How to Cope With Import Competition

Governments impose policies that affect trade between to countries, sometimes resulting in an increase of import competition. Companies have several options when faced with government influences on trade that increase import competition. One option is to move operations to a lower-cost country. This will allow companies to produce more cheaply, however many companies lack the proper resources to exercise this option. A second option is for the company to shift focus to specific market niches that attract less international competition. However, in many industries, a problem arises with identifying profitable market niches. A third option is for companies to innovate internally, in order to make domestic output more competitive. This will usually include trying to create greater efficiencies or products that are superior to the international competition. The problem is that the foreign companies usually will quickly copy any internal efficiency that is developed.

If a company cannot successfully combat import competition caused by foreign government's subsidies, they often ask their own governments for help. Companies request that their government restrict imports in their industry or open up export markets for them to compete. However, governments cannot help every company that faces competition from foreign imports. Companies stand the best chance of receiving help from their government if they ally with the other domestic companies in their industry. The government still might not be willing to help, as in most cases helping one industry will end up hurting another.

Written by Carl Phelps, Research Associate for GLOBAL ID, LLC
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