What is protectionism?

  • Icon: Entry date 10th February, 2009
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What is Protectionism?

Protectionism is the policy of protecting domestic industries at the expense of global trade, by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors.

 

 

Protectionist policies have been implemented by many countries despite the fact that virtually all mainstream economists agree that the world economy generally benefits from free trade.

 

Government-levied tariffs are commonly used - these raise the price of imported articles, making them more expensive (and therefore less attractive) than domestic products.

Arguments for protectionism

In the past protective tariffs have been used to stimulate industries in countries suffering from recession or depression.

Protectionists fault the free trade model as being reverse protectionism in disguise, that of using tax policy to protect foreign manufacturers from domestic competition.

Protectionism

The London Summit 2009

On the 2 April 2009 world leaders, including Prime Minister Gordon Brown and President Obama, will gather in London to address the global financial crisis.

» London Summit website

» The G20 website

Protectionism in the past

Mid 19th century - Britain began to abandon its protective tariffs in the first half of the after it had achieved industrial dominance in Europe

1920s - Damage and dislocation caused by World War I lead to a continual raising of customs barriers in Europe 

1930s - The Great Depression lead to record levels of unemployment and an epidemic of protectionist measures. World trade shrank drastically as a result

1947 - United States was one of 23 nations to sign reciprocal trade agreements in the form of the General Agreement on Tariffs and Trade (GATT)

1995 - GATT replaced by the World Trade Organization (WTO) in Geneva

2009 - Fears of a shift to protectionist measures grow in Europe and America amid the global financial crisis

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