Import Substitution Policy Versus Export Led Growth Strategy

Import Substitution Policy Versus Export Led Growth Strategy The Countries conduct two different strategies for industrialization; import substitution and export promotion for their international trade. Whether to adopt import substitution or export promotion trade strategy is controversial issue throughout the years for the countries. This issue forms a debate between Trade Optimists who support outward looking development policy, which envisages the free trade and free movement of goods and the Trade Pessimists who believe that the company must write its own destiny, and do not cooperate with other countries [Tadora, (2006) p621]. In 1950s and 1960s import substitutors are outweigh this debate by becoming popular in most of the developing countries but after the late 1970s export promoters become more powerful. The both policies have advantages and disadvantages. In this report, I will firstly give some information with respect to these two policies and then critically analyze advantages and disadvantages of these two policies. Import Substitution Low-income countries must industrialize to become more developed; but as they could not compete with already industrialized markets, firstly they have to protect themselves from the imports, which came from already industrialized and highly productive economies and concentrate on their production in order to achieve this goal. [Bruton, (1997) p904]. They have to reach a level, which make them compete with foreign industries in all over the world. Import substitution policy could be defined as putting various barriers to the importation of foreign goods to reduce the countries foreign dependency and providing these goods by producing them domestically [Ray, (1998) p657]. The import substitution policy could be varied among the goods. The capital good and consumers goods are treated differently. Consumer goods had been imported more strictly with the reason the consumer goods could be produced with less cost and the production of the capital good requires more intense capital and more complex technology. [Bruton, (1997) p908]. So mostly developing countries put bans on importation of consumer goods but not capital goods. As stated above, in order to provide import substitution, a protection is required. This protection could be supplied by government intervention. There are several ways to restrict the importation. Firstly, it could be provided by tariffs and quatos. Tariff is the percentage that is applied to the value of and imported item with the resulting sum of money going to the government. In the presence of tariff, the potentials import has been substituted by domestic production [Ray, (1998) p657]. Whereas the quato gives the maximum quantity on a particular good. Above that limit, no more of that good can be imported into the country. The other instrument, which restricts import, is the exchange rate. If the domestic currency will be overvalued, the price of the imported will be high and domestic good will be low [Bruton, (1997) p912]. When the exchange rate is higher, it will be more expensive to purchase foreign product imports. If for example, the government wants to overvalue its currency to make the foreign imports more expensive in domestic market, it may keep the currency from circulation. For example, if we assume that there is a demand of 1 million US Dollar but only the 500 thousand US Dollar has been issued to economy by government. This directly increases the price of US Dollar. It is believed that the import substitution encourages the learning of new techniques of production (as they are afforded with this protection) and the labors skills are improved with the experience, which provides increase in productivity of the firm [Ray, (1998) p669]. Besides this, import substitution strategy in a single industry can also be beneficial in other industry by creating additional demand that shall increase the employment and income. In conformity with these advantages, as per the data obtained by Maddisson (1995), there is an overall positive development (in terms of GDP growth rate, investment rate) in the countries that conduct import substitution policies. However starting from 1960, the negative consequences of import substitution starts to show itself and today it is mostly accepted that import-substituting strategy becomes unsuccessful in most of the countries. In the light of the information gathered from Bruton [(1997) p917]. and Tadora [ (2006) p631], the negative effects of import substitution could be summarized as follows: First of all, the import-oriented industries remain inefficient and costly to operate, as they are not competing with international industries and they do not need to make any research and development. So it is not incorrect to argue that industrialization has been inhibited with this strategy. Since there is inefficiency, the unemployment will automatically will increase within this respect. Secondly, although some industries were conducted with import substitution policy, most of them acquired by foreign companies and they transfer their profits abroad rather than investing them in the domestic industries. Thirdly, the newly established domestic industries specialized for production of consumer goods created a demand for importation of intermediate goods, but the danger is that there appears the need for import of intermediate goods in order to produce final goods inside the country and significant part of the profit transferred to the foreign countries. In addition to this, as the local currency is overvalued, -which increase exports price and decrease the imports- the local farmers become less competitive in the international market. Besides this, since it does not have any interactions with other countries, the country will be less affected in case of global economic crisis. Also, import substitution strategy has a negative effect on exporters. As the exchange rate increases, domestic goods, which are produced in internal industries, become expensive which will detrimentally affect the export. Both the decreasing exports and increasing dependence on foreign intermediate goods makes the trade balance worse. This cycle leads countries to borrow money to overcome their trade deficit. Import substitution strategies were conducted most nations in Latin America from the 1930s until the late 1980s. Over the period, 1949-1964, the total demand in manufacturing was growth significantly [Ray, (1998) p675]. however when the world economy went into recession in the 1970s and 1980s, Latin America went into worst economic crisis because of its foreign debt and it also changed its policy towards export orientation. Export Promotion As the distortions and failure of the import substitution policy is recognized, the export strategy gains importance for the countries. The case of Taiwan and South Korea is significant in this respect [Bruton(1997) p920]. They started to export the goods in 1960s and they remarkably increase their growth from that period. Import substitution is sharply contrasted with outward (export) oriented approach. In the export promotion, primary attention is given to the foreign trade and exports. [Bruton(1997) p904]. Basic goal is to maintain domestic economy to open the foreign capital. Export oriented approach has become popular in last 15 years and many countries has changed their policy from import to export oriented. [Bruton(1997) p905]. Generally rather than the exporting primary products, manufactured products are encouraged by governments of developing countries to be exported. The most of the developing countries have a comparative advantage in such primary products and they do not want to be dependent to other countries [Ray, (1998) p678]. Unlike import substitution, the tariffs and quotas on imports are reduced for exporters in order to encourage exportation. In addition to this, the banks are providing more easy and flexible terms to exporters. Governments can also make some payments to specific products to encourage the export of goods cheaper to foreign consumers and give some exemptions and incentives for those who want to export. According to Bruton [(1997) p924-925], the export-oriented strategy helps Taiwan and South Korea to overcome their balance of payment problems, increase their employment, and improve the knowledge of technology and quality of the product. One obvious benefit of the export promotion is that it provides more visible gains [Ray, (1998) p677]. Because as there is competition in the international market, the goods are provided more cheaply. The allocation of resources could be done more efficiently and the cost of the production will be much more less (Salvatore, Hatcher, 1992). It also increases economic growth and it generates required foreign exchange that can be used to import goods [Tadora (2006) p640]. As the exporters are in the competitive market, they have to improve their quality and they have to conduct research and development studies within this respect. It is argued that although import substitution has more immediate positive effects on economy on the short term, the export promotion has more long run positive effects. [Tadora (2006) p640]. Outward oriented strategy helps country to use its capital for progress by not facing any barriers in relation to payment of debt. As it is stated in above, inward oriented policy is a significant reason why Latin America have faced with debt issue. (Dollar 1992) Although there are significant numbers of empirical result, which proves that there is a correlation between outward oriented strategy and growth rate, as it is more dependent to external factors and foreign countries economies, it can create unexpected results. The success of the export-oriented policy is dependent to foreign demand. In order to form a successful export oriented policy, it is crucial to envisage future demand of such market, the ability of any government to forecast is not totally possible as the information with regards to supply and demand can be vary easily in relation to external factors. In the light of the above information, it is correct to argue that both of the strategies are totally not perfect. The success of the strategy depends fluctuations in the world economy. When the world economy is growing significantly in the period 1960 to 1973, the countries who applied export promotion have more advantages but when the world economy slowed down between the period 1973 to 1977, the countries having import oriented strategy get less effected. It is widely accepted that export oriented economies are more effective when the external demand is high. Besides, the success of the export strategy is changing from country to country. While China benefited from this strategy, Thailand, Indonesia faced a lot of difficulties. In addition to this, it is stated by Todora (2006) that even the most successful East Asian export promoters have pursued import substitution strategy in some of its industries. In other words, export promotion or import substitution policies could not be i mplemented entirely to all industries.

