All posts tagged 'Protectionism'

Import substitution and protectionism

Import substitution and (import) trade restrictions

A few interesting links to start with:

There are several ways to restrict imports:

Import Tariffs:
Tariffs are an easy way to make imported goods more expensive, but can run counter to WTO agreements.

Import Quotas:
Quotas can be imposed on certain products or countries.

Local industries are supported by the government, so it makes local products cheaper.

(Import) Licensing requirements:
Foreign companies must "buy" import certificates in order to sell into market. This allows a government to tightly control imports.

Special standards and certifications are required, so importers must spend time and money to get certified in order to sell their goods or in some cases, completely change the product.

Anti-Dumping duties
Foreign countries or companies can be designated as "dumpers" for a type of goods, so special duties are applied in order to "protect" local industries.

The Sovereign Economic Model supports such measures in order to limit imports.

But all the above measures should only be surgically used in order to really improve the local economy and local companies. In cases where local companies are competitive to foreign ones, these measures can be applied. If the local companies are much inferior to foreign ones, trade restrictions can make the local economy sector even less competitive. A minimal amounts of imports should always be allowed, to keep the local companies on their toes especially if they conquered a large majority of market.