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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

You have just been put in charge of trade policy for Malawi. Coffee is a recent crop that is growing well and the Malawian export market is developing. As such, Malawi coffee is an infant industry. Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee. What sorts of policies will you enact? Explain.

To determine

The trade policy suggestions for Malawi to protect its developing coffee industry from cheap Tanzanian coffee.

Explanation

Protectionism refers to the policy of the government of a country restricting free trade for various purposes. Protectionism is practiced for protecting domestic producers and workers from foreign competition. It is generally followed by developing countries to shield small producers from foreign competition. Protecting infant industries is a type of protectionism policy.

Infant industries argument: Infant industries are the term used for nascent industries i.e. industries that are newly established and not competitive enough to compete in international market. It is argued that infant industries should be protected from foreign competition until they grow and become mature enough to be able to compete in international market. This can take place through either restricting import of goods specific to that industry or by providing subsidies to infant industries for a given time period...

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