Import Substitution :: essays research papers

Import SubstitutionDescribe importee substitution (Inward looking) developmental strategy, clearlyoutlining the differences amidst the first and second stage. Assess itseffectiveness in promoting economic development. Compare inward looking andoutward looking strategies and discuss the assertion that the latter is superior.The kickoff power point of Import Substitution     All present day industrial and developing countries protect theirmanufacturing industries for the domestic markets. While the industrialcountries of today rely chiefly upon the usage of relatively low tariffs,developing countries apply high tariffs or quantitative restrictions whicheither limit or completely exclude competition from their imports. securitylike that - high protection - discriminates against exports through theexplicit/ inexplicit taxation of the export activities.     Explicit taxation can take the form of export taxes whereas implicittaxation occurs as a result of the effects of protection on the counterchange rate.As your protection level increases, your exchange rate level volition decrease inorder to ensure the necessary equilibrium of the balance of payments and thelower the amount of domestic currency exporters receive per unit of foreignexchange earned.     There is no need for high protection at the first stage of importsubstitution in the replacement of the imports of non-durable consumer goods(clothing, shoes, household goods, textile fabrics, leather, timberland and othertypes of inputs) since these commodities exist in the developing countries thatare at the initial frontier of industrialization.     The commodities I mentioned are intensive in unskilled labor, the scaleof return is relatively low, and costs do non rise substantially at lower outputlevels. The production of the commodities do not involve the use of forward-looking technology or highly educated workers and sup pliers for parts,components, materials and accessories are not necessary for highly efficientoperations.     An argument for infant industry protection and promotion is do for the"easy" stage, that being the first stage of import substitution because eventhough the domestic production of the commodities generates external economiesin the form of labor training, entrepreneurial development and the spread oftechnology, there is a viable argument for infant industry protection becausewithout the shielding from larger, more sophisticated companies, these infantindustries will be crushed and overwhelmed by exceeding costs, non-competitiveness due to the lack of highly skilled laborers and the simple factthat these infant industries are technologically incompetent.The Second Stage of Import Substitution     I see the first stage of import substitution as a temporary requirementbecause the domestic production rises since it not only provides for increasesin consumption but it also replaces imports. The rate of this growth howeverwill decline as soon as the process of import substitution is completed.