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In economics, protectionism is the economic policy of restraining trade between states (countries) through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations. Protectionist policies protect the producers, businesses, and workers of the import-competing sector in a country from foreign competitors. However, they adversely affect consumers in general, and the producers and workers in export sectors, both in the country implementing protectionist policies, and in the countries protected against.

There is a broad consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth.[1][2][3][4][5] However, liberalization of trade usually results in large and unequally distributed losses and gains, and, in the short run, can cause significant economic dislocation of workers in import-competing sectors.[2][6]

Protectionist policies[edit]


  • Protection of technologies, patents, technical and scientific knowledge [7][8][9]
  • Prevent foreign investors from taking control of domestic firms[10][11]
  • Tariffs: Typically, tariffs (or taxes) are imposed on imported goods. Tariff rates usually vary according to the type of goods imported. Import tariffs will increase the cost to importers, and increase the price of imported goods in the local markets, thus lowering the quantity of goods imported, to favour local producers. Tariffs may also be imposed on exports, and in an economy with floating exchange rates, export tariffs have similar effects as import tariffs. However, since export tariffs are often perceived as "hurting" local industries, while import tariffs are perceived as "helping" local industries, export tariffs are seldom implemented.
  • Anti-dumping legislation: "Dumping" is the practice of firms selling to export markets at lower prices than are charged in domestic markets. Supporters of anti-dumping laws argue that they prevent import of cheaper foreign goods that would cause local firms to close down. However, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters.




Tariff Rates in Japan (1870-1960)
Tariff Rates in Spain and Italy (1860-1910)


In the 18th century, Adam Smith famously warned against the "interested sophistry" of industry, seeking to gain advantage at the cost of the consumers.[14] Friedrich List saw Adam Smith's views on free trade as disingenuous, believing that Smith advocated for freer trade so that British industry could lock out underdeveloped foreign competition.[15]

Some have argued that no major country has ever successfully industrialized without some form of economic protection.[16][17]


According to economic historians Douglas Irwin and Kevin O'Rourke, "shocks that emanate from brief financial crises tend to be transitory and have little long-run affect on trade policy, whereas those that play out over longer periods (early 1890s, early 1930s) may give rise to protectionism that is difficult to reverse. Regional wars also produce transitory shocks that have little impact on long-run trade policy, while global wars give rise to extensive government trade restrictions that can be difficult to reverse."[19] They also note that sudden shifts in comparative advantage for specific countries have led said countries to become protectionist: "The shift in comparative advantage associated with the opening up of New World frontiers, and the subsequent “grain invasion” of Europe, led to higher agricultural tariffs from the late 1870s onwards, which as we have seen reversed the move toward freer trade that had characterized mid-nineteenth-century Europe. In the decades after World War II, Japan’s rapid rise led to trade friction with other countries. Japan’s recovery was accompanied by a sharp increase in its exports of certain product categories: cotton textiles in the 1950s, steel in the 1960s, automobiles in the 1970s, and electronics in the 1980s. In each case, the rapid expansion in Japan’s exports created difficulties for its trading partners and the use of protectionism as a shock absorber."[19]

In the United States[edit]

Tariff Rates(France, UK, US)
Average Tariff Rates in US (1821–2016)
U.S. Trade Balance (1895–2015)

According to Paul Bairoch, the United States was "the mother country and bastion of modern protectionism" since the end of the 18th century and until the post-World War II period. [20] A very protectionist policy was adopted as soon as the presidency of George Washington by Alexander Hamilton, Secretary of the Treasury from 1789 to 1795 and author of the text "Report on the Manufactures, 1792 " which called for customs barriers to allow American industrial development. This text was one of the references of the German economist Friedrich List (1789-1846). This policy remained throughout the 19th century and the overall level of tariffs was very high (close to 50% in 1830). The victory of the protectionist North states against the free trade states of the South at the end of the Civil War (1861–1865) perpetuated this trend, even during periods of free trade in Europe (1860–1880).[citation needed]

In Europe[edit]

Europe became increasingly protectionist during the eighteenth century.[21] Economic historians Findlay and O'Rourke write that "the immediate aftermath of the Napoleonic Wars, European trade policies were almost universally protectionist," with the exceptions being smaller countries such as the Netherlands and Denmark.[21]

Europe increasingly liberalized its trade during the 19th century.[22] Countries such as Britain, the Netherlands, Denmark, Portugal and Switzerland, and arguably Sweden and Belgium, had fully moved towards free trade prior to 1860.[22] Economic historians see the repeal of the Corn Laws in 1846 as the decisive shift toward free trade in Britain.[22][23] A 1990 study by the Harvard economic historian Jeffrey Williamsson showed that the Corn Laws (which imposed restrictions and tariffs on imported grain) substantially increased the cost of living for unskilled and skilled British workers, and hampered the British manufacturing sector by reducing the disposable incomes that British workers could have spent on manufactured goods.[24] The shift towards liberalization in Britain occurred in part due to "the influence of economists like David Ricardo", but also due to "the growing power of urban interests".[22]

