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Protection Needed for Infant Industry

Explain why an infant industry may need protection.

Category:

International Trade and Exchange Rates

Frequently asked question

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Answer

Begin each paragraph with a topic sentence that presents the main idea.

➡Title: The Need for Protection of Infant Industries
🍃Introduction: The development and growth of new industries, often referred to as infant industries, play a crucial role in a country's economic progress. However, due to various challenges they face, such as limited resources and competition from established foreign firms, infant industries may require protection. This essay aims to explore the reasons why infant industries may need protection and the potential benefits that such protection can bring.
I. Limited Resources and Time for Growth ➡️1.➡️1 Lack of Resources: Infant industries often struggle with limited financial resources, access to capital, and technology. This hampers their ability to compete on equal terms with well-established foreign firms that already possess substantial resources and economies of scale.
➡️1.➡️2 Need for Time and Potential: Protection is necessary to provide infant industries with the time and opportunity to grow, establish themselves, and build a solid foundation. This allows them to develop the necessary capabilities, infrastructure, and expertise to compete effectively in the market.
II. Advantages of Economies of Scale ➡️2.➡️1 Competing with Established Foreign Firms: Foreign firms may already benefit from economies of scale due to their established operations and larger market presence. This advantage enables them to produce at lower costs and offer competitive prices, posing a significant challenge to infant industries.
➡️2.➡️2 Lower Costs and Price Competitiveness: Economies of scale allow firms to reduce their per-unit production costs. By protecting infant industries, they can gradually achieve economies of scale, leading to cost reductions and enhanced price competitiveness. Without protection, foreign firms may flood the market with cheaper products, making it difficult for infant industries to survive.
III. Impact on Employment, Trade, and Economic Growth ➡️3.➡️1 Employment Generation: The growth of infant industries can have a positive impact on employment by creating new job opportunities. Protecting these industries allows them to expand and absorb a larger workforce, contributing to overall employment growth.
➡️3.➡️2 Promotion of Domestic Products and Trade Balance: By protecting infant industries, a country can foster the development of domestic products, reduce reliance on imports, and increase exports. This promotes a more balanced trade situation and contributes to improving the trade balance, which is essential for long-term economic stability.
➡️3.➡️3 Stimulating Economic Growth: Infant industries play a vital role in driving economic growth. By protecting these industries, governments can nurture innovation, technological advancement, and increased productivity. This, in turn, leads to higher levels of economic growth, improving living standards and fostering economic development.
👉Conclusion: The protection of infant industries is crucial for nurturing their growth and allowing them to overcome initial challenges. By providing necessary support, such as tariffs, subsidies, or trade restrictions, governments can create an enabling environment for infant industries to thrive. This protection allows them to develop competitive advantages, achieve economies of scale, create employment opportunities, and contribute to the overall economic growth and stability of a nation.

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I. 🍃Introduction
- Definition of infant industry
- Importance of infant industry

II. Reasons for infant industry protection
- New industries need time to grow and establish themselves
- Lack of resources
- Competition with foreign firms
- Economies of scale

III. Benefits of infant industry protection
- Increased employment
- Reduced imports/increased exports
- Promote domestic products
- Increased economic growth

IV. Risks of infant industry protection
- May not survive in the long run
- May not be able to compete with foreign firms
- May increase unemployment
- May reduce economic growth

V. 👉Conclusion
- Infant industry protection is a complex issue with both benefits and risks
- The decision to protect an infant industry should be made on a case-by-case basis.

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Logical explanation which might include: New industries - need time/potential to grow / to survive / to establish themselves / to build up a reputation / lack resources - need time to take advantage of economies of scale / may be competing with foreign firms which are more able to take advantage of economies of scale - economies of scale lower costs / foreign firms may have lower costs -. Lower costs may reduce price the infant industry can charge - make the infant industry more competitive / be able to compete / foreign firms may be more competitive / foreign firms may drive the infant industry out of business -. The growth of infant industry may increase employment / elimination may increase unemployment - growth of infant industry may reduce imports/increase exports/promote domestic products / elimination of infant industry may increase imports/reduce exports - growth of infant industry may increase economic growth / elimination of infant industry may reduce economic growth -.

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