrial policy necessary for African countries? Explain why.

Discuss some of the differences between developing countries and industrial market countries, including differences other than...

Discuss some of the differences between developing countries and industrial market countries, including differences other than per capita income. Give examples.

What are Import-Substitution Industrialization (ISI) and Export-Oriented Industrialization (EOI)? Why do countries place such importance on...

What are Import-Substitution Industrialization (ISI) and Export-Oriented Industrialization (EOI)? Why do countries place such importance on industrializing? What are the main instruments and institutions that characterize each approach? What are their main differences? In what regions of the world were each primarily implemented? How does each approach shape the interests of domestic firms and institutions? Which has proven to be more successful?

Infant Industry protection is a key solution for the growth of industrialization of developing countries. Discuss...

Infant Industry protection is a key solution for the growth of industrialization of developing countries. Discuss your answer by using the graph below and any other graph(s) that you can deem appropriate

Portfolio investment towards developing countries: instrument of growth or instability? There is an enormous controversy on...

Portfolio investment towards developing countries: instrument of growth or instability? There is an enormous controversy on the role that FPI (Foreign Portfolio Investment) plays in developing countries. For some authors FPI is an instrument of capital investment and growth; for some others it is a tool of financial and macroeconomic instability. The scope of this research project is to shed light on this debate and provide recommendations on how FPI can promote growth and reduce instability.

Subjects