What is an infant industry. What is an Infant Industry? (with pictures) 2019-01-20

What is an infant industry Rating: 8,7/10 205 reviews

Infant Industry

what is an infant industry

Despite its appeal to common sense, the infant-industry argument is often criticized. In contrast, young industries in East Asian countries such as and benefited from temporary protection, most likely because these sectors were oriented toward exports. I've studied economics and am aware of a number of market theories. According to this view, countries should concentrate on those economic sectors in which they can produce more efficiently and cheaply than their trading partners. Mature industries versus infant industries have three types of knowledge that give them a competitive edge. The main motive behind Infant Industry Argument is to create a level playing field between a backdated industry and a highly advanced industry producing similar commodities. In addition, countries that put up will often face retaliatory barriers to their exports, potentially hurting the same industries that infant industry protection is intended to help.

Next

Infant Industry

what is an infant industry

On the one hand, the economic history of some advanced countries suggests that protecting young industries was conducive for industrial development. Infant industries are very vulnerable to competition and weakness in the market because they are not well established. After all, national comparative advantage comes from being different, not from doing the same as others do. Mr Brimble said there is a role to be played by a carefully developed industrial policy, while policy development needs to take account of the context and be implemented accountably. For example, from 1816 through 1945, tariffs in the United States were among the highest in the world. Many protected industries never quite fail. Subsidies may be indirect, as in when import duties are imposed or some prohibition against the import of a raw or finished material is imposed.

Next

Infant Industry Argument

what is an infant industry

There was a definite need for strong desks in a school, as the children had to sit on the hard ground for five to six hours a day. They need a tariff, so they argue, to have enough revenue to research the trade secret. Hamilton and List, the pioneers of the infant-industry concept, already noted that such a bandwagon effect in is inefficient from an economic perspective. Look at their competition, oil and coal companies which are some of the oldest, strongest and most profitable in the world. During this period, the new firm or industry is given a chance to grow up. The infant industry argument is said to be an economic argument that favors a protectionist approach to trade. Hamilton specifically suggested that this aid could likewise be offered by stamping out competition through import duties or, in an extreme case, the banning of imported products of that type completely.


Next

What is the infant industry argument?

what is an infant industry

In order to gain greater profits, eventually the market should expand from country to the globe. They argued that in such uneven playing fields, the domestic, traditional, and backward industry would require government protection and backing either through tariff protection on a temporary basis or forwarding subsidy towards these industries. These advantages could include being able to purchase in bulk, get better loan rates, and allocate personnel resources more efficiently. A policy position stating that new industries developing in a country need government protection. The second is that the ultimate gains of infant-industry protection for society must be large enough to compensate for the costs incurred during the period of government support. Journal of Political Economy 77 3 : 295-305.


Next

Infant Industry Theory Definition & Example

what is an infant industry

Otherwise, tariffs simply serve to penalize consumers by denying them access to more competitively priced goods. Over the years, the infant-industry argument has persuaded many policymakers all over the globe. This kind of approach to economically helping third world countries really makes sense. There seems to be a number of different start up companies with a lot of interesting ideas, but no big company that dominates the market. The argument was first fully articulated by in his 1790 , was systematically developed by , and was later picked up by in his 1841 work The National System of Political Economy, following his exposure to the idea during his residence in the United States in the 1820s. Others are calling for Myanmar to take a generally more protectionist stance overall.

Next

What is INFANT INDUSTRY ARGUMENT? What does INFANT INDUSTRY ARGUMENT mean?

what is an infant industry

During the 1950s and 1960s, infant-industry promotion in and Africa often took the form of import substitution, or the replacement of imported goods by products from domestic industries. These give an infant industry a chance to get off its feet and develop. One way to do this is to raise tariffs. This is most frequently used when foreign maturity is thought to be due to a trade secret and suffers the same deadweight loss as a tariff. Some of these barriers will never relax. Indeed, the argument seems plausible and is theoretically valid under the right set of circumstances. In assessing opportunities for industrial growth, the state usually is no better informed than the market.


Next

What is INFANT INDUSTRY? What does INFANT INDUSTRY mean? INFANT INDUSTRY meaning & explanation

what is an infant industry

One industry that immediately comes to mind is the renewable energy industry, especially wind and solar. With harsh importation laws or tariffs in place, other countries may no longer be interested in trade. A new car manufacturer, for example, cannot realistically hope to compete with an established foreign producer of cars that can make cars cheaply and more efficiently. Among other measures, the nation ensured that competition was not allowed to import into their market especially when the destined goods were of superior quality. Thus stated, the infant-industry argument does not conflict with the principle of comparative cost advantage.

Next

Infant industry argument

what is an infant industry

The first is that the sector must eventually be able to compete on its own. Economists argue that state support for infant industries is justified only if there are. The infant industry argument may impact trade significantly or very little. The empirical evidence on the effectiveness of infant-industry protection is inconclusive, however; both developed and developing nations show mixed results. Other related government actions include subsidizing production or paying for industry-related research with public funds. For further detail one should refer to the Reports of the Secretary of the Treasury on the Subject of Manufacturers 1791 regarding infant industries.

Next

Infant industry argument

what is an infant industry

Despite this, infant industry protection is controversial as a policy recommendation. After completion of this protectionist regime or protectionism, the government would allow its industries to be subjected to international competition to fend for itself. Governments are sometimes urged to support the development of infant industries, protecting home industries in their early stages, usually through subsidies or tariffs. While many countries including Myanmar had pursued failed protectionist policies in the past, proponents of infant industries say it is important the policies are targeted at making companies internationally competitive rather than focusing on the domestic market. Just look at the United States -- when your industry vanishes, you are in trouble. The basic argument is that when an industry develops, particularly in non-industrialized areas, it has specific disadvantages. This industry never matured; the technological gap between Brazil and the rest of the world actually widened, while the protected industries merely copied low-end foreign computers and sold them at inflated prices.

Next