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Import substitution

Import substitution is a trade and economic policy based on the premise that a developing country should attempt to substitute products which it imports (mostly finished goods) with locally produced substitutes. This usually involves high tariff barriers to protect local industries and hence import substitution policies run contrary to the concept of free trade.

Import substitution policies were adopted by most nations in Latin America in the 1950s and 1960s. They were rejected by most nations in East Asia in the 1960s, and many economists attribute the superior performance of East Asia in the 1970s and 1980s to this difference in policies. As a result, import substitution policies generally became unpopular by the mid-1980s.



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