Seeing Nature Through Our Own Eyes :: Advertisements Advertising Essays

Seeing Nature Through Our Own Eyes missing works cited Cultural signs and messages can be seen everywhere. Advertisements are one example of these signs and messages. All of these advertisements are made depending on what our society wants and how we view things. For example, many ads try to attract a busy, stressed out, urbanized man to a more peaceful and calm scenario by making a connection of their product to a peaceful part of nature. Since we believe that nature is peaceful and calm, we believe these products will bring us these qualities through nature. If nature were labeled as disturbing and unbearable, then these ads, which try to connect nature with their product, would not attract us. Oscar Wilde also agrees with this when he points out à ¬Things are because we see them, and what we see, and how we see it, depends on the Arts that have influenced usà ®(Oates 465). A careful analysis of a few ads can help exemplify this belief. Everything we see, including these advertisements of nature, is interpreted differently depending on our background and experiences that has influenced us. All advertisements fall into one or more of three categories defined by Merchant. These categories are hierarchy, dialectics, or pastoral. The hierarchy category includes masculine aspects such as activeness, dominance, and adventure. On the other hand, the pastoral category is the opposite of the hierarchy category and includes more feminine ideas such as passiveness, peacefulness, and motherhood. The remaining dialectic category is one that is hard to define because it is neither active nor passive. This category falls in between hierarchy and pastoral because it contains ads that contain ideas that are neither feminine nor masculine. The following descriptions of the three ads fall into one or more of these categories. The first advertisement of a Nissan Xterra SUV gives you a à «reference domainà ­ of strength, comfort, and power. The ad tries to convince us to buy this SUV, which can be used to conquer nature comfortably. The ads has in big bold letters à ¬Couch for Sale,à ® as it tells us that this SUV can be taken to à ¬the mountains, the rivers, the oceans, whereverà ® and we can still be comfortable with this new type of à ¬couch.à ® The ad tries to make our couch at home seem boring and this SUV not only comfortable but also more fun by telling us à ¬rid [ourselves] of the soft, fluffy cushions and venture to where the fun is.

