Import Substitution Industrialization (ISI)

AAA

DEFINITION of 'Import Substitution Industrialization (ISI)'

An economic theory employed by developing or emerging market nations that wish to increase their self-sufficiency and decrease their dependency on developed countries. Implementation of the theory focuses on protection and incubation of domestic infant industries so they may emerge to compete with imported goods and make the local economy more self-sufficient.

INVESTOPEDIA EXPLAINS 'Import Substitution Industrialization (ISI)'

Import Substitution Industrialization (ISI) came to emergence in the post-World War II era in Latin American countries. ISI seeks to protect local industries through various avenues such as tariffs, import quotas and subsidized government loans. Those countries practicing ISI seek to develop production channels for every stage of a product, not just the final product. ISI runs counter to the economic theory of comparative advantage, where countries specialize in the production of goods in which they have a particular advantage, and then engage in international trade.

RELATED TERMS
  1. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  2. Terms of Trade - TOT

    The value of a country's exports relative to that of its imports. ...
  3. Detariffing

    The act of removing the pricing regulations of an industry, set ...
  4. Quota

    A government-imposed trade restriction that limits the number, ...
  5. Protectionism

    Government actions and policies that restrict or restrain international ...
  6. Import

    A good or service brought into one country from another. Along ...
RELATED FAQS
  1. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  2. What regulations exist to protect infant industries?

    There are far more protections of once-infant and now-dominant industries in the United States than regulations designed ... Read Full Answer >>
  3. In what manner will a recession likely affect the marginal-propensity-to-save rate ...

    The marginal propensity to save, or MPS, rises in most, though not all, recessions. This makes perfect sense on an individual ... Read Full Answer >>
  4. Why would a country's gross domestic product (GDP) and gross national income (GNI) ...

    A country’s gross domestic product, or GDP, and gross national income, or GNI, are likely to differ considerably because ... Read Full Answer >>
  5. While closely related, how do gross domestic product (GDP) and gross national income ...

    Gross domestic product, or GDP, and gross national income, or GNI, are the two most important economic indicators that measure ... Read Full Answer >>
  6. How does protectionism affect gross domestic product (GDP?)

    The vast majority of economic literature suggests that protectionist policies reduce the gross domestic product, or GDP, ... Read Full Answer >>
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    The Basics Of Tariffs And Trade Barriers

    Everything you need to know - from the different types of tariffs to their effects on the local economy.
  3. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  4. Economics

    What is a Resident Alien?

    A resident alien is a foreigner who is a permanent resident of the country in which he or she resides but does not have citizenship.
  5. Economics

    Explaining Protectionism

    Protectionism is government measures that limit imports into a country to protect commerce within that country against foreign competition.
  6. Economics

    What is Neoliberalism?

    Neoliberalism is a little-used term to describe an economy where the government has few, if any, controls on economic factors.
  7. Economics

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  8. Economics

    Is Texas The Future Of America?

    The top three fastest-growing cities are located in Texas and 20% of jobs created between 2009 and 2014 were in the Lone Star State.
  9. Economics

    Explaining Demographics

    Demographics is the study and categorization of people based on factors such as income level, education, gender, race, age, and employment.
  10. Economics

    The Most Likely Outcome For Greece

    After more than five years of a Greek drama, most of us have become fatigued with hearing about Greece’s debt problems, the one issue that won’t go away.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!