"While import substitution policies might create jobs in the short run, as domestic producers replace foreign producers, economics theory shows that in the long run output and growth will be lower than it would otherwise have been. This is because import substitution denies the country the benefits to be gained from specialisation and foreign imports. The law of comparative advantage shows how countries will gain from trade. Moreover, protectionism leads to dynamic inefficiency: Domestic producers have no incentive from foreign competitors to reduce costs or improve products. Import substitution can impede growth through poor allocation of resources, and its effect on exchange rates harms exports."
"While import substitution policies might create jobs in the short run, as domestic producers replace foreign producers, economics theory shows that in the long run output and growth will be lower than it would otherwise have been. This is because import substitution denies the country the benefits to be gained from specialisation and foreign imports. The law of comparative advantage shows how countries will gain from trade. Moreover, protectionism leads to dynamic inefficiency: Domestic producers have no incentive from foreign competitors to reduce costs or improve products. Import substitution can impede growth through poor allocation of resources, and its effect on exchange rates harms exports."