International Trade in Infant Industries: A Dynamic Analysis of Different Trade Policy Instruments and Their Implications for Sustainable Consumption

Infant industries have come to be associated with behind the frontier technologies in developing countries. This paper takes a fresh look at the infant industry problem and in the more contemporary perspective of developed-emerging economy competition in lead markets such as for example the global solar panel industry. Different policy scenarios are considered under two different trading regimes. First one where all firms learn symmetrically in cost. Then one where learning paths and preference about sustainable consumption partly could be conforming with prevailing institutions in each country. The paper demonstrates that NTBs or standards can be welfare improving in ways that ordinary instruments such as tariffs and subsidies cannot.