One of the main reasons why many economists remain critical of the infant industry argument is its assumption that: protection of manufacturing from foreign competition is harmful. absolute advantage cannot sustain productivity of an industry. foreign firms too come under the definition of infant industry when they newly enter a foreign market. firms are unable to make efficient long-term investments through domestic or international capital markets.

protection of manufacturing from foreign competition is harmful.

Explanation:

Infant industry argument is a theory of international economics that new or infant industries needs to be protected from foreign competition

Various forms of protection includes :

1. placing quotas on goods that can be imported

2. Taxing imported goods

3. granting subsidies to infant firms

advantages of the infant industry argument

1. It encourages domestic production

2. It provides employment in the domestic economy

3. It encourages consumption of domestically produced goods

Disadvantages of the infant industry argument

1. It increases inefficiency due to reduced competition from foreign firms

2, consumers surplus is reduced

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