Impact Protectionism

1 impact

1.1 living standards
1.2 growth
1.3 developing world
1.4 conflict

impact

there broad consensus among economists protectionism has negative effect on economic growth , economic welfare, while free trade , reduction of trade barriers has positive effect on economic growth.

protectionism criticized economists harming people meant help. mainstream economists instead support free trade. principle of comparative advantage shows gains free trade outweigh losses free trade creates more jobs destroys because allows countries specialize in production of goods , services in have comparative advantage. protectionism results in deadweight loss; loss overall welfare gives no-one benefit, unlike in free market, there no such total loss. according economist stephen p. magee, benefits of free trade outweigh losses as 100 1. protectionists believe there legitimate need government restrictions on free trade in order protect country’s economic, , therefore political independence.

living standards

a 2016 study found trade typically favors poor , spend greater share of earnings on goods, , free trade reduces costs of goods. other research found china s entry wto benefitted consumers, price of chinese goods substantially reduced. harvard economist dani rodrik argues while globalization , free trade contribute social problems, serious retreat protectionism hurt many groups benefit trade , result in same kind of social conflicts globalization generates. have recognize erecting trade barriers in limited set of circumstances , trade policies best response problems [of globalization] .

growth

according economic historians findlay , o rourke, there consensus in economics literature protectionist policies in interwar period hurt world economy overall, although there debate whether effect large or small.

economic historian paul bairoch argued economic protection positively correlated economic , industrial growth during 19th century. example, gnp growth during europe s liberal period in middle of century (where tariffs @ lowest), averaged 1.7% per year, while industrial growth averaged 1.8% per year. however, during protectionist era of 1870s , 1890s, gnp growth averaged 2.6% per year, while industrial output grew @ 3.8% per year, twice fast had during liberal era of low tariffs , free trade. 1 study found tariffs imposed on manufactured goods increase economic growth in developing countries, , growth impact remains after tariffs repealed.

according dartmouth economist douglas irwin, there correlation between high tariffs , growth in late nineteenth century cannot denied. correlation not causation... there no reason thinking import protection policy because economic outcome good: outcome have been driven factors unrelated tariff, or perhaps have been better in absence of protection. irwin furthermore writes few observers have argued outright high tariffs caused such growth.

according oxford economic historian kevin o rourke, seems clear protection important growth of manufacturing in first half of 19th century; not imply tariff beneficial gdp growth. protectionists have pointed german , american industrialization during period evidence in favour of position, economic growth influenced many factors other trade policy, , important control these when assessing links between tariffs , growth.

a prominent 1999 study jeffrey a. frankel , david h. romer found, contrary free trade skeptics claims, while controlling relevant factors, trade indeed have positive impact on growth , incomes.

developing world

there broad consensus among economists free trade helps workers in developing countries, though not subject stringent health , labour standards of developed countries. because growth of manufacturing—and of myriad other jobs new export sector creates—has ripple effect throughout economy creates competition among producers, lifting wages , living conditions. nobel laureates, milton friedman , paul krugman, have argued free trade model economic development. alan greenspan, former chair of american federal reserve, has criticized protectionist proposals leading atrophy of our competitive ability. ... if protectionist route followed, newer, more efficient industries have less scope expand, , overall output , economic welfare suffer.

protectionists postulate new industries may require protection entrenched foreign competition in order develop. alexander hamilton s argument in report on manufactures , , primary reason why george washington signed tariff act of 1789. mainstream economists concede tariffs can in short-term domestic industries develop, contingent on short-term nature of protective tariffs , ability of government pick winners. problems protective tariffs not reduced after infant industry reaches foothold, , governments not pick industries succeed. economists have identified number of cases across different countries , industries attempts shelter infant industries failed.

economists such paul krugman have speculated support protectionism ostensibly further interests of workers in least developed countries in fact being disingenuous, seeking protect jobs in developed countries. additionally, workers in least developed countries accept jobs if best on offer, mutually consensual exchanges must of benefit both sides, or else wouldn t entered freely. accept low-paying jobs companies in developed countries shows other employment prospects worse. letter reprinted in may 2010 edition of econ journal watch identifies similar sentiment against protectionism 16 british economists @ beginning of 20th century.

conflict

protectionism has been accused of being 1 of major causes of war. proponents of theory point constant warfare in 17th , 18th centuries among european countries governments predominantly mercantilist , protectionist, american revolution, came ostensibly due british tariffs , taxes, protective policies preceding both world war , world war ii. according slogan of frédéric bastiat (1801–1850), when goods cannot cross borders, armies will.