that would have benefited from up-to-date computers paid the costs and Brazil’s computer industry never

competed effectively on world markets, Brazil phased out its infant industry policy for the computer industry.

Protectionism for infant industries always imposes costs on domestic users of the product, and typically has

provided little benefit in the form of stronger, competitive industries. However, several countries in East Asia

offer an exception. Japan, Korea, Thailand, and other countries in this region have sometimes provided a

package of indirect and direct subsidies targeted at certain industries, including protection from foreign

competition and government loans at interest rates below the market equilibrium. In Japan and Korea, for

example, subsidies helped get their domestic steel and auto industries up and running.

Why did the infant industry policy of protectionism and other subsidies work fairly well in East Asia? An early
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