Final answer:
The argument for using tariffs to protect a nascent industry until it grows strong enough to compete internationally is known as the infant industry argument. This economic theory has been employed with varying degrees of success, facing challenges such as industries not maturing as expected or becoming perpetually reliant on protection.
Step-by-step explanation:
Infant Industry Argument for Protectionism
The argument that a tariff can provide temporary protection to an industry so that it can expand, realize economies of scale, and eventually become an export industry is known as the infant industry argument. This economic rationale suggests that new industries may require a shield from international competition so that they can grow and develop a competitive edge. For instance, several industries in East Asia were successfully nurtured under this premise, though the challenge remains that many protected industries do not always mature as expected.
Implementation Challenges
While the infant industry argument is theoretically sensible, offering protection to foster industry growth, it frequently faces practical difficulties. Industries often become dependent on protective measures, and these measures can be difficult to remove, leading to long-term inefficiencies and market distortions. Furthermore, industries with significant political influence can exploit policies intended for emerging sectors, thereby undermining the original intent of fostering competitive new industries.
Comparison with Other Trade Arguments
The infant industry argument is distinct from others, such as the anti-dumping argument, which justifies tariffs to combat predatory pricing practices, or the national defense argument, which is about protecting industries critical for national security. The terms of trade argument, meanwhile, is about using tariffs to improve a country's trade balance.