<< Chapter < Page Chapter >> Page >

By the end of this section, you will be able to:

  • Explain and analyze various arguments that are in support of restricting imports, including the infant industry argument, the anti-dumping argument, the environmental protection argument, the unsafe consumer products argument, and the national interest argument
  • Explain dumping and race to the bottom
  • Evaluate the significance of countries’ perceptions on the benefits of growing trade

As previously noted, protectionism requires domestic consumers of a product to pay higher prices to benefit domestic producers of that product. Countries that institute protectionist policies lose the economic gains achieved through a combination of comparative advantage, specialized learning, and economies of scale. With these overall costs in mind, let us now consider, one by one, a number of arguments that support restricting imports.

The infant industry argument

Imagine Bhutan wants to start its own computer industry, but it has no computer firms that can produce at a low enough price and high enough quality to compete in world markets. However, Bhutanese politicians, business leaders, and workers hope that if the local industry had a chance to get established, before it needed to face international competition, then a domestic company or group of companies could develop the skills, management, technology, and economies of scale that it needs to become a successful profit-earning domestic industry. Thus, the infant industry argument for protectionism is to block imports for a limited time, to give the infant industry time to mature, before it starts competing on equal terms in the global economy. (Revisit Macroeconomic Policy Around the World for more information on the infant industry argument.)

The infant industry argument is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant, healthy industry. Implementation, however, is tricky. In many countries, infant industries have gone from babyhood to senility and obsolescence without ever having reached the profitable maturity stage. Meanwhile, the protectionism that was supposed to be short-term often took a very long time to be repealed.

As one example, Brazil treated its computer industry as an infant industry from the late 1970s until about 1990. In an attempt to establish its computer industry in the global economy, Brazil largely barred imports of computer products for several decades. This policy guaranteed increased sales for Brazilian computers. However, by the mid-1980s, due to lack of international competition, Brazil had a backward and out-of-date industry, typically lagging behind world standards for price and performance by three to five years—a long time in this fast-moving industry. After more than a decade, during which Brazilian consumers and industries that would have benefited from up-to-date computers paid the costs and Brazil’s computer industry never competed effectively on world markets, Brazil phased out its infant industry policy for the computer industry.

Questions & Answers

Why wont the app just let me look at other comments?
aaa Reply
Never mind i found out how lmao
aaa
the difference between microeconomis and macroeconomics
Prince
what is economics
KENESA Reply
ecnomics is the study of how society use there limited resources according to their unlimeted wants
Aj
some time it is also called the science of choice
Aj
You are right. I thing Economic is a world wide thought because we know that Economics is related in everywhere in our daily life.
Abdul
Where are you from?
Abdul
Me?
rajat
Lol
rajat
What is lol, man? And why?
Abdul
Lol means laugh out loud
aaa
Lots of love from India 😁😁😁
rajat
Where are you from?
aaa
From India
rajat
I am from Bangladesh.
Abdul
but why is economics considered as an inexact science
Prince
What do you do?
Abdul
I am a student of Economics Department at Dhaka University Final year.
Abdul
Im from UK
aaa
What do you do?
Abdul
Economics is considered as a social science because itbuses scientific methods to build up theories
aaa
what are disadvantages of government interacting with private sector to solve economic issues?
TUMUTUNGIRE Reply
There's going to be heavy labour expectation of labour from both the private and public sector
ADEYEMI
It depends how they interact
aaa
They good use price ceilings, price floors, taxes and VAT
aaa
They all have adv and disadvantages for both consumers and producers
aaa
what is arc method
Sandeep Reply
what is unitary elastic demand
Sandeep
what is low of demand full info?
Sandeep
Law of demand says that as price increases demand will decrease
aaa
And unitary elastic demand is when percentage change in the price of a commodotiy is equal to the percentage change in quantity demanded
aaa
law of demand States the higher the price the lower the quantity demanded and vice versa all other things being equal
Prince
what's the 7th law of demand and supply
Neba
what is shortrun
Rejoice Reply
short run is when at least one factor of production is fixed for example land
Nigel
explain the various de terminates of own price elasticity
Kwotega Reply
what do you understand by competitive firm?
Nisha Reply
yea
Tinashe
yoo
Issah
these things really confuse me a lot
Tinashe
it's very sample but i don't know how can i halp you
Moraswi
ya these are all confusing
Yuva
Therefore a competitive firm is whereby two or more firms produce a particular goods or are engaged in the same business.
Kusi
A competitive firm aims at profit and it can only be achieved based on the demand curve
Kusi
theoretically the PC firm can make no economic profit on the LR
Nelsonomics
Definition of government budget
Anand Reply
what is inelasticity
Alfayo Reply
what's utility ?
Ilyass Reply
Utility means to get satisfaction from the goods which are consuming. And it can not be measure in numerical terms
rajat
when we are buying some goods and these goods gave us satisfaction this kind of satisfaction are called utility
rmaan
Hmmmm
rajat
it is the satisfaction derived from goods and services
Emmanuel
hi i am new and i am student ecnomics 1st semester
Aj
i would like to learn from you people some thing special
Aj
it can assume by Calculating Marginal utility
bechar
it is the happiness business
Aj
how to determine total utility
Annette Reply
total utility = average utility *quantity
Mate
discuss various types of equilibrium
George Reply
when the price and quantity intersect each other in graph
Abul
what is Quantity Supply?
Nhoraine Reply
It is the amount of good's the supplies are willing to supply with a certain price
Alfayo
to the market
Alfayo
*"Goods the suppliers are willing to supply at a given price" (sorry, auto-'in'correct)
Nelsonomics
definition of microeconomics
Marion Reply
Branch of economics that deals with micro behaviour of individuals in a society. It deals with theory of Demand, Production, Firm and Welfare
jUKUN
Is a branch of economics that deals with the individual agents in an economy or in a country.
ADEYEMI
The concept of monopoly
Francis Reply
Ed Afrah
Ed

Get the best Microeconomics course in your pocket!





Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Microeconomics' conversation and receive update notifications?

Ask