Which statement best describes the core difference between import-substitution industrialization and export-led growth?

• A. Import-substitution protects domestic industries via tariffs; export-led growth relies on expanding exports in competitive sectors; outcomes depend on institutions and external demand.
• B. Import-substitution protects domestic industries by tariffs; export-led growth relies on expanding exports in competitive sectors; outcomes depend on institutions and external demand.
• C. Export-led growth protects domestic industries via tariffs; import-substitution relies on expanding exports in competitive sectors; outcomes depend on institutions and external demand.
• D. Import-substitution emphasizes export expansion, while export-led growth relies on protecting domestic industries

Answer: (B)

The main idea here is the direction of a country’s development strategy. Import-substitution industrialization relies on shielding domestic firms from foreign competition, typically using tariffs and other trade barriers to protect and build local industries so they can substitute for imports. In contrast, export-led growth focuses on expanding sectors that can compete internationally, pushing the economy to specialize in and export goods and services, with growth driven by demand from the global market. The outcomes of each approach depend on the country’s institutions (policy credibility, governance, implementation) and, for export-led growth, on external demand from abroad. That combination—protection at home versus competitive, outward-oriented expansion—is the key distinction.