Import Substitution Law and Legal Definition
Import substitution refers to a governmental economic strategy to build up a domestic economy by emphasizing the replacement of imports by domestically produced goods. Import substitution aims to generate employment, reduce foreign exchange demand, stimulate innovation, and make the country self-reliant in critical areas such as food, defense, and advanced technology. In developing countries import substitution involves a low degree of risk as there are always large domestic markets for manufactured goods. The reason is that protecting local industries against foreign competition is easier than forcing developed countries to lift trade barriers against manufactured goods from developing countries.