More and more countries are closing into the global economy and introducing tariffs to defend their own market.
Although Donald Trump is again threatening the EU or Canada, it is not just the US playing this protectionist game. For respective years, governments around the planet have introduced thousands of trade barriers a year – twice as many as a decade ago. And although the trend slowed down in 2024, the numbers are inactive alarming. The latest Warsaw Enterprise Institute (WEI) study reveals false promises, shows real costs.
The WEI study breaks protectionism down into parts one
WEI paper "Resurrection of a dangerous thought – arguments for protectionism in conflict with economical knowledge" by Dr. Przemysław Rapka, it spreads protectionism to parts 1 – from its false promises to real costs – with the hope that economical populism will give way to reason before the planet forgets for good what prosperity is built on free trade.
It should be borne in head that protectionism policy and subsequent responses from another countries will lead to a decline in prosperity in a country applying protectionism. The usage of protectionist measures on the 1 hand has negative effects, on the another hand it can origin a negative reaction from the work countries, which besides causes another adverse effects.
Key conclusions of the report:
- The spectrum of protectionism is returning. After years of globalization, the thought of protectionism is again gaining supporters around the planet – from the US to Poland. While the number of protectionist policies, specified as customs, subsidies and product regulations, increased globally from 100 to 200 per year by 2019, this figure amounts to 200 to 600 per year after 2019.
- Back to the dead. Protectionist ideas are a modern version of mercantylism, an thought of an economy in which it is not economical improvement and the strength of the state is simply a priority. This view prevailed in pre-capitalistic times. Protectionism combines utmost left and utmost right. Both the nationalist right and the anticapitalist left call for protection of the marketplace against import.
- 6 (bad) arguments. Supporters of protectionism usage 6 types of argument. In their opinion, protectionism is the protection of emerging industries, ensuring a level playing field, protecting existing and creating fresh jobs, improving the trade balance, supporting the improvement of key industries and strategical security.
- Even 90% of economists are convinced of the harmfulness of protectionism. Economists inform that foreclosure affects both the country and its trading partners.
- Strong arguments for free trade. Economists stress that the deficiency of competition force resulting from protectionism can make companies lazy and never become globally competitive. Furthermore, protectionism distorts the marketplace and increases prices. The protection of the manufacture may temporarily halt the collapse of factories, but higher costs of natural materials and retaliation of trading partners can destruct more jobs than was saved.
- Anti-protection hammer: comparative advantage. The concept of comparative advantage is 1 of the most crucial concepts in economical science. Countries grow rich, producing what is comparatively best. erstwhile countries block trade, they quit specialization and cut off from global supply chains, losing the chance for faster growth. The effort to support industries that are already developed elsewhere is straight against the comparative advantage mechanics and involves a advanced hazard of money being wasted.
- A self-propelled demolition mechanism. Unilateral tariff increases frequently provoke retaliation by partners, escalating conflict. Example: US-China Customs War – both sides suffered billions of losses. The investigation showed that the duties imposed by Trump on imports from China in 2018. Americans lost $8.2 billion in a year, and US exports fell by 2.4 billion a month.
- The thought for naive people: lobbyists gain from protectionism. Protected companies and industries and politicians who build capital on the slogans “job defence” are gaining protection from the market. It loses the remainder of society: consumers (higher prices) and efficient companies that are more hard to compete on abroad markets.
- Anything should be done to prevent the 1930s from repeating. In 1930, the U.S. dramatically increased its hopes of saving the economy. another countries responded thus and global trade collapsed by 65%. Under these conditions, the weakening of trade relations has increased the likelihood of a trade conflict.
The WEI invites you to read the report, which shows that protectionist action is not an effective means of supporting economical development, with economical consequences.
