Infant Industry Argument Theory and Practice

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Infant Industry Argument: Theory and Practice An Independent Study by Mamurjon Rahimov The University of Illinois at Chicago - 2004 Introduction First of all, it was very hard to choose a topic for the independent study. The idea of researching the argument of infant industry protection came to me suddenly after reviewing a list of topics in one economics class. From my several years of experience working in the major infant industry of Uzbekistan – the Uzbek automotive industry, I learnt how problematic the argument on infant industries was. There are no clear guidelines, accepted practices, limitations, and the like, despite the fact that infant industries persist all over the world, especially in Less Developed Countries (LDCs). I started my independent study with a hope

that I would learn more about this topic to apply it when I go back to my country, and that my experience would allow me better understand the theory. The argument of infant industries remains to be a controversial topic in the world economy. The fact that it is not well defined further exacerbates the problems caused by its application. Infant industry argument remains to be one of the major reasons for justifying protectionism in various forms. Although protectionist measures such as tariffs, quotas, multinational agreements are imposed due to various reasons. It is very important for me to learn pros and cons of this argument, now and here – since scientific literature is one of the strongly censored aspects of life in Uzbekistan. In fact, I never saw any mentioning that

Uzbek auto industry was an infant industry. Moreover, I never read any local article mentioning problems and/or losses of the Uzbek auto industry. Even the export revenues of the company were often calculated on the basis of shipments made out of the country, even though these “shipments” did not sell for several years. When I got started working with the Uzbek automotive industry, I was a new graduate from a prestigious American business school, and all excited about the opportunity to apply the knowledge that I acquired overseas, as well as to learn new things. I met all kinds of people - those who did not know where the industry was going; foreigners who tried to take advantage of our ignorance, and smart people who were never allowed in decision-making. I read about

infant industries while in business school, and at that time, everything seemed logical and simple. . In my discussions of this topic with leading managers, industry ministers, and PhDs in Uzbekistan (especially those working directly in the management of this venture), I felt that I lacked theoretical and empirical knowledge to base my arguments. All of those managers, ministers, PhDs have background in the old socialist economy, so often neither I nor them learnt something useful after long and intense discussions. I remember the excitement of my department general manager when I brought a Harvard Business case on The Uzbek auto industry with me from the United States (actually, while studying in the USA, I went to a graduate level class with a permission from a professor to

participate in its discussion). He immediately got several photocopies of the case and passed on to the higher echelons of the management. I doubt that they learnt anything useful from it (business cases generally do not criticize or approve certain policy), but the very fact that they were eager to get to know what Americans think about them was very interesting. Hence, they might heed if someone who was well aware of the infant industry argument advised them. Our marketing department, in which I was an assistant manager, did not receive funds for basic market research, let alone for scientific, comparative-empirical work. We could not buy books, attend seminars, and subscribe to industry magazines, purchase software and databases. I knew we should learn from other countries’