Which policy uses trade restrictions and subsidies to promote domestic production of manufactured goods?

• A. Parastatals
• B. Import Substitution
• C. Neoliberalism
• D. Mexican Miracle

Answer: (B)

The main idea behind this approach is to build up domestic manufacturing by shielding it from foreign competition and supporting it with government help. Trade restrictions like tariffs or quotas make imported manufactured goods more expensive, giving local industries room to grow, while subsidies, tax breaks, or favorable government support reduce costs and encourage investment in domestic production. This combination—protecting new industries and backing them with state support—is the classic Import Substitution Industrialization strategy. In Mexico and other Latin American countries after World War II, ISI aimed to reduce reliance on imports and foster a growing manufacturing sector, links that are sometimes associated with the period known as the Mexican Miracle. Parastatals are about government-owned enterprises, neoliberalism pushes for free trade and privatization, and the Mexican Miracle refers to the growth period itself rather than a specific policy tool.