China and WTO Essay

Since 2001 the world has witnessed a rapid growth of China in terms of its economy. With the goods having a â€Å"Made in China† label becoming a frequent part of our lives, China paves its way ever on the road to success. The credit to such a boom in the country’s trade (peculiarly exports) goes to one key factor: Globalization. Cognizant of the World Trade Organization’s potential to let China fully practice Globalization, right after its membership of WTO China marked an instance of global significance. Today with the steps of China gradually turning the uni-polar world into a bi-polar one, the analysts of global trade and economy predict China to soon supplant the United States, wholly on the basis of its tenacious economic stand. Initially, this paper attempts to develop a comprehension of rudimentary concepts pertaining to the World Trade Organization, Globalization and China. The paper further elucidates the major argument by a conscientious analysis of China’s practice of Globalization, accession to WTO, different attitudes about a Globalized China and impacts of its WTO membership not only on the country itself but also on the whole world. Introduction: It is a datum of experience that in the scene of modern existence globalization has emerged as an inevitable process. With its instruments like the World Trade Organization, Globalization has profoundly penetrated into the roots of the modern economic system thereby affecting different nations differently. With WTO and economic globalization being in vogue in the business world, what remains the topic of a controversial debate is the entrance of China into WTO. Previously a member with average participation in the international trade, China has established itself as one of the top most economies of the contemporary world immediately after signing the agreement with WTO in the year 2001. As the concerned year marked a celebration for China, it also proved as a sinister for many other nations that had been dominating the international trade before China’s formal stepping into it. With a multifaceted nature of China’s WTO membership, there remain a number of ambiguities in terms of its corollaries on the world and the country itself. Globalization: Before laying the foundation of the paper’s major argument, it is mandatory to comprehend the concept of globalization. â€Å"Globalization is what happens when the movement of people, goods, or ideas among countries and regions accelerates. † In the contemporary world, all the aspects of life are touched by the ravishing presence of globalization. Once comprehended as a mere economic phenomenon involving the flow of goods and services across borders, the term has transcended to reach the exchange of language, culture and relationships among nations† . According to Suarez in ‘Globalization: Culture and Education in the New Millennium’, the commencement and proliferation of globalization coalesces a series of cycles. Of them, the first cycle began in 1492 ending in the early seventeenth century whereas the second cycle embarked in the late seventeenth century. Globalization is often reckoned as an elusive concept keeping under consideration its dual prospects. This multi faceted view is clear in every aspect of globalization. For instance, international organizations like WHO, UNESCO and UNDP are trying to ameliorate the standard of life across the globe by attempts for eliminating poverty, improving health conditions and providing job opportunities etc. Such steps on the part of globalization provide its positive picture attempting to elevate the nations. On the other hand, the instruments of globalization like multinational companies are exploiting the world labour and have become a major source of collapse of many domestic businesses. Wal-Mart is one of the many examples in this concern. Not only feared by the smaller businesses of Non American countries, the domestic investors suffer the same threat. According to an interview (documented in the article ‘Rediscovering Uncle Sam’ of the book ‘Ambassadors of Peace) with the Mayor of Chestertown, Margo G. Bailey told how she has been fighting the Wal-Mart from entering into the small city of Chestertown for almost a decade because the invasion of Wal-Mart would mean a fiasco for the owners of the small businesses in the locality. This means that if globalization is elevating humans, it is equally abusing them. With the ascending power of globalization in the contemporary world, what becomes the reason of its achievement is three facts. First is the globalization’s role in the amelioration of technology. Twenty first century is considered as the hey day of science, technology and telecommunication. The second reason is the provision of integration of people across borders to get acquainted with the foreign cultures. This has specially marked a boom in tourism industry. Thirdly, the concept of free trade as advocated by globalization has increased the capital flow between nations who are now more interested in global trade without being interfered by the state government. Of many forces of globalization, World Trade Organization is considered its key instrument. World Trade Organization: Formed in 1995, World Trade Organization stands as the only hegemonic power ruling the trade in the international business market. WTO started to informally supplant General Agreement on Tariffs and Trade (GATT) that had been carrying on the same function in