The Case for Protection: Infant Industries and Security

Not every argument for trade barriers is simple special pleading. The infant-industry argument, advanced by Alexander Hamilton in his 1791 Report on Manufactures and by German economist Friedrich List in 1841, holds that new industries need temporary protection until they can compete with established foreign rivals. Supporters point to the nineteenth-century United States and Germany, and to South Korea and Taiwan, which protected and guided industries before exposing them to competition.

Critics respond that protection often becomes permanent, rewards lobbying rather than efficiency and fails in many countries; Latin America's long protection of inefficient industries is the usual counterexample. Other arguments include national security, protecting supplies of food, energy or critical technology, and responding to unfair foreign subsidies. Economists generally agree that such cases can exist but disagree over how often governments can apply them wisely, making this one of the liveliest debates in trade policy.