According to WTO (1998), the core principles of GATT now (WTO) include the most favored
nation, tariff reduction, national treatment, tariff preferred, and transparency. The Most Favored
Nation (MFN) rule is fundamental to the GATT's entire structure. According to Article I of the
GATT, if one GATT (now WTO) member provides another country "more favorable treatment"
(such as a decrease in the customs tax due to importation of a certain product), the other party
must promptly and unconditionally reciprocate. The second fundamental premise is that
members make commitments to indicate the maximum level of import duty, another charge, or
condition that they will impose on certain types of products imported. Tariff preferred is also
used to protect the interest of countries that are members of GATT and WTO. The idea of
national treatment states that a product's domestic provider should only be protected by border
action.
Advantages of Import Substitution
Disadvantages of Import Substitution
Suitable for large domestic economy
Inefficiency
Due to heavy protectionism, ISI restricts the
economy while protecting domestic businesses.
Increased savings
Minimize investment
Firms
sought
minimize
to
maximize
investments
since
profits
and
they
were
protected from foreign competitors and had a
safe home market.