Advantages of import substitution strategy: the implementation of import substitution has stimulated the development of consumer goods industry in national industries to some extent, enhanced the ability of developing countries to independently develop their economies, and reduced the degree of external dependence of their own economies.
Some specialized technical personnel and skilled workers have also been trained, and government departments have also gained experience and knowledge in managing the economy. Therefore, many countries in Latin America, South Asia and Central Europe have chosen the import substitution strategy and achieved their economic development goals to some extent.
2. Disadvantages: However, this strategy is limited in stimulating the development of national industries, because it cannot completely eliminate external dependence, and it still relies on imports to a large extent. It just changed the structure of imported goods, from finished products to raw materials, technical patents, machinery and equipment, intermediate products and capital that China does not have.
Advantages of export-oriented strategy: Compared with import substitution trade strategy, the biggest feature of export-oriented trade strategy is to continuously promote the process of market economy, give full play to the advantages of cheap labor in developing countries, and expand the export of labor-intensive industries, thus promoting economic development.
4. Disadvantages: As the export market is mainly developed countries, the excessive pursuit of exports leads to a "duality" tendency within the domestic industrial system, that is, the export industry is over-expanded and the domestic demand industry is relatively shrinking.
Extended data
Policies adopted in the import substitution strategy
In the primary stage, almost all imported goods that should be restricted or prohibited are consumer goods. Because, compared with the production of capital goods and intermediate products, the production technology required to produce consumer goods is relatively simple, and the investment required is much lower, so it is easy to start a business.
This also means that the cost gap between domestic and imported consumer goods is small, while the cost gap between capital goods and intermediate products is large. Therefore, the import substitution cost of consumer goods is small. Moreover, there is a market for consumer goods, and the demand for capital goods and intermediate products is caused by investment.
As for the most critical measure to restrict or prohibit imports, it is to implement the protection policy. The specific measures are to implement a differential tariff system in terms of tariffs, impose high tax rates on consumer goods that are restricted or prohibited from importing, and adopt preferential tax rates on capital goods or intermediate products needed for import substitution.
In foreign exchange management, foreign exchange control is implemented, and consumer goods that need to be replaced are not provided to import foreign exchange. At the same time, the value of domestic currency against foreign currency can be set very high, that is, foreign currency means that the exchange rate of domestic currency is very high.
Through these measures, the import cost of capital goods and intermediate products is lower than their actual cost, thus encouraging the production of consumer goods rather than imports. Through the above measures, when the production of protected consumer goods meets the domestic market demand, the substitution process at this stage is over.