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The Import Substitution Trap in the Realities of the Automotive Industry

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  • V. R. Partsvaniya

    (Institute of Social Sciences at the Russian Presidential Academy of National Economy and Public Administration (RANEPA))

Abstract

— The article examines mechanisms underlying the formation of the “import substitution trap,” which is a stable ineffective institution that serves as a means of protecting national producers from foreign competition. The costs and risks of rooting this institution in the Russian automotive industry are analyzed, the import substitution strategies of the Russian government at the current stage of the industry’s development are investigated, the experience of import substitution in the foreign automotive industry is summarized. The conclusion is substantiated that the import substitution policy brings short-term effects but is disadvantageous in the long term. Domestic substitutes can gain a strong market position but their success is fragile and requires continued government support and protectionist patronage. The author shows that the policy of import substitution becomes successful when it relies on competition, when the domestic import substitute, having entered the market and strengthened its position, is gradually deprived of preferential conditions, and the state support of its manufacturer is gradually cut while the market is transferred to a “freewheeling” mode for all players.

Suggested Citation

  • V. R. Partsvaniya, 2022. "The Import Substitution Trap in the Realities of the Automotive Industry," Studies on Russian Economic Development, Springer, vol. 33(2), pages 203-210, April.
    • Handle: RePEc:spr:sorede:v:33:y:2022:i:2:d:10.1134_s1075700722020095
    DOI: 10.1134/S1075700722020095
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    References listed on IDEAS

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    1. Panle Jia Barwick & Shengmao Cao & Shanjun Li, 2021. "Local Protectionism, Market Structure, and Social Welfare: China's Automobile Market," American Economic Journal: Economic Policy, American Economic Association, vol. 13(4), pages 112-151, November.
    2. Waterbury, John, 1999. "The Long Gestation and Brief Triumph of Import-Substituting Industrialization," World Development, Elsevier, vol. 27(2), pages 323-341, February.
    3. Yury Simachev & Mikhail Kuzyk & Nikolay Zudin, 2016. "Import Dependence and Import Substitution in Russian Manufacturing: A Business Viewpoint," Foresight and STI Governance, National Research University Higher School of Economics, vol. 10(4), pages 25-45.
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    6. V. Zagashvili., 2016. "Foreign experience of import substitution and possible conclusions for Russia," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
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