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Protection and development (English)

The advantages and disadvantages of protection as an instrument of industrialization policy in developing countries are examined. While there are strong arguments for moderate levels of protection as an instrument of industrialization, in the past many nations have used protection and import substitution excessively with counterproductive economic and social effects. This does not mean, however, that some measure of protection, varying with a country's economic condition, may not be desirable. The case for protection rests on infant industry, diversification and balance of payments, employment, and trade retaliation arguments. In addition, industrialization often has a high value in itself. The products for which most developing countries have provided the highest effective protection in the past are those associated with an overall development strategy which favors upper income groups; a strategy focused on the needs of lower income groups would be likely to stimulate an industrial structure requiring relatively low protection and hence avoid many of the high costs. Optimal policies are unique to each country, but rich, industrialized countries retain the key role in improving the international trading framework.

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Citation

HUGHES, H.

Protection and development (English). Staff working paper ; no. SWP 164 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/261191467980500161/Protection-and-development