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Taiwan is an example of successful economic development through pursing import substitution Taiwan successfully avoided many of the pitfalls which countries trying to develop their export products typically fall into The typical process for developing an industry for import substitution is to identify an industry where there may be a comparative advantage erecting protective barriers stimulating the development of that industry and then removing the protective barriers once the industry can be competitive Taiwans success can be attributed to following the proscribed procedure and avoiding the temptations which cause many developing industries to fail Taiwan went from being an exporter of mushrooms to an exporter of electronics This is because Taiwan was successful in selecting which industries to pursue development Taiwan is an island nation with a relatively high population therefore it did not make sense for Taiwan to pursue an agricultural export sector because of its relatively scarce land Taiwan identified that it was importing consumer goods so it chose to focus on this industry because Taiwans comparatively abundant labor would allow it to develop a successful manufacturing industry Countries often fail at developing successful import substitution industries because the target the incorrect sectors to develop All to often countries target industries based on prestige rather than comparative advantage A good example of developing countries incorrectly choosing to develop prestigious industries over industries where they have a comparative advantage is when they try to develop capital-intensive industries such as automobile manufacturing While it may be a source of national pride it is difficult to develop an industry to produce such a technologically complicated and capital-intensive product while being competitive in the global market place The second step to successful import substitution is erecting trade barriers Taiwan did this in 1953 by placing extensive tariffs and quotas on consumer goods Taiwan avoided placing protective barriers over other industries where it does not have a comparative advantage Many countries often make the mistake of using
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