国际贸易理论与实务（英文版）Ch.8Argumentagainstfreetrade教学教材演示幻灯片.pptVIP

;1. Infant industry argument An argument in favor of protecting the domestic backward industries through government backing, help, and intervention. (valid as from the standpoint of enhancing the welfare of the world as a whole) The main motive is to create a level playing field. Home country industry “late start”, often do not have the economies of scale (crux of the argument) If protection temporarily, firms realize sufficient economies of scale (internal or external) Eventually per-unit costs fall, home industry becomes an exporter. At this point protection can be removed. Consumers finance the expansion, but more than repaid when the industry grows.;The argument was first explicated by Alexander Hamilton in his 1790 Report on Manufactures. The first US Secretary of the Treasury. Was later picked up by Friedrich List in his 1884 work The National System of Political Economy ;Many countries have successfully industrialized behind tariff barriers. For example, from 1816 through 1945, tariffs in the USA were among the highest in the world. Almost all NDCs [Newly Developed Countries] had adopted some form of infant industry promotion strategy when they were in catching-up positions.” But it is controversial as a policy recommendation: Even when infant industry protection is well– intentioned, infant industries may never grow up”. ;Two problems that come up with this argument: The identification of infant industry. The industries that are likely to become low-cost producers should be indentified. Costs amount of foreign exchange saved? (2) The form of protection. Tariff or subsidy？ A subsidy has a lower welfare cost to the country than a tariff. Why not let the industry proceed on its own? (as Entrepreneurs in a market economy would undertake expansion on their own ) Build efficient system in allocating funds through deregulation or government guarantees