Trade policies for developing nations: Import Substitution Policies (consider BRIC'S)

Trade policy is very important for developing nation to be involved in trade because trade helps to open up economy, trade and investment with the rest of the world for sustainable economic growth. No county in a decade has gained economic success without being open to the rest of the world. Opening up the economies to the global trade has enabled many developing countries to develop competitive advantage in manufacturing certain product.

Import substitution Policies was most successful in countries with large populations and income levels which allowed for the consumption of locally produced products. Latin American countries such as Brazil, Mexico, Chile, Uruguay and Venezuela, had the most success with import substitution policies. This is so because while the investment to produce cheap consumer products may have paid as automobiles and heavy machinery, which depended on larger consumer markets to survive. 

  In the past few years,  BRIC: Brazil, Russia, India and China  has been given to the growth prospects pay close attention to different reasons. With each of these nations having different strategies for growth, they also have different backgrounds, areas of advantage and growth , and challenges for each of their countries as their economies have gathered momentum in the global economy. 

Brazil during the 1960’s and 1970’s. Brazil successfully implemented import substitution policies, which increased economic growth and allowed its industries to develop and diversify. This strategy also helped the country to reduce its reliance on coffee as the country’s main export, so it succeeded on moving from an agricultural economy to a manufacturing one. In 1990 Brazil opened its doors to international trade to allow for further economic growth and this decision has made it a global economic competitor. 
Russia holds a wealth of natural resources: the country holds 13 percent of the world's oil reserves and 33 percent of the natural gas reserves. After communism fell in 1989, Russia wanted to encourage capitalism quickly, and privatized state-owned industries all at once. Most prices were released from government control one night in 1992. Inflation followed shortly after, so monetary policy was raising interest rates in the face of inflation, it made it more expensive for households to borrow money. The financial institutions were not stable enough to handle the sudden privatization, and few had enough capital to provide consumers with the amounts they wanted. This considerably delayed the ability of ordinary citizens to participate in the market economy.

India during the 1960’s and 1970’s, they applied import substitution policies that included tight controls on imports and exports. This strategy allowed the country to be self-sufficient. In 1980 India began a liberalization strategy where tariffs and import and export controls were relaxed. This reduced the costs to import, which reduced the costs of some consumer goods. The result of the 1980’s strategies saw growth for the GDP, export growth and productivity increases. India has been growing in terms of real GDP, and productivity is also quite strong. However, there is still much poverty in the country along with a gender gap and caste system.   

China began it reforms in 1979 and gradually transitioned from a centrally planned economy to open markets. Their rising household incomes have increased consumer demand for goods and services, causing expanding retail sales.

Brazil, Russia, India and China have tried to open their economies to global trade and investment,with varying degrees of success. These four countries have varied economic histories and strategies for stimulating economic growth.  Today, much attention has been placed on the growth potential of the BRICs, but there is no consensus about whether these countries will be significant economies in the coming decades. These countries have quite different economic histories, but all have seen high growth rates and have the potential to continue. However, the BRICs are growing from a lower level of economic activity, since they are all developing countries, and can sustain higher growth rates more so than developed countries. In my opinion import substitution policies are helping the domestic industries because it will let the domestic products has compete skills. It doesn't effect the cost product.