Bastobota without reality chara

The infant-industry argument is the argument that protection is necessary to enable an infant industry to grow into a mature industry that can compete in world markets. As an example, if Bangladesh wants to produce cars, it will try to prevent importing cars from foreign countries for some times, so that in this time the car manufacturers of Bangladesh becomes efficient enough to compete with the existing car producers of the world market.

This argument of Infant industry claims that protection is warranted for small new firms especially in less developed countries. New firms have little chance of competing head-to-head with the established firms located in the developed countries. Developed country firms have been in business longer and over time have been able to improve their efficiency in production. They have better information and knowledge about the production process, about market characteristics, about their own labor market, etc. As a result they are able to offer their product at a lower price in international markets and still remain profitable. A firm producing a similar product in less a developed country, on the other hand, would not have the same production technology available to it. It's workers and management would lack the experience and knowledge of its developed country rivals and thus would most likely produce the product less efficiently. If forced to compete directly with the firms in the developed countries the LDC firms would be unable to produce profitably and thus could not remain in business.

(2003)