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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.
However, such measures would be counter-productive. Direct trade-restricting measures have the most negative impacts on growth and employment.
OECD says that governments should resist calls for protectionism and instead pursue further trade liberalisation, including a successful conclusion to the Doha Development Agenda talks.
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Facts about protectionism
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- 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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