"Competently executed series of studies on the distorted trade regime of Uruguay until the late 1980s and the effect of protectionism on a variety of economic outcomes. Topics covered range from the political economy of trade distortions to the sectoral impact of specific regulations. Worth reading"--Handbook of Latin American Studies, v. 57.
Protectionism is an economic policy which is imposed by the government in order to confine international trade through various methods such as regulating import tariffs, subsidies, import quotas and direct state intervention. Economists and policymakers have identified many impacts of trade protectionism on short and long-term effects on a country's economic growth as well as the influence of protectionism on the economic growth is a debatable topic in the commercial world. This paper based on a vigorous literature review depicts a general overview and the contemporary state of knowledge regarding the protectionism and an understanding about the extent to which the protectionism aids to improve the long-run economic growth of a country. Through the critical analysis of data, it can be stressed out that protectionism has a negative impact on economic growth and economic welfare while there exists a significant positive impact of free trade, less trade barriers and deregulation on economic growth. Protectionism might be effective in the short-term economic growth, but mostly in the long term, it is harmful. It creates the country and its trades less competitive in international business. Long-term economic growth is influenced by a range of factors other than trade protectionism, and therefore it is important to control protectionism when considering the links between growth and such policies cautiously in order to eradicate aftermath risks it could have on a long-run economy as well as globally. According to the comprehensive review of data, it can be perceived that threats of protectionism are more than their benefits which underline protectionism is not a solution for issues in long-run economic growth.
The global financial crisis of 2008/9 is the Great Depression of the 21st century. For many though, the similarities stop at the Wall Street Crash as the current generation of policymakers have acted quickly to avoid the mistakes of the past. Yet the global crisis has made room for mistakes all of its own. While governments have apparently kept to their word on refraining from protectionist measures in the style of 1930s tariffs, there has been a disturbing rise in "murky protectionism." Seemingly benign, these crisis-linked policies are twisted to favour domestic firms, workers and investors. This book, first published as an eBook on VoxEU.org in March 2009, brings together leading trade policy practitioners and experts - including Australian Trade Minister Simon Crean and former Mexican President Ernesto Zedillo. Initially its aim was to advise policymakers heading in to the G20 meeting in London, but since the threat of murky protectionism persists, so too do their warnings.
The trade policies addressed in this book have far-reaching effects on the world's increasingly interdependent economies, but until now little research has been devoted to them. This volume represents the first systematic effort to analyze specific U.S. trade policies, particularly nontariff measures. It provides a better understanding of how trade policies operate, how effective they are, and what their costs and benefits are to trading nations. The contributors chart the history of U.S. trade policy since World War II, analyze industry-specific trade barriers, and discuss the effects of tariff preferences and export-promoting policies such as export credits and domestic international sales corporations (DISCs). The final section of essays examines the worldwide impact of import policies, pointing out subtleties in industry-specific policies and providing insight into the levels of protection in developing countries. The contributors blend state-of-the-art economics with language that is accessible to the business community, economists, and policymakers. Commentaries accompany each paper.
We study the macroeconomic consequences of tariffs. We estimate impulse response functions from local projections using a panel of annual data that spans 151 countries over 1963-2014. We find that tariff increases lead, in the medium term, to economically and statistically significant declines in domestic output and productivity. Tariff increases also result in more unemployment, higher inequality, and real exchange rate appreciation, but only small effects on the trade balance. The effects on output and productivity tend to be magnified when tariffs rise during expansions, for advanced economies, and when tariffs go up, not down. Our results are robust to a large number of perturbations to our methodology, and we complement our analysis with industry-level data.
How did the rich countries really become rich? In this provocative study, Ha-Joon Chang examines the great pressure on developing countries from the developed world to adopt certain 'good policies' and 'good institutions', seen today as necessary for economic development. His conclusions are compelling and disturbing: that developed countries are attempting to 'kick away the ladder' with which they have climbed to the top, thereby preventing developing countries from adopting policies and institutions that they themselves have used.
We first construct three measures of the expected damage from the unintentional introduction of alien species into a country called Home. We then focus on four market structures. First, perfect competition prevails in both Home and Foreign and Home is a small country. Second, the Home and the Foreign markets are both perfectly competitive but Home is now a large country. Third, the exporter in Foreign is a monopolist and there are no import competing firms in Home. Finally, the Foreign exporter and the import competing firm in Home engage in Cournot competition. In all four scenarios, we analyze the impact of small and optimal Home tariffs on prices, exports, imports, the damage from alien species, and social welfare, in Home. Inter alia, our analysis identifies conditions under which it makes sense to use trade policy (tariffs) to regulate invasive species and conditions under which it does not.
We study the consequences of protectionism for macroeconomic fluctuations. First, using high-frequency trade policy data, we present fresh evidence on the dynamic effects of temporary trade barriers. Estimates from country-level and panel VARs show that protectionism acts as a supply shock, causing output to fall and inflation to rise in the short run. Moreover, protectionism has at best a small positive effect on the trade balance. Second, we build a small open economy model with firm heterogeneity, endogenous selection into trade, and nominal rigidity to study the channels through which protectionism affects aggregate fluctuations. The model successfully reproduces the VAR evidence and highlights the importance of aggregate investment dynamics and micro-level reallocations for the contractionary effects of tariffs. We then use the model to study scenarios where temporary trade barriers have been advocated as potentially beneficial, including recessions with binding constraints on monetary policy easing or in the presence of a fixed exchange rate. Our main conclusion is that, in all the scenarios we consider, protectionism is not an effective tool for macroeconomic stimulus and/or to promote rebalancing of external accounts.
