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

In short, governments can identify good candidates for infant industry protection by assessing factors such as high initial capital requirements, steep learning curves, potential for economies of scale, and strategic importance. Industries like computers are not suitable candidates for protection due to their rapid technological progress, complex global supply chains, and highly competitive markets.

Step-by-step solution

Understanding Infant Industry Protection

Infant Industry Protection is a strategy used by governments to protect new and emerging domestic industries from international competition until they become mature and competitive. This protection can take the form of tariffs, import quotas, subsidies, or other means of support.

Characteristics of Good Candidates

There are some key characteristics that make certain industries better candidates for infant industry protection: 1. High initial capital requirements: Industries that require a significant amount of capital investment to start up are more likely to benefit from protection, as the support can help them overcome these barriers to entry. 2. High learning curve: Industries with a steep learning curve can benefit from protection, which allows them time to develop expertise and experience without being threatened by more established competitors. 3. Potential for economies of scale: Industries with strong potential for economies of scale can benefit from protection, as it can help them achieve the necessary size and scale to compete effectively. 4. Strategic importance: Industries that are considered of strategic importance to a country, such as defense or energy, are more likely to receive support and protection.

Identifying Good Candidates

Governments can identify good candidates for infant industry protection by evaluating the key characteristics mentioned above. By considering an industry's capital requirements, learning curve, potential for economies of scale, and strategic importance, policymakers can determine if infant industry protection would be beneficial and appropriate for a specific industry.

Why Computer Industry is Not a Good Candidate

The computer industry is not a good candidate for infant industry protection for several reasons: 1. Rapid technological progress: The pace of innovation in the computer industry is extremely fast, with new technologies being introduced frequently. Infant industry protection may not provide enough time for a protected firm to catch up and become competitive. 2. Global supply chains: The computer industry relies on complex global supply chains, with components often being sourced from multiple countries. Protectionist measures may disrupt these supply chains and lead to inefficiencies or higher costs. 3. Competitive markets: The global market for computers and related products is highly competitive and dynamic. Even with protection, new entrants may struggle to gain a foothold and establish themselves against existing players who have already achieved economies of scale and possess extensive research and development capabilities. In conclusion, governments can identify good candidates for infant industry protection by evaluating their capital requirements, learning curves, potential for economies of scale, and strategic importance. Industries like computers are not good candidates for infant industry protection due to their rapid technological progress, reliance on global supply chains, and highly competitive nature.