International Economic Essay Example | Topics and Well Written Essays - 1750 words

International Economic - Essay ExampleThis would lead customers to prefer the old company than the new one and thus the babe industry would be trapped in a vicious cycle and in the end would have to close kill.The infant industry argument is regarded as one of the greatest arguments of protection known. The argument claims that newly real small fast(a)s should be granted some protection for their survival. The new firms have very small-minded chance of competing with the already ceremonious and flourishing old firms in the developed countries that is why they require some sort of protection to enable their survival. The already established industries have more exposure to the world and have greater knowledge of the ways of production, determineet, labor etc and are able to sell their goods at a unhorse price in the international market without suffering any kind of loss, in fact for a greater profit.On the other hand, a firm producing the same product in a relatively new setu p industry would not have the same production technologies available to it. The employees and the management would overlook the experience and knowledge. A head on competition with the old industries, would make them a cripple and they might have to close down.Now narrowing it down to the international scenario, we see that developing countries are the ones that need the protection more. They lack the basic resources required to establish an industry and even if established they have lowly resources or talent to keep it thriving. Instead they become victim to the developed countries, and can not meet their standard of production, quality, expertise etc. The under developed nations lack human resources and therefore can not develop the natural ones. As the porter model suggests the availability of raw material can not give an industry a competitive edge until and unless we are able to develop and upgrade them. However the third world area lacks the modern engine room and knowledg e base that the developed countries possess. Therefore no matter how hard they fight, no matter what advertising policies they adopt, it is very difficult for them to come up to the mark and challenge the old firms. Thus the laws of humanity suggest that some sort of protection must be given to infant industries for the purpose of their survival. These protections can be given in many plaster bandages. For instance, Quotas. For many years, the textile industry of Pakistan, India and Bangladesh have been given subsidies. Also protection can be given in the form of import tariffs. With this the domestic price of the goods will rise and the imports will decrease from the rest of the world. If the prices are raised within a certain limit past the firm would be able to cover its high production costs and then remain in business. After a span of some years, these firms would win more experience and knowledge which in turn would lead to them being able to produce more cheaply. The firms would then do the same things that the developed country firms did and thus would be able to improve even more. So protection in simple words, gives an infant industry time to settle into the fast paced world. what is more since the firms production efficiency would improve, the