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.
Details
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Author
HUGHES, H.
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Document Date
1973/10/31
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Document Type
Staff Working Paper
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Report Number
SWP164
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Volume No
1
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Total Volume(s)
1
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Disclosure Date
2010/07/12
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Disclosure Status
Disclosed
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Doc Name
Protection and development
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Keywords
import substitution;balance of payment;trade among developing countries;protection can;exchange control liberalization;export subsidies;export subsidy;upper income group;Trade Policies;Trade Policy;conduct of business;terms of trade;mass consumption good;labor-intensive product;trade policy options;international economy;multinational corporation;comparative advantage;capital intensive production;returns to capital;large urban centers;foreign exchange control;negative interest rate;influx of refugees;country of destination;protection against import;natural resource base;forms of protection;world war i;standard of living;transfer of revenue;income tax holiday;choice of technique;misallocation of resources;cost of employment;free trade debate;agriculture and industry;cost of production;export subsidy system;natural resource endowment;economies of scale;company income tax;extended family system;trade policy choice;durable consumer good;export promotion instruments;infant industry argument;Industrialized countries;protectionist instrument;industrialized country;trade retaliation;domestic price;manufactured export;protectionist policy;administrative capacity;high wage;small country;direct subsidy;manufactured goods;middle class;export orientation;world market;Cultural Heritage;political feasibility;mutual trade;employment creation;Public Utilities;industrial growth;industrial good;Industrial Goods;import license;Direct Subsidies;raw material;reducing protection;international trading;marginal price;protective measure;
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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