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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Those who believed in free trade came up with what came to be called the 'infant industry argument', according to which it was right to protect those enterprises that were in the early stage of development.
Local content policies have their origins in the writings which outlined the 'Infant Industry Argument', an argument that was first articulated in the 1790s.
The infant industry argument had traditionally led our government to use high import tariffs to protect domestic producers from foreign competition.
Fourth, 'the infant industry argument' is also advanced by some sectors of business to oppose grant of MFN status to India.
The bases for dirigiste industrial policies are variants of the infant industry argument based on the presumed existence of what are termed pecuniary externalities.
Thierry Rommel, the EU ambassador to Malaysia, said Malaysia uses the excuse of ''infant industry argument'' allowed under the World Trade Organization to bar foreigners access into markets like the automotive, steel and public procurement sectors.
now-forgotten economist Daniel Raymond, who first systematically developed the infant industry argument. List, considered the father of the infant industry argument, started out as a free-trader (ardently supporting the Zollverein, a customs union which eliminated trade barriers among German states) and learned about this argument during his exile in the United States during the 1820s.
While theoretical challenges emerged as to the optimality of free trade based on distortions in factor markets (such as capital market imperfections in developing countries justifying protection in the 1950s a la the infant industry argument) and product markets ("new trade theory" arguments of welfare increasing trade interventions due to imperfectly competitive product markets), by the end of the 1990s they had subsided.
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.

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