The infant industry argument

Question 1

What is the infant industry argument?

Answer 1

The temporarily protected industry will become internationally competitive
=> dynamic comparative advantage

Question 2

When can the infant industry argument can be supported?

Answer 2

Present value of national benefits when the economy becomes internationnly competitive
>
Present value of the stream of national costs furing the period of protection

Question 3

What are the 3 problems of the infant industry argument?

Answer 3

i) benefits should offset costs
ii) difficult to identify industries with dynamic comparative advantage
iii) industries wish to remain protected