Infant industry argument

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Infant industry argument

Argument that industries in the developing and emerging sectors of the economy need protection against international competition in order to establish themselves.

Infant Industry Argument

A policy position stating that new industries developing in a country need government protection. That is, the infant industry argument states that a government must subsidize these industries and/or protect them through tariffs. Proponents of this argument note that several East Asian tigers used this policy following World War II with a great deal of success. Critics maintain that these policies are capital intensive and not all states can afford them. It could also lead to retaliatory moves in countries to which a country seeks to export. See also: Import-substitution industrialization.
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The book then reviews the infant industry argument for trade.
Irwin takes the infant industry argument from cradle to grave.
Finally, infant industry argument is cited in favour of tariff protection.
Because he wants readers to make their own informed decisions, they and Ed must grapple with sunk costs, opportunity costs, present value, factor mobility, dumping, tariffs, quotas, voluntary restraint agreements, the infant industry argument, the national security argument, industrial policy, the rise of the service sector, income inequality, the causes of the Japanese catch-up, how to correctly compare incomes across countries, and many other issues and concepts.
It is the infant industry argument, which is in reality an argument for temporary protection.
Munro, 1985a) I have stated that the infant industry argument applied to coastal states and EFJ might run as follows:
While the infant industry argument is certainly legitimate, there are counter arguments which need to be taken into account.
Thus the risk exists in applying the infant industry argument that the latent comparative advantage will prove to be nonexistent.
In the case of fisheries, there is yet another problem with the infant industry argument, which has become particularly visible in Alaska.
That is, just as developing countries generally overused the infant industry argument during their import-substitution industrialization (ISI) phase from the 1950 to the 1970s, so developed countries now grossly overuse antidumping as an excuse for "temporary" protection to undo foreign trade unfairness, and that this in the end would bring the world economy to function more effectively.
The infant industry argument, while obviously correct in theory when appropriate externalities and dynamic effects are assumed, has been badly misused in practice; in large part, this was due to the inability to associate theory with ex ante empirically identifiable conditions.
For these, and other, reasons Lall advocates active and selective policy in line with the traditional infant industry arguments.

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