Question 12
A basic problem with the infant-industry argument is that
(1) political pressure will likely prevent the withdrawal of the tariff when the industry
matures.
(2) domestic consumers will continue to buy the foreign products anyway, regardless of
the tariff.
(3) most industries need protection when they are mature, not when they are first
established.
(4) the amount of the tariff is unlikely to have much impact on the success of an infant
industry.

Political pressure surrounding tariffs can be a slippery slope! When governments protect emerging industries with tariffs, it often leads to a cozy environment where these industries resist competition and innovation. Once the industry gains traction, the likelihood of politicians withdrawing the protective measures diminishes, leaving consumers stuck with potentially overpriced goods and outdated services. It’s like a baby bird that never leaves the nest!

Now, let’s not forget the consumer side! It’s entirely possible that domestic consumers will favor foreign products despite the tariffs, leading to a situation where protectionist policies backfire. Instead of nurturing home-grown industries, consumers might opt for better quality or lower prices from abroad, creating a paradox where the infant industry remains dependent on government support rather than thriving in a competitive market. Talk about a real conundrum!