Infant industry argument

The infant industry argument is an economic rationale for trade protectionism. The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale. The logic underpinning the argument is that trade protectionism is costly in the short run but leads to long-term benefits.

Infant industry protection is controversial as a policy recommendation. As with the other economic rationales for protectionism, it is often abused by rent seeking interests. In addition, countries that put up trade barriers to imports often face retaliatory barriers to their exports, potentially hurting the same industries that infant industry protection is intended to help. Even when infant industry protection is well-intentioned, it is difficult for governments to know which industries they should protect; infant industries may never grow up relative to adult foreign competitors.