Question

The infant industry argument (Political Economy of International Trade) suggests that an industry should be protected until it can develop and be viable and competitive internationally. However, this argument has been criticized because

Answer 1

Efficiency & Competitiveness Loss

Step-by-step explanation:

Infant Industry Argument is the argument that - underdeveloped & developing countries' firms are not capable to compete with developed countries markets internationally. So, they should be protected from international market competition, until they develop competence to survive amidst them.

The argument against this infant industry protection argument is loss of efficiency & competitiveness. It happens because protected infant firms tend to become lethargic & lose growth incentive, because of absence of healthy competition. So, they become inefficient & incompetent due to such circumstances. Exposing them to healthy competition can rather push them towards better efficiency.