Answer to Question 1
Infant industry arguments rely on the idea that in industries with economies of scale, or substantial learning by doing, it is important for policymakers to protect local firms early in their development. One of the problems with this argument is that starting a company in isolation may deprive it of technological spillovers that its competitors, all located near one another, may enjoythe isolated company will be the last to learn of changes in the industry.
Answer to Question 2
There are several arguments against free trade. Some of them are:
i. National security concerns Countries would rather diversify by investing in steel production and defense technology and maintaining a variety of agricultural industries so that they do not need to rely on other countries during a war.
ii. Fear of the effects of globalization on a nation's culture Globalization is the shift towards more open, integrated economies that participate in foreign trade and investment. Some people, however, want to maintain their culture's uniqueness and therefore view globalization as homogenization.
iii. Environmental and resource concerns Countries with lax environmental policies allow for relatively more pollution than countries with strong environmental policies. Opponents of free trade often site these policy differences as creating pollution havens in poor countries.
iv. Infant industry arguments Infant industry arguments rely on the idea that in industries with economies of scale, or substantial learning by doing, it is important for policymakers to protect local firms early in their development.
v. Potential negative effects on local wages and jobs Domestic producers and consumers are affected in different ways by trade. Therefore, many individuals worry about their own jobs when trade increases between countries.
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