It is a set of arguments that is involved in the proper functioning of the international trade. There are many things that are involved in it, but is based on the infant industry argument, which is very important to know. Get New Trade Theory Homework Help & Essay writing help by tutorspoint.com. experts.
Nature of the infant industry argument:
It is essential to know the nature of this argument. It is very important to know that it is not a static one and that it keeps changing with time. This is because the attitude of the government to protect the domestic industries would not last for long. It would last for the time period when there is a need for the industry to survive in the market. When this is done, the protectionist attitude of the government stops to exist. This is when the domestic industries are let to compete in the international market all by themselves.
This is the argument that is made use in economics to apply for corrections of the distortions that are present in the industry. They are the distortions that are very short lived and cease to exist after a certain period of time. This argument will hold good until the industry find a place for itself in the market, after which it can sustain on its own.
The main reason why this infant industry argument happens is because of the need to create a playing field. This would be between the advanced industries in the market and the highly outdated and older industries or the very new ones who do not have much knowledge or chances of survival. They should be done between the industries of similar kind that produce the same good. This is the argument that is often used by the underdeveloped countries or the developing countries in the nation. In case this argument does not happen, the industries would have to face the international market, in which case the survival of their products would become highly challenging to them.
The infant industry argument would require lot of funding that would have to go in to the process. They would need this from the government on a very primary basis. This is possible to the government only when they have a high income of the economy than that of the non protection phase.