Infant Industry

Infant industry argument an economic protectionist measures by countries so that industries (mainly manufacturing) industries of other countries than the country enacting the measure can produce cheaper goods and services can be protected as used is. Measures before Alexander Hamilton, the nation's first Treasury Secretary was debated in the United States. Before the American Revolution, the UK industry with the development of their own colonies, Britain was disappointed that so many can benefit from its mercantilism. In addition, strong fees will raise capital for the new Republic. Friedrich List (1856) in Germany used a similar argument to protect Germany against British industries. John Stuart Mill argued in economic terms spruce eventually moved on.

Infant industry argument protectionist tariff measures using the host country that only those objects (hence the term baby) has begun construction of a particular industry on imported goods of the same type as (a preset time) promotes. Since this industry is in its infancy, not to their large-scale production have the opportunity to get a learning curve. Therefore, the argument assumes two things. First, the argument assumes that industry leaders have a learning curve so that it came after a predetermined period of time the goods will be able to get the price match. Second, infant industry argument (labor, materials, etc.) using knowledge of the country are the same or the same as other countries. Modern-day nation state in economic activity impossible to make many holes infant industry argument, or at least inappropriate.

First, World Trade (WTO), Organization and regional trade agreements to reduce the fee increase sought free trade. Therefore, a country that wants to use an infant industry argument and could face retaliation by the many countries in the organization is a partner and not just the country against which protectionist tariffs enacted before the country. Next, are violating the principles of comparative advantage. All things being equal, it's a good nationstate to an industry in which they have low efficiency or opportunity cost is not in the interest of removing the resources. If a nation-state principles of comparative advantage, thus protecting the resources being used inefficiently in the industry efficient industries (the nation-state is better than the other nation states) will be distributed to.

In addition, today's global economic climate, Western Europe and the United States an input (dollars / hour wage) as a developing country like India, China or the cost of labor is not the same as. Late in the mid 19th century, labor costs were comparable. Therefore, currently the only ethically less developed countries could use this argument. In addition to labor cost disparity, the country's other natural resource inputs that the country currently producing at a lower price than can be good. Once the charges are raised, these inputs that the infant industry argument is the product in terms of opportunity cost is protected by prohibitive costs of making a general effect. Then, when determining the initial charge should be removed less than an economic issue and starring duties for the country is politically.

Infant industry argument presupposes that protective duties can be taken off the industry with other industries, the level of nation states and can meet domestic demand, as well as other countries will export these goods. The "even" level is the open for debate. In addition, the infant industry argument presupposes that the defense industry to invest in the industry with other nation states will continue to keep in the same industry. If the industry Due to frequent changes in new investment, defense industry for many years may have tariff protection.

Also, the argument is less clear when other players join the industry after some companies want to have been preserved. Finally, it is ethically inappropriate when the trade does not occur naturally by Adam Smith ("invisible hand") is. Comparative advantage and opportunity cost, resources and relate naturally to build nation states that the products can produce most cheaply should flow to. Consumer demand and supply with the normal cycle to work should receive a product on its balance value.

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