the global market since 1947. The working of WTO is based key principles which are available in the form of its written documentation covering almost every kind of activity happening in the international trade. One of these principles is to equally treat all the participating nations in the business market. This means that any policy framed by WTO would be implemented on all the nations alike irrespective of their status in the global market. Another principle of WTO advocates Free Trade which means the elimination of trade barriers like tariffs, regulation or other such measures of protectionism imposed by the government thereby impeding the process of liberal trade or smooth flow of goods and services among the nations. WTO also makes sure the transparency of trade policies by making all the nations cognizant of them through their 2300 paged of agreements providing every term in black and white. In the similar way, the negotiations regarding the policy matters are not made surreptitious thereby making the adjustments open to all the other members too. With a seemingly stringent frame of law, WTO also believes in providing flexibility to the developing countries in order to make their positive contribution possible in the competitive market. According to Article III of ‘Agreement establishing the World Trade Organization’ WTO is responsible for five major functions. These responsibilities involve, 1. Implementation, administration and operation of Multilateral, Plurilateral and its own trade agreements. 2. Providing a platform of negotiations between different member nations regarding their trade policies and agreements. It also assists them in implementing the decided policies. 3. Settling the disputes among the member nations. The nature of such disputes is generally trade-policy based where the WTO serves as an arbiter between the conflicting nations. 4. Facilitating and training the weaker members in order to create a balance in the global economy. For achieving the desired goal, WTO co-operates with World Bank and International Monitory Fund. 5. Monitoring the trade policies that have been implemented and to make possible the aspect of transparency in these policies. China in the contemporary world: It was about two hundred years ago that China was he ruling power of global economy. After years of a sleeping giant, China has rapidly raised its status in the global community in the wake of the last decade. This aggrandizing significance is specially marked in the growing performance of the country in terms of its annual economic performance. This is clear by analyzing the performance of China’s ship building industry. Considered as a poor quality manufacturer around 1980s, it has grown into a ‘bona fide’ world industry today. As a result of this boom in the economy, millions of Chinese previously living at the bottom line of poverty enjoy better standards of life today. For the very reason World Bank believes that â€Å"China achieved the fastest doubling of economic output ever from 1978 to 1987, far outpacing both early industrializers (e. g. , United Kingdom, United States, and Japan) and late industrializers (e. g. , Brazil, South Korea, and Taiwan) alike. It then repeated the feat from 1987–1996† and looks like continuing the same pace in the future to come. To restate, as a result of globalizing process China has doubled the per capita income for three times after 1978. Of the over all augmenting profits, China’s major gains also lie in its textile industry. Reviewing China’s consistent rise for the past many years, many analysts proscribe China most likely to supplant the position of the U. S. by becoming the most powerful economy of the world around 2050 as the former has already caught the high brow of the world. While talking to China Daily, Long Yongtu, China’s former WTO chief negotiator said, â€Å"Because China’s economy is more open, and China’s economic size is much bigger, the world is more sensitive to what’s happening in China. I think in that way China is really changing the world. â€Å"

History And Development Of Mesoamerica - 1934 Words

Steven Hermosillo Professor Duran History 101 23 May 2016 The History and Development of Mesoamerica According to Module 4, â€Å"America’s Pre-Columbian populations evolved into highly developed communities which by the time of the European invasion and conquest in the 16th century had engendered some of the world’s most highly evolved civilizations, in both North and South America.† Module 4 states that â€Å"Shortly after Columbus arrived in the Caribbean in 1492-1493, other Europeans made their way to various parts of America, but in the process they unwittingly brought Eurasian disease pathogens to which America’s Pre-Columbian population were not immune or ready. Thus, even before the actual invasions and conquests began, much of the Pre-Columbian population had already been physically and numerically decimated, which further aggravated the problem of dearth of Native historical records, since many Pre-Columbian American societies passed their histories down orally and through their rituals.† Columbu s brought disease to America’s Pre-Columbian population that were not immune or ready. â€Å"In this vein, these pre-conquest decimations also gave the misleading impression to most Europeans that the American continent was a sparely populated wilderness peopled by societies with underdeveloped cultures. 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