traditionally was associated with doctrines like mercantilism (the economic concept
that said trade creates prosperity, which a government need to encourage by
means of protectionism), and import substitution (economic theory that depend
on the presumption that a country should commit to scale back its import
through the native production of industrial merchandise.).
argued that no major country has ever with success industrialized without some
variety of economic protection.
historian Paul Bairoch who was from Belgium wrote that historically, free trade
is the exception and protectionism the rule.
United States of America
history USA has been a major supporter of protectionism. From its independence
till the end of nineteenth century it remained a protectionist country. There were
a series of tariff laws which raised its barriers so that its local industry
could grow without restraint. But in the late nineteenth century, they began exporting
more than they imported, which led to their increasing integration into the
global marketplace. A major setback for US liberalization came during 1930,
when Smoot-Hawley Tariff act was passed. This act implemented the protectionist
trade policies on over 20,000 imported groups.
But during the
Great Depression (1929-1939) it became clear that strong protectionist policies
had led to it. Thus, after the WW-II in 1948 GATT (General Agreement on Tariffs
and Trade) was launched to protect the free trade worldwide.
progressively protectionist during the eighteenth century. It was noted by Economic
historians that immediately after the Napoleonic Wars, Europe increasingly
became protectionist, but some smaller countries like Netherlands and Denmark believed
in free trade.
But in the mid
nineteenth century, Europe started becoming more and more progressive and liberalized
in trade. Countries like United Kingdom, Netherlands, Denmark, Portugal, and
Switzerland almost liberalized themselves in 1860. The 1860 Cobden Chevelier Written
agreement was signed between France and United Kingdom, which was a major step
in the direction of free trade in Europe. Similar Trade agreements were signed
between many countries in Europe. In less than two decades after the
aforementioned trade agreement, in 1877 Germany was almost a free trade country.
countries that failed to liberalize during the nineteenth century remained Protectionist
like Russian Empire and Austro-Hungarian Empire. Western Europe began to
steadily liberalize their economies after World War II.
was a very protectionist for its local markets and Manufacturers and producers.
This was due to difference in technological advancement in the east and west.
They also kept certain sectors of industry with them (their government). India
was in the late 20th century famous for its license raj, whereby for
trading, setting up industry and many others you have had to buy the license
from the Indian Government.
A variety of policies have been used
to achieve protectionist goals. These include:
Import Tariffs: Tariffs (or taxes) are generally placed on goods which are imported.
Tariff rates sometimes vary as per the kind of products imported. Since export
tariffs are generally perceived as “hurting” local industries, whereas
import tariffs are perceived as “helping” local industries, export
tariffs are seldom enforced.
Import quotas: The government allows only certain number of goods and thus increases
the market value of imported products. The economic effect of an import quota
is similar to tariff.
Direct subsidies: Government gives low-cost loans to local companies that cannot compete
well against imports. These subsidies protect the local jobs, and assist local
companies adjust to the international markets.
Export subsidies: Export subsidies increases the exports. Export subsidies have the opposite
result of export tariffs because exporters get payment, which may be a share of
the value exported.
Anti-dumping legislation: When the corporations sell to export markets at
lower prices than that are charged in domestic markets is called “Dumping”. Anti-dumping
law supporters argue that the laws stop import of cheaper foreign merchandise which
will cause local companies to shut down.
Exchange rate control: A government can reduce or increase the value of its
currency by intervening in the foreign exchange market by either selling or
buying its currency. This causes the cost of imports to increase and cost of
imports to decrease that results in the improvement of its balance of trade.
And many others.