Import Substitution and Export Promotion: The Case of Australia and the United States

This presentation discusses the two different strategies for export industrialization employed by different states and countries, with a focus on the case of Australia and the United States. It covers the advantages and disadvantages of import substitution and export promotion, as well as examples and references.

1Import substitution
and Export
oriented approach
THE CASE OF AUSTRALIA AND THE UNITED STATES

2Introduction
 There are two different strategies for export industrialization
employed by different states and countries.
 Import substitution and export promotion trade strategies have
always been a controversial issue among many states through
the years.
 These battle is between two philosophical thoughts.
 Trade optimists who support outward looking development policy
and believe in free trade and free movements of goods across all
the border.

3The case of Australia
 The second school of thought believes in independent existence.
 They believe that a country and a company must write their own
destiny an purpose without necessarily depending on other
external cooperation's with other countries.
 Both of these policies have disadvantages and advantages.
 The policies are used depending on the need of the state or the
continent at that particular time.
 Australia, however, as a country employs export promotion.

4Import substitution
 Low income countries engage in industrialization in order to
develop.
 But they can’t keep competition with already industrialized
markets.
 They have to protect themselves from imports which come from
industrialized and highly productive economies and need
protection from imports from developed countries.
 For a developed country like the US, the industrial method is
employed as a way of battling competing currencies.

5Advantages of import substitution
 They will engage in such business until they reach the level they can now compete in the foreign
market.
 The protection is normally provided by the states government in agreement with their countries
government.
 Developed economy like Australia benefit from building a national infrastructure and logistic.
 The US applies these method to compensate for under-investment in the public sector,
therefore, employing currency manipulation.

6Import substitution
 Apart from government protection, the intervention can also be done through
executions of tariffs.
 Tariffs are percentages that a country is allowed to apply to the value of the
imported item
 The resulting sum of money goes to the government as a way of discouraging
import into the country.
 The tariff is allowed to a certain limit which when reached, no more
percentage of imported goods is allowed into the country.

7Example of import substitution
 For instance:
 In the US, after the election of president Trump, the president
decided to prefer employ domestic production over purchase of
goods abroad.
 Together with his fellow economist, Trump based his economic
justification and reasoning on competitive problems
 They also based the decision on claims that China was
participating in currency manipulation. (Baer, 2018).

8Export promotion
 While import substitution is focused on outward oriented
approach, export promotion primarily focuses on foreign trade
and exports (Cruz, Lederman & Zoratto, 2018).
 The basic goal, for example the case of Australia, is to maintain
domestic economy so that foreign capital is open.
 This policy gives chance to manufactured products to be
exported to developing countries

9Example
 A perfect example would be an Australian cars being exported to
the US.
 The country does not have to export any primary products to
Australia anymore except for easy in exportations whih demands
lowering the tariffs and quotas.

10Advantage of external promotion
 United States’ banks, for instance, provide lower rates for
exporting countries.
 For example, Australia, which in this case, acts as an economic
block.
 The benefit Australia has through by export promotion is that it
keeps an edge in a very competitive international market while
reducing cost of production and efficiency to lower rates.

11References
 Baer, W. (2018). Brazil’s Import-Substitution Industrialization. The
Oxford Handbook of the Brazilian Economy, 89.
 Cruz, M., Lederman, D., & Zoratto, L. (2018). Anatomy and
impact of export promotion agencies.