Trade barriers come in far more disguises than a simple tariff
A tariff is the obvious way to shut out foreign goods, but governments have many quieter tools. Fussy safety rules, certification hoops, buy-local purchasing laws, cheap loans to struggling firms and a deliberately weakened currency can all tilt the field. Even patent systems, one scholar argues, have served as a polite cloak for protection.
Protectionism means restricting imports to shelter domestic producers and workers from foreign competition. The classic instruments are tariffs, which are taxes on imported goods, and quotas, which cap how much may come in. Tariffs began mainly as a way to raise revenue; today they are chiefly meant to guard local industries and wages. Other measures include limits on foreign takeovers, anti-dumping duties aimed at exporters accused of selling abroad below their home prices, and export subsidies. Pushing down a currency makes imports dearer and exports cheaper, though the gain fades as inflation follows.
Some barriers are hard to spot. Countries are accused of using food, environmental or electrical standards to keep rivals out, and the economist Jagdish Bhagwati has described rich nations' attempts to impose their labour and environmental rules on trading partners in the same light. Peter Drahos contends that states learned to use intellectual property regimes as a handy protectionist weapon while enjoying the reputation of respecting inventors. Critics also note that free trade agreements can carry protective clauses on copyright and patents that favour large firms.
Most economists judge protection to be a drag. The consensus holds that it lowers growth and welfare, raises consumer prices and dulls domestic firms' incentive to innovate, while comparative advantage lets countries gain by specialising. Stephen Magee put free trade's benefits at as much as 100 times its costs, and a 2016 study found that trade tends to favour the poor, who spend more of their income on goods. Douglas Irwin counts protectionism among the causes of the Great Depression; Paul Krugman sees the tariffs of that era more as a response than a cause.
History is contested. High tariffs coincided with fast growth in the late 19th century, but Irwin warns that correlation is not causation, and Brian Varian found no link between tariffs and growth across the Australian colonies, which each set their own. Kevin O'Rourke accepts that protection helped early American manufacturing while doubting it boosted overall output. Dani Rodrik, sympathetic to globalization's critics, still argues that retreating behind trade walls would hurt the many who gain from trade.
Source: Protectionism
