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25 June, 15:24

what is the problem with the argument that infant industries need to be protected from foreign competitions

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  1. 25 June, 18:18
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    The problem with the argument that infant industries need to be protected from foreign competitions are as follows:

    1, Fall in standard of living

    2. Barrier to free trade

    3. Invitation to trade wars

    4. Protection of inefficient industries

    5. Distortion of free market actors

    Explanation:

    1. Fall in Standard of Living - Consumers are not forced to patronize producers of substandard products due to the barriers to suppliers of high quality imported goods.

    2. Barrier to Free Trade - Trade protection is a barrier to free international trade, the gains of the principles of comparative cost advantage upon which international trade is established will be lost.

    3. Invitation to Trade Wars - Other countries may take retaliatory measures

    which may eventually lead to trade war between or among trade partners.

    4. Protection of Inefficient Industries - The incentive to perform better is not there when infant industries are protected from foreign competitors.

    5. Distortion of free market actors - Protection leads to distortion in market equilibrium which will lead to market failure.
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