How can infant industries be harmed by open free trade?
Open free trade has been a cornerstone of global economic policy for decades, promoting international cooperation and economic growth. However, this policy has also raised concerns about the potential harm it can cause to infant industries, which are new and often fragile businesses in developing countries. This article explores the various ways in which open free trade can harm infant industries and the implications of such harm on economic development.
Competition from Established Industries
One of the primary ways in which open free trade can harm infant industries is through competition from established industries in more developed countries. These established industries often have significant advantages, such as economies of scale, advanced technology, and established supply chains. When these industries enter the markets of developing countries, they can outcompete the local infant industries, leading to their decline or even closure. This competition can be particularly damaging to infant industries in sectors such as manufacturing, agriculture, and technology, where established industries have a strong global presence.
Access to Capital and Resources
Another challenge for infant industries is the difficulty in accessing capital and resources. Developing countries often face limitations in terms of financial resources, technology, and skilled labor. Open free trade can exacerbate this problem by making it harder for infant industries to secure the necessary funding and resources to grow and compete. As established industries from more developed countries gain access to local markets, they can leverage their financial and technological advantages to outmaneuver infant industries, further widening the gap between them.
Intellectual Property Rights
Intellectual property rights (IPR) are crucial for the development of infant industries, as they protect the innovations and investments made by these businesses. However, open free trade can undermine IPR protection, making it easier for established industries to pirate or copy the technologies and products of infant industries. This not only harms the infant industries but also discourages investment in research and development, which is essential for their growth and sustainability.
Market Access Barriers
While open free trade aims to eliminate barriers to market access, it can sometimes have the opposite effect on infant industries. Developing countries may face trade barriers, such as tariffs and quotas, imposed by more developed countries. These barriers can limit the ability of infant industries to export their products, making it difficult for them to gain the necessary experience and market share to become competitive. Moreover, the removal of trade barriers for established industries can lead to a flood of imports, further squeezing the market space for infant industries.
Conclusion
In conclusion, open free trade can harm infant industries in several ways, including competition from established industries, limited access to capital and resources, intellectual property rights violations, and market access barriers. These challenges can impede the growth and development of infant industries, leading to a less diversified and less resilient economy. It is essential for policymakers to recognize these potential harms and implement measures to support the development of infant industries, ensuring a balanced and sustainable economic growth.
