Question

How can governments identify good candidates for infant industry protection? Can you suggest some key characteristics of good candidates? Why are industries like computers not good candidates for infant industry protection?

Short answer

Governments can identify good candidates for infant industry protection by looking for industries with high potential for growth, capacity for building a skilled workforce, possibility of economies of scale, technological spillover, and strategic importance. Industries like computers may not be suitable candidates for protection due to high competition levels, rapid technological advancements, existing economies of scale, limited spillover effects, and fewer job opportunities.

Step-by-step solution

Understanding Infant Industry Protection

Infant industry protection is a policy to protect relatively new and underdeveloped industries in a country from foreign competition. Governments may utilize measures like tariffs, import quotas, or subsidies to shelter these industries until they can compete on an international level.

Identifying Key Characteristics of Good Candidates for Infant Industry Protection

Some of the key characteristics of industries that could be good candidates for infant industry protection are: 1. High potential for growth: Industries that have the potential to grow and excel in the future if given proper support and protection could be considered as suitable candidates. 2. Capacity for building a skilled workforce: Industries that can generate jobs and provide specialized training to the local workforce. 3. Possibility of economies of scale: Industries that can achieve economies of scale as they grow are expected to be more competitive, so protecting them during their infancy stage makes sense. 4. Technological spillover: An industry that has the potential for technological advancements and innovations that can be transferred to other industries in the country. 5. Strategic importance: Industries that are essential for national security, self-reliance, or sustainable development.

Analyzing Why Industries like Computers Are Not Good Candidates for Infant Industry Protection

Industries like computers may not be good candidates for infant industry protection because: 1. High level of competition: The computer industry is highly competitive globally, with many established players continuously investing in research and development. It might be challenging for a new entrant to catch up in such an environment despite the protection. 2. Rapid technological advancements: The pace of innovation in the computer industry is very high and may outpace the ability of a protected industry to keep up with the latest advancements. 3. Economies of scale already achieved: Many computer manufacturers have already achieved economies of scale, enabling them to produce computers at low costs. An infant industry may struggle to match these costs, even with protection. 4. Limited spillover effects: The computer industry is highly specialized and may not provide significant technological spillover benefits to other domestic industries. 5. Fewer benefits for the domestic workforce: Since the computer industry is capital-intensive, it may not create as many job opportunities for the local workforce as labor-intensive industries. In conclusion, identifying good candidates for infant industry protection involves analyzing the potential of an industry to grow, create jobs, and contribute to the economy while considering factors like competition, technological advancements, and local workforce benefits. Industries like computers may not be suitable candidates for protection due to high competition levels, rapid technological advancements, existing economies of scale, limited spillover effects, and fewer job opportunities.