The infant-industry theory states that new industries in developing countries need protection against competitive pressures until they mature . This theory, first developed in the early 19th century by Alexander Hamilton and Friedrich List, is often a justification for protectionist trade policies.
What are the infant industry and dumping arguments for protection are they correct?
the infant industry and the dumping arguments for protection are not correct . protection does not save jobs. free trade cost some jobs, but it also creates other jobs. it brings about a global rationalization of labor and allocates labor resources to their highest valued activities.
What are the reasons for protecting infant industries?
- In order that the economy can become self-reliant.
- To encourage domestic production.
- To encourage consumption of locally produced goods.
- To conserve scarce foreign exchange.
- To create employment for the citizens.
- To develop the local market.
What are the benefits of infant industry argument?
Advantages of Infant Industry Argument
It helps the economy to gain self-dependence in terms of production and reduces its reliance on foreign markets . When the new industries are protected, and they grow, they bring new employment opportunities in place.
What are the arguments for protection?
- Protect sunrise industries. ...
- Protect sunset industries. ...
- Protect strategic industries. ...
- Protect non-renewable resources. ...
- Deter unfair competition. ...
- Save jobs. ...
- Help the environment. ...
- Limit over-specialisation.
What is protecting infant industries?
What Is the Infant-Industry Theory? The infant-industry theory states that new industries in developing countries need protection against competitive pressures until they mature and develop economies of scale that can rival their competitors ‘.
Why is it difficult to stop protecting infant industries?
Why is it difficult to stop protecting them? Infant industry agreement need the time for maturity before competition by blocking import for some time . The blocking of the import is important so that the infant firm advances in equal terms for the global market.
What are the problems with protecting infant sectors?
There are several criticisms of the infant industry argument: Infant industry protectionism may encourage industries to be inefficient . Developing industries that have protection may lack the incentive to be efficient and competitive. Infant industry protectionism may result in retaliation from other countries.
What is the unfair competition argument?
One of the strongest arguments for some degree of trade protectionism is the tendency for unfair competition to emerge , particularly in developing markets without the infrastructure to monitor their businesses and enforce penalties. This is called the unfair competition argument.
How does the government protect infant industries?
A government planner can protect the infant industry using domestic production subsidies, tariffs, or quotas in order to maximize domestic welfare over time. ... Given such restrictions, the paper shows that quotas induce higher welfare levels than tariffs.
What is meant by infant industry argument?
The infant industry argument is an economic rationale for trade protectionism . The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale.
How infant industry is protected in WTO?
The “infant industry” clause of the WTO permits developing countries to deviate temporarily from their obligations in order to promote the establishment of a new industry by, for example, raising a bound tariff rate or imposing an import restriction on the goods which the new industry will be or is producing.
What is the infant industry argument quizlet?
What is meant by the infant industry argument? The blocking of imports for a short time, to give the affected industry time to mature, before eventually it starts competing on equal terms in the global economy .
What are the fallacious and questionable arguments for protection?
- Keeping Money at Home Argument: According to Abraham Lincon, protection prevents the purchase of foreign goods and thereby keeps money at home. ...
- Home Market Argument: ...
- National Defence Argument: ...
- National Self-Sufficiency Argument:
What are the 5 main arguments in favor of restricting trade?
The most common arguments for restricting trade are the protection of domestic jobs, national security, the protection of infant industries, the prevention of unfair competition , and the possibility to use the restrictions as a bargaining chip.
What are the 6 arguments for protectionism?
- the protection of domestic jobs,
- national security,
- protection of infant industries,
- the maintenance of health, safety and environmental standards,
- anti-dumping and unfair competition,
- a means of overcoming a balance of payments deficit and.
- a source of government revenue.
