What is understood by infant industry arguments against free trade?

What will be an ideal response?


Infant industries are fledgling domestic industries. When an economy opens up to free trade, domestic industries face competition from foreign industries. Initially, these infant industries may not have a comparative advantage in production, but if provided protection from foreign trade, they are eventually likely to develop some comparative advantage. On the other hand, foreign industries may have access to better technology and human resources and can also enjoy economies of scale. Thus, they may be able to produce at a cost lower than that of new domestic industries. This allows them to price the goods lower than domestic industries. Therefore, domestic infant industries are adversely affected when a country opens up to free trade, and the infant industry argument against free trade suggests that they should be protected until they develop some sort of comparative advantage.

Economics

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Economics