Import Substitution

Definitions

Page Contents:	Definitions
	Substitution vs. Replacement
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Definitions of Import Substitution

Import substitution, like many common economic development strategies, can be considered both as a process and as a practice.

As a Process:

Import substitution is when goods and services previously purchased outside a region or not consumed due to high import costs are produced within the region. (Lee Huskey, 1987)

To start the process, practitioners need to develop the Practice of import substitution:

Import substitution is identifying goods and services which local businesses and institutions plan to buy from outside the area and then determining which items can be competitively supplied by local businesses. (Alberta Bureau of Economic Development and Tourism, 1992)

Import Substitution versus Replacement

In her book Cities and the Wealth of Nations, Jane Jacobs distinguishes between import substitution and import replacement

Import substitution - is when a region replaces imports with goods it already produces.
Import replacement - is when a region replaces imports with goods it can now make for itself.

In other words, import replacement is distinguished by the start of local production tailored to the particular needs and preferences of the region. Jane Jacobs argues that import replacement is far superior to import substitution, in that the region develops the capacity to alter production qualities and creates inputs and products uniquely suited to local uses. She argues that, historically, cities or regions that have been able to engage in import replacement have retained their vitality, while other regions stagnated.
Practically, encouraging import replacement as opposed to import substitution may not be feasible. Deliberate policies are more likely to be able to effect import substitution. Some theorists suggest that import substitution will naturally lead to import substitution (e.g., see Sandro, 1995) These pages generally consider import substitution as an explicit economic development strategy, with the understanding that import replacement is likely preferable when feasible and may arise naturally from import substitution.