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The attempt to run a country's economy without foreign trade. This always results in the setting up of inefficient industries and in poverty. Lack of competition drives prices high. As well as Nazi Germany, three European countries attempted it: Ireland 1920-1960s; Albania 1945-1991. Spain under General Franco also tried it (1939-1960s). The whole Soviet bloc was an autarkic zone, though breaking down in the last years as the Soviet Union sold oil and gold to the market world.

Argentina attempted it during the Peron period. Mexico also has tried it but is dismantling the tariffs. Cuba may be the only example left in the Americas, mainly because the Soviet Union no longer subsidizes the economy and the United States operates a trade embargo. North Korea is another. Burma still practices it, but with export of tropical timber and an increasing trade with China and Thailand. Australia has inefficient industries after a long period of protection. India from 1948 until 1992 also attempted it and stagnated.

The opposite policy is Free Trade. In this theory each area of the world produces those goods which are most suitable. International trade then spreads the advantage throughout the trading system. The General Agreement on Tariffs and Trade (GATT) exists to promote free trade (now World Trade Organization). (But there may be reasons for discouraging completely free trade, such as health and environmental protection - most things are good only up to a limit).

During the World Economic Slump or Depression of the 1930s the imposition of tariffs by the United States (Smoot-Hawley Act), followed by other countries, prevented world trade and made the slump more serious. Some commentators believed a failure of the Uruguay GATT talks might have threatened a similar outcome in 1993. If world trade were threatened by restrictions the current (2008) Depression would become worse. President Clinton of the US started his term by putting large duties on European steel to protect inefficient steelworkers whose votes had helped his election. This was a bad sign, but later he supported NAFTA and the GATT agreement, in opposition to many of his voters.

Last revised 12/12/08


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