Substitution between Domestic and Foreign Goods Substitution between domestic and foreign goods and services has reached an all-time high in the world today and is expected to continue to increase sharply in the future. For homogeneous products such as a particular grade of wheat and steel, and for many industrial products with precise specifications such as computer chips, fiber optics, and specialized machinery, substitutability between domestic and foreign products is almost perfect. Here, a small price difference can lead quickly to large shifts in sales from domestic to foreign sources and vice versa. Even for differentiated products, such as automobiles and motor Cycles, computers and copiers, watches and cameras, films and TV programs, soft drinks and cigarettes, soaps and detergents, commercial and military aircrafts, and most other products that are similar but identical, substitutability between domestic and foreign products is very high and rising. Despite the quality problems of the past, U.S.-made automobiles today are highly substitutable for Japanese and Euro- pean automobiles, and so are most other products. Furthermore, with many parts and components imported from many nations and with production facilities and sales around the world often exceeding sales at home, even the distinction between domestic and foreign products is fast becoming obsolete. Should a Honda Accord produced in Ohio be considered American? What about a Chrysler minivan produced in Canada? Is a Kentucky Toyota or Mazda which uses nearly 50 percent of imported Japanese parts American? It is clearly becoming more and more difficult to define what is an American automobile even after the American Automobile Labeling Act of 1992, which requires all automobiles sold in the United States to indicate what per centage of the car's parts are domestic or foreign. Indeed, one could even ask if the question is relevant in a world growing more and more interdependent and globalized. question: what promotes substitution in this reading? and how