Final answer:
A large country may prefer import-substitution to strengthen domestic industries and reduce reliance on foreign goods, but this can result in higher costs and missed benefits of international trade. Protectionism can be used for national security or preserving cultural identity, but may also stifle the advantages provided by free trade.
Step-by-step explanation:
A large country might be better off favoring import-substitution industries instead of export industries to strengthen domestic industries and reduce dependence on foreign goods. This approach prioritizes protecting and developing domestic markets by creating high protective tariffs that encourage local production, often of consumer and capital goods. However, while this may bolster particular sectors within the economy, it can also lead to higher costs for domestic consumers and cause the country to miss out on economic benefits from international trade, such as comparative advantage and economies of scale.
In terms of national security or preserving national identity, nations may engage in protectionism to safeguard key industries. For instance, a country might refrain from importing certain goods if those goods are tied closely to national security concerns or represent an essential aspect of cultural identity, despite the economic benefits of comparative advantage.
On the other hand, international trade allows even a small economy to leverage economies of scale and benefit from competition, leading to a greater variety of products and potentially better prices. Yet, protectionist policies can inadvertently hinder these benefits, leading to a less efficient and more costly industrial environment.