infant industry

The infant-industry argument in international trade suggests that new industries, especially in developing countries, need protection from established foreign competitors. This protection, often through tariffs, allows these nascent industries to grow, achieve economies of scale, and eventually become competitive on a global level.1

However, this protection can be costly for the international community, as it can lead to fragmented markets and inefficient production if multiple countries adopt similar protectionist measures. Furthermore, infant industries may not always mature into competitiveness, and the argument is sometimes misused. Economists suggest that production subsidies might be a more effective and transparent way to support these industries compared to tariffs, though subsidies can strain government revenue. The national defense argument for protection is also often seen as a pretext, with direct subsidies being a preferred alternative for ensuring the survival of essential industries.12