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Not necessarily. Let say you are a large developing country and you want to bootstrap a domestic car industry. The first cars coming out will probably not be t
by kakwa_ 8y ago
Not necessarily.
Let say you are a large developing country and you want to bootstrap a domestic car industry. The first cars coming out will probably not be that great as you don't have the engineering knowledge or the experience building cars yet.
Cars built by foreign companies are definitively better, and maybe cheaper to buy and/or to operate.
If you do nothing, this new car industry would die quite soon.
So you impose tariffs on foreign cars, that way your domestic production is protected, and you are able to make it grow and make it better. However be careful to not protect it too much, otherwise it will keep producing crappy cars looking like Trabant. With time you decrease the protection progressively.
Another less abstract example is food, for instance, rice production and tariffs in Haiti:
https://en.wikipedia.org/wiki/Rice_production_in_Haiti https://en.wikipedia.org/wiki/Rice_production_in_Haiti
- BurningFrog 8y agoSo while you protect the local industry, your population is forced to overpay for inferior cars. I think we agree on that fact. You're saying that that is more than compensated for by the later emergence of a competitive car industry, and the various wealth effects it spreads across the nation over many following decades. I just don't think there is empirical support for that. I'm sure you can cherry pick examples in hindsight, but if you do an honest accounting of these attempts, including those that failed I don't think it looks good. Except for the favored industry of course, who makes a nice living during the protected era.