Export promotion and import substitution

Import substitution rests on the infant industry argument

From the 1950s into the 1970s, many low- and middle-income countries feared that richer trading partners would exploit them through trade. Import substitution turned that fear into policy.

A country with no firms able to match world prices and quality blocks imports for a limited time. Behind it, home firms build up the skills, management, technology and economies of scale they need, then compete on equal terms. The theory holds together: a short-term indirect subsidy through protection, repaid by a healthy industry later.