Import substitution means replacing imports with goods made at home, protected by tariffs, quotas or subsidies.
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Import substitution: for and against
Infant industries grow
Tariffs shield new firms until they are big enough to compete.
Jobs and foreign exchange
Goods made at home save dollars spent on imports.
But firms get lazy
With no foreign rivals, costs rise and quality falls.
And buyers pay more
Higher prices, less choice, and other countries may retaliate.
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Other strategies look outward, to world markets.
Looking outward
| Strategy | What the government does | Example |
|---|---|---|
| Export promotion | Helps firms sell abroad: export zones, cheap credit, a low exchange rate | South Korea and Taiwan from the 1960s |
| Economic integration | Joins a trade agreement for duty-free access to bigger markets | The African Continental Free Trade Area, trading since 2021 |
| Diversification | Moves from one or two raw materials into manufacturing and services | Malaysia, from rubber and tin to electronics |
The points to remember
- Export promotion: sell to the world, not just at home.
- Diversification spreads the risk of one product's price falling.
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Paper 1 asked this in May 2026, as part (b) for 15 marks.
Using real-world examples, evaluate the effectiveness of import substitution strategies in promoting economic growth in economically least developed countries (ELDCs).
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
How the 15 marks are given
| Marks | What your answer needs |
|---|---|
| 13–15 | Theory fully explained, terms right all the way through, balanced evaluation, real examples fully developed to support the argument |
| 10–12 | Theory explained, terms mostly right, evaluation mostly balanced, real examples developed |
| 7–9 | Theory partly explained, some evaluation but one-sided, examples partly developed |
| 4–6 | Theory only described, evaluation superficial, examples only named |
| 1–3 | Theory stated but not relevant, no evaluation |