Why Countries Resist Protectionism: A Global Perspective

Protectionism is often seen as a shield to safeguard domestic industries and jobs. However, the reality is much more complex. In this article, we explore why countries might resist protectionism and embrace free trade. We will also examine the interconnected nature of global trade and the consequences of protectionist policies.

Introduction to Protectionism

Protectionism refers to policies that limit or restrict the importation of goods or services from other countries. The argument for protectionism is simple: by reducing imports, domestic industries can thrive, leading to more jobs and better wages. However, the benefits of protectionism are often overstated, and its drawbacks can be significant.

Examples of Countries with Limited Imports

Two examples that come to mind are Cuba and North Korea. Both countries have implemented policies that limit or prohibit imports, leading to a closed and isolated economy. However, this policy choice has not been a deliberate one for either country. Instead, it has been a result of their geopolitical situation. In both cases, a lack of trade has dramatically affected their ability to meet the basic needs of their populations.

The Impact of Isolation on Trade-Dependent Countries

Consider the United States. Where does your next cup of coffee come from? What about all the things that aren't available in the USA? How are rubber plantations faring? These questions highlight the interconnected nature of global trade. A country cannot produce everything it needs, and the loss of trade can have devastating consequences.

The Illusion of Complete Isolation

Imagine trying to cut all trade except for a few essentials. This is not a viable strategy. When a country attempts to limit imports, it faces significant challenges:

Other countries will likely refuse to engage in trade. Forces may be used to compel cooperation if trade is vital.

For instance, would the USA invade Brazil to get Starbucks? The idea is preposterous, yet it highlights the reality that complete isolation is practically impossible in today's interconnected global economy.

The Complexity of Global Trade

Global trade is not a simple transaction between two countries. It is a complex web of interdependent relationships. Let us take the example of toasters:

Country X makes heater elements and sends them to Country Y. Country Y makes a thin sheet of steel and sends it to Country C, who makes toaster frames and covers. Country Z makes the plastic handles. The final assembly takes place in Country A, which imports all these components.

This is just a small glimpse into the intricacies of global supply chains. An aircraft tail section, for instance, is assembled in Mexico from panels made in France, with electronics from Vietnam, hydraulics from Germany, and so on. Each part comes from different countries, illustrating the interconnectedness of the global economy.

Automation and the Future of Manufacturing Jobs

Protectionism is often touted as a solution to save manufacturing jobs. However, the real issue is automation. According to Augie Picado's TED talk, only 13% of manufacturing jobs are lost to offshoring. The majority of job losses are due to automation. These jobs are gone and will not return, regardless of protectionist policies.

Consequences of Protectionism

Protectionist policies can have significant negative impacts:

They can lead to higher prices for consumers. They can discourage innovation and hinder the development of efficient production methods. They can exacerbate trade tensions and lead to a costly trade war. They can harm small and medium-sized enterprises that rely on global supply chains.

In the end, nations that specialize in what they do best and trade for the rest are more likely to thrive. Protectionism can be tempting, but it often leads to unintended consequences. The interconnected nature of the global economy means that cutting one strand can have far-reaching repercussions.