Lanterna Rally

Author: Mehdi Shafaeddin

Publisher:

Published: 2000

Total Pages: 36

ISBN-13:

The purpose of this study is to clarify some confusion surrounding the infant industry argument presented by Frederick List. Its main contribution is to show that List recommended selective, rather than across-the-board, protection of infant industries and that he was against neither international trade nor export expansion. In fact, he emphasizes the importance of trade and envisages free trade as an ultimate aim of all nations; he regards protection as an instrument for achieving development, massive export expansion and ultimately free trade. List's theory was a dynamic one, with dimensions of time and geography. Making a distinction between 'universal association' and national interest, he argues that infant industry protection is necessary for countries at early stages of industrialization if some countries 'outdistanced others in manufactures'. Nevertheless, protection should be temporary, targeted and not excessive. Domestic competition should in due course be introduced, preceded by planned, gradual and targeted trade liberalization. List guards, however, against premature liberalization. He is aware of the limitation of size for infant industry protection but claims that in most cases this obstacle could be overcome through collaboration with other countries. To List, trade policy is not a panacea; it is an element in his general theory of 'productive power' (development); industrial development also requires a host of other socio-economic measures. The infant industry argument is not only still valid, if properly applied, but, in fact, it is at present even more relevant owing to recent technological revolution and changes in the organization of production. But despite this increased need, the means to achieving it have been restricted by international trade rules. The study also refers to significant incidences of targeted protection of production and exports in advanced countries, while universal and across-the-board liberalization is recommended for developing countries. International trade rules need to be revised to aim at achieving a fair trading system, in which the differential situations of countries at various stages of development are taken into greater consideration. Universal free trade may be easier for developing countries to implement th an a dynamic and targeted trade policy; but 'easiness' is not a substitute for 'soundness'. It is emphasized, however, that, as List maintained, after a point in time trade should be liberalized selectively and gradually, aiming at the ultimate goal of free trade when all nations have reached the same level of development.