Findlay and O'Rourke characterize the 1860 Cobden Chevalier treaty between France and the United Kingdom as "a decisive shift toward European free trade."[22] This treaty was followed by numerous free trade agreements: "France and Belgium signed a treaty in 1861; a Franco-Prussian treaty was signed in 1862; Italy entered the “network of Cobden-Chevalier treaties” in 1863 (Bairoch 1989, 40); Switzerland in 1864; Sweden, Norway, Spain, the Netherlands, and the Hanseatic towns in 1865; and Austria in 1866. By 1877, less than two decades after the Cobden Chevalier treaty and three decades after British Repeal, Germany “had virtually become a free trade country” (Bairoch, 41). Average duties on manufactured products had declined to 9–12 percent on the Continent, a far cry from the 50 percent British tariffs, and numerous prohibitions elsewhere, of the immediate post-Waterloo era (Bairoch, table 3, p. 6, and table 5, p. 42)."[22]



In Latin America[edit]

According to one assessment, tariffs were "far higher" in Latin America than the rest of the world in the century prior to the Great Depression.[27][28]



Protectionism is frequently criticized by economists as harming the people it is meant to help. Mainstream economists instead support free trade.[14][33] The principle of comparative advantage shows that the gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage.[34] Protectionism results in deadweight loss; this loss to overall welfare gives no-one any benefit, unlike in a free market, where there is no such total loss. According to economist Stephen P. Magee, the benefits of free trade outweigh the losses by as much as 100 to 1.[35] Protectionists believe that there is a legitimate need for government restrictions on free trade in order to protect their country’s economic, and therefore political independence.[citation needed]

Living standards[edit]

A 2016 study found that "that trade typically favors the poor", as they spend a greater share of their earnings on goods, and as free trade reduces the costs of goods.[36] Other research found that China's entry to the WTO benefitted US consumers, as the price of Chinese goods were substantially reduced.[37] Harvard economist Dani Rodrik argues that while globalization and free trade does contribute to social problems, "a serious retreat into protectionism would hurt the many groups that benefit from trade and would result in the same kind of social conflicts that globalization itself generates. We have to recognize that erecting trade barriers will help in only a limited set of circumstances and that trade policies will rarely be the best response to the problems [of globalization]".[38]







Developing world[edit]


Protectionists postulate that new industries may require protection from entrenched foreign competition in order to develop. This was Alexander Hamilton's argument in his "Report on Manufactures",[citation needed] and the primary reason why George Washington signed the Tariff Act of 1789.[citation needed] Mainstream economists do concede that tariffs can in the short-term help domestic industries to develop, but are contingent on the short-term nature of the protective tariffs and the ability of the government to pick the winners.[46][47] The problems are that protective tariffs will not be reduced after the infant industry reaches a foothold, and that governments will not pick industries that are likely to succeed.[47] Economists have identified a number of cases across different countries and industries where attempts to shelter infant industries failed.[48][49][50][51][52]




Current world trends[edit]

Protectionist measures taken since 2008 according to Global Trade Alert.[56]

Since the end of World War II, it has been the stated policy of most First World countries to eliminate protectionism through free trade policies enforced by international treaties and organizations such as the World Trade Organization[57] Certain policies of First World governments have been criticized as protectionist, however, such as the Common Agricultural Policy[58] in the European Union, longstanding agricultural subsidies and proposed "Buy American" provisions[59] in economic recovery packages in the United States.



Since then however, then-President-elect Donald Trump announced in November 2016 that he would abandon the TPP (Trans-Pacific Partnership) deal, placing the protectionist policies reflected in Trumponomics very much on the table, despite the wishes of all the other G20 nations.

See also[edit]


  2. ^ a b c "Free Trade". IGM Forum. March 13, 2012. 
  10. ^ "Why Access To China Can Be Suicide For U.S. Companies". 2 August 2016. Retrieved 16 October 2017. 
  11. ^ "What it's like to rub shoulders with Chinese student spies". Retrieved 16 October 2017. 
  13. ^ [1] Archived October 17, 2006, at the Wayback Machine.
  14. ^ a b Free to Choose, Milton Friedman
  18. ^ [2][dead link]
  23. ^ "7 – Trade: discovery, mercantilism and technology". The Cambridge Economic History of Modern Britain. Cambridge Core. Retrieved 2017-06-27. 
  24. ^ Williamson, Jeffrey G (1990-04-01). "The impact of the Corn Laws just prior to repeal". Explorations in Economic History. 27 (2): 123–56. doi:10.1016/0014-4983(90)90007-L. 
  28. ^ Coatsworth, John H.; Williamson, Jeffrey G. (June 2002). "The Roots of Latin American Protectionism: Looking Before the Great Depression". 
  29. ^ "Import Duties". IGM Forum. October 4, 2016. 
  36. ^ Fajgelbaum, Pablo D.; Khandelwal, Amit K. (2016-08-01). "Measuring the Unequal Gains from Trade". The Quarterly Journal of Economics. 131 (3): 1113–80. doi:10.1093/qje/qjw013. ISSN 0033-5533. 
  40. ^ DeJong, David (2006). "Tariffs and Growth: an empirical exploration of contingent relationships". The Review of Economics and Statistics. 88: 625–40. 
  41. ^ a b Irwin, Douglas A. (2001-01-01). "Tariffs and Growth in Late Nineteenth Century America". World Economy. 24 (1): 15–30. doi:10.1111/1467-9701.00341. ISSN 1467-9701. 
  50. ^ E, Baldwin, Richard; Paul, Krugman, (1986-06-01). "Market Access and International Competition: A Simulation Study of 16K Random Access Memories". NBER. 
  51. ^ Luzio, Eduardo; Greenstein, Shane (1995). "Measuring the Performance of a Protected Infant Industry: The Case of Brazilian Microcomputers". The Review of Economics and Statistics. 77 (4): 622–633. 
  60. ^ "Global Trade Alert". Retrieved 16 October 2017. 