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 scaling back its
import through the native production of industrial merchandise).
have argued that no major country has ever with success industrialized without
some variety of economic protection.
Economic historian Paul Bairoch who was
from Belgium wrote that historically, free trade is the exception and
protectionism the rule.
United States of America
Throughout the history, USA has been a
major supporter of protectionism. From its independence till the end of the
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.
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
became 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.
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 Chevalier Written agreement was signed between France
and the 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.
Some European 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.
Asia was a very protectionist for its local markets and Manufacturers and
producers. This was due to the 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 the 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 are a kind of tax which is generally placed on imported
or exported goods. Tariff rates vary as per the kind of products exported
Import quotas: The government imposed trade restriction that allows an only
certain number of goods and thus increases the market value of imported (or
exported) products. They are typically used in global trade to regulate
the trade between any two countries.
Direct subsidies: Government gives cheap loans to local companies
which are not able to compete in the international markets. These
subsidies protect the local jobs by assisting the local companies to
adjust to the international markets.
Export subsidies: Export subsidies is a government scheme that increases
the exports of goods and decreases the sale of them on the domestic market.
Import licensing – governments grants
importers the license to import goods
legislation: It is a type of tariff that is imposed on imports
from foreign countries that the government believes are placed well below the
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.