3.11 The case for government intervention (economic)
In the previous section it was noted that the Australian car industry was until recently a 'protected animal' - protected by tariffs on imported vehicles. It is now achieving world competitive standards, but it would not have existed without the protection of infant industry tariffs. This may be symptomatic of a changing economic view. Until the 1980s economists saw little benefit in government intervention and strongly advocated free trade policies.
Economists now note that the WTO recognises the infant industry argument as a legitimate reason for protection. A second point made by your textbook is that, given the development of global capital markets over the last twenty years, governments may no longer need to subsidise infant industries: they can now borrow money from capital markets.
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