Industrialization Strategies and Global Trade Rules

Industrialization Strategies

Integral Industrialization

Followed in core countries, where all industries are industrialized. The pattern is to re-diversify the industry. The economy is articulated with a domestic market. Specialization is low, meaning it is very diversified.

Import Substitution Industrialization

Applied in the periphery, this involves industrialization to substitute imports. Countries industrialize to replace products they used to import. Income from basic products is used to develop industry.

Export Substitution Industrialization

Aims to replace the export basket. Focuses on exporting high-tech products to increase profits. These countries manage to acquire some technology transfers developed by multinationals.

Trade Policy Debates

Liberalism vs Protectionism

Arguments for and against protectionist measures include:

• Infant Industry protection
• Export Promotion (measures against imports to promote exports)
• Anti-dumping (protectionist measures against unfair foreign firm practices)
• Non-equitable Trade concerns
• Defense against Low Wages and Unemployment
• Specialization Concerns
• Externalities
• Rent-Shifting
• Protection for Traditional Economies
• Currency Shortages

WTO Trade Agreements

Agriculture Agreement

Regarding agriculture, the EU has the CAP, while the US has the Farm Bill. There are three main issues:

1. Market Access: All barriers concerning free trade in agricultural products should be transformed into tariffs. These tariffs should be reduced, especially in developed countries.
2. Export Competition: Core countries should reduce the value of their agricultural exports.
3. Domestic Support: The proposal is to reduce by 30% the support local farmers receive from the government in peripheral countries. This also applies to developing countries, where it is reduced by 10%.

TRIMS Agreement

TRIMS (Trade-Related Investment Measures) are about the abolition of some existing limitations related to investment linked to trade and the liberalization of foreign direct investment (FDI). These limitations include:

• Obligation to sell part of production in the host market
• Requirement to export a certain part of production
• The product must contain a certain percentage of national origin or be purchased from local suppliers.