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Protecting Emerging Industries - An Economic Argument for Protectionism. The point is that the emerging industries do not have access to the benefits of scale, as opposed to mature industries from other countries. Because of this, they must be protected until they can work out for themselves. This argument was first used in 1790 by Alexander Hamilton and then in 1841 by Friedrich List in defense of the German industry against the British counterpart.

Arguments for protection

Protectionism in this case allows the development of young industry until it is able to compete on the international market itself. There have been many cases in history that have argued the validity of this strategy. In the 1830s, the average tariff in the United States was 40%, the highest in the world, allowing the American industry to evolve, until at the time of World War II its dominance was undisputed. A more contemporary example is the expulsion of General Motors from Japan in 1939 to help Toyota, which was then unable to compete on the international market. Taiwan's economic miracle was accompanied by customs duties 1.5 times higher than the world average. Arguments against protection

Emerging industries are by definition not strong enough to withstand open competition - their survival depends on the charity of the government and the protection they have over the government. At the moment, protectionism together with the ineffectiveness of the protected industry lead to higher prices and lower quality of goods than would be the case for goods produced by an internationally operating company.

For this reason, the policy of protecting new industries is often criticized. The government generally does not know which of the new branches have the potential to bring in high profits in the future. Failure to be competitive or the absence of unforeseen serious rivals from abroad may paradoxically cause the protected companies to never become competitive in the long run. The overly protective cover makes it easier for companies instead of becoming more innovative to rest on their laurels.

Too high customs duties on imported goods can lead to retaliation for higher tariffs on the goods we export, narrowing the market available to domestic companies. Bibliography

wiki

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