Echanges
Protectionism - the case against
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In the face of concerns over unemployment and recession, governments are coming under pressure to implement protectionist policies and measures - including tariffs, quotas and various forms of subsidies - as a way of 'saving' domestic jobs and enterprises. |
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Jagdish Bhagwati on why trade still matters (4 mins 49 sec) Protectionism would hurt world trade and the economic recovery, says Professor Jagdish Bhagwati in this OECD interview. |
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Facts about protectionism |
- Protectionism makes domestic firms less competitive in the export market
Import barriers raise domestic prices through higher costs for intermediate inputs - and so export products also become more expensive and lose market share in the face of international competition. Also, protectionism leads to retaliation by trading partners. - Protectionism has costs for a country's overall domestic production
Each dollar of increased protection leads to a drop of 66 cents in gross domestic product (GDP). - Protectionism has a negative impact on the global economy
An increase of $1 in tariff revenues can result in a $2.16 fall in world exports and a $0.73 drop in world income. - Protectionism holds back economic growth for all countries
Full liberalisation of trade in goods and services would help increase average real incomes in developing countries by 1.3%, and by 0.76% in high-income countries. Newly-emerging economies, including Egypt, Thailand and Nigeria, would gain 3% to 6% of GDP.
From Trade, Policy and the Economic Crisis, (OECD policy note, May 2010) and Seizing the Benefits of Trade for Employment and Growth (joint report by OECD, ILO, World Bank and WTO, November 2010).
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More on protectionism |
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"Unsuitable for wives and servants" (OECD Insights blog) |
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Protectionism? Tariffs and Other Barriers to Trade (chapter from International Trade: Free, Fair and Open?) Countries put up barriers to trade for a number of reasons, sometimes unintentionally. Getting rid of unnecessary trade barriers would give a great boost to global economic welfare, says this chapter from our basic guide to international trade. |
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Protectionism - "Nobody benefits: everybody loses"
Video: Ken Ash, OECD Trade and Agriculture Director, on how consumers would pay the cost of any protectionist measures taken by governments. |
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Imports: helping domestic firms International trade in intermediate inputs such as computer components and raw materials helps businesses become more productive and competitive. Restricting this trade is more likely to result in firm closures and job losses. |
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Why open markets matter
Open trade is an essential component of any realistic policy framework for economic recovery and continued, sustainable development. |
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Trade, Policy and the Economic Crisis Analysis of trade-related measures taken by countries in response to the global economic crisis that started in 2008. |
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Trade policy response to the economic crisis Governments should resist protectionist pressures and work towards a level playing field for trade, says OECD analysis including the 2010 publication Trade and Economic Effects of Responses to the Economic Crisis. |
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Do open markets matter - or is protectionism the answer?
A comparison of these two policy approaches shows the benefits of open markets and the reasons why protectionism would backfire. |
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