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Terms in this set (47)

A state's motivation to protect domestic industry can arise from several sources. Often governments simply cater to the political demands of important domestic industries and interests, regardless of the overall national interest. An industry may lobby or give campaign contributions in order to win special tax breaks, subsidies, or restrictions on competing imports.

States often attempt to protect an INFANT INDUSTRY as its starts up in the state for the first time, until it can compete on world markets.

Another motivation for protection is to give a domestic industry breathing room when market conditions shift or new competitors arrive on the scene. Sometimes domestic industry requires time to adapt and can emerge a few years later in healthy condition. Government also protects industries considered vital to national security. Autarky may not pay in most economic activities, but for military gods, states will sacrifice some economic efficiency for the sake of self sufficiency, to reduce vulnerability in the event of war

Finally, protection may be motivated by a defensive effort to ward off predatory practices by foreign companies or states. Predatory generally refers to efforts to unfairly capture a large share of world markets, or even a near-monopoly, so that eventually the predator can raise prices without fearing competition. Most often these efforts entail DUMPING products in foreign markets at prices below the minimum level necessary to make a profit. Within a domestic economy, the government can use antitrust laws to break up an impending monopoly, but because no such mechanism exists in IR, governments try to restrict imports in such situations to protect their state's industries. Such restrictions are recognized as legitimate, although great disagreements exist about whether given price level is predatory or merely competitive. These conflicts now generally are resolved through the WTO.