“Even if a domestic industry will, within some years, have a cost advantage over its foreign competitors, when the industry is young its costs will invariably be higher … [and it must therefore] be protected from lower-cost foreign competition” (Egger, 2006, p.9).
The infant industry argument (IIA), initially devised by Alexander Hamilton (in 1791) and Friedrich List (in 1841) (Hoekman, 2001, p. 23), is a widely-used concept to justify the protection of young start-up companies against international competition.
By invoking the IIA - which is even recognized by the WTO as a legitimate reason for restricting trade - countries apply protective regulations in favour of their domestic industries through various measures such as tariffs, import quotas and subsidies (Hill, 2009, p. 218).
But just like every trade barrier, the argument is intensively discussed and contradicted in economic science. Adversaries of the concept show the danger of abuse, and question its validity in general, referring to the scientifically proven advantages of free trade.
By analyzing its pros and cons and showing successful examples as well as downsides of the concept, this paper will therefore examine whether the IIA can be considered to be valid, and if so, under which circumstances it should be applied.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Scientific discussion of the IIA
- The IIA - general concept
- Rationales in favour of the IIA
- Refutations of the IIA
- The IIA in praxis - empirical cases
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to analyze the infant industry argument (IIA) and assess its validity in the context of international trade. It explores the rationale behind the IIA, examines its scientific underpinnings, and evaluates its practical application through empirical cases. The paper also delves into the counterarguments and critiques surrounding the IIA.
- The Infant Industry Argument (IIA) and its justification
- Rationales for protecting emerging industries
- Economic implications and potential downsides of the IIA
- Empirical evidence and case studies of the IIA in practice
- The debate on the effectiveness and validity of the IIA
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: Introduces the concept of the IIA, outlining its historical origins and contemporary relevance in international trade. It highlights the ongoing debate surrounding the validity of the IIA and previews the paper's focus on exploring its strengths and weaknesses.
- Scientific discussion of the IIA: Examines the theoretical foundation of the IIA, exploring its general concept, its rationales, and the arguments against it. This section delves into the underlying assumptions and economic models related to the IIA.
- The IIA in praxis - empirical cases: Explores the practical application of the IIA through specific examples of industries or countries that have implemented protectionist measures. This section assesses the effectiveness and consequences of the IIA in real-world settings.
Schlüsselwörter (Keywords)
Infant Industry Argument, international trade, protectionism, tariffs, subsidies, import quotas, free trade, economic development, learning-by-doing, economies of scale, welfare loss, empirical evidence, case studies, WTO.
- Quote paper
- Wiebke Klingemann (Author), 2012, The infant industry argument - valid or not?, Munich, GRIN Verlag, https://www.grin.com/document/197293
