Protectionism,traditionally was associated with doctrines like mercantilism (the economic conceptthat said trade creates prosperity, which a government need to encourage bymeans of protectionism), and import substitution (economic theory that dependon the presumption that a country should commit to scale back its importthrough the native production of industrial merchandise.).Some haveargued that no major country has ever with success industrialized without somevariety of economic protection.Economichistorian Paul Bairoch who was from Belgium wrote that historically, free tradeis the exception and protectionism the rule.United States of AmericaThroughout thehistory USA has been a major supporter of protectionism.
From its independencetill the end of nineteenth century it remained a protectionist country. There werea series of tariff laws which raised its barriers so that its local industrycould grow without restraint. But in the late nineteenth century, they began exportingmore than they imported, which led to their increasing integration into theglobal marketplace. A major setback for US liberalization came during 1930,when Smoot-Hawley Tariff act was passed.
This act implemented the protectionisttrade policies on over 20,000 imported groups. But during theGreat Depression (1929-1939) it became clear that strong protectionist policieshad led to it. Thus, after the WW-II in 1948 GATT (General Agreement on Tariffsand Trade) was launched to protect the free trade worldwide.EuropeEurope becameprogressively protectionist during the eighteenth century. It was noted by Economichistorians that immediately after the Napoleonic Wars, Europe increasinglybecame protectionist, but some smaller countries like Netherlands and Denmark believedin free trade.But in the midnineteenth century, Europe started becoming more and more progressive and liberalizedin trade. Countries like United Kingdom, Netherlands, Denmark, Portugal, andSwitzerland almost liberalized themselves in 1860. The 1860 Cobden Chevelier Writtenagreement was signed between France and United Kingdom, which was a major stepin the direction of free trade in Europe.
Similar Trade agreements were signedbetween many countries in Europe. In less than two decades after theaforementioned trade agreement, in 1877 Germany was almost a free trade country.Some Europeancountries that failed to liberalize during the nineteenth century remained Protectionistlike Russian Empire and Austro-Hungarian Empire. Western Europe began tosteadily liberalize their economies after World War II.AsiaTraditionally, Asiawas a very protectionist for its local markets and Manufacturers and producers.This was due to difference in technological advancement in the east and west.
They also kept certain sectors of industry with them (their government). Indiawas in the late 20th century famous for its license raj, whereby fortrading, setting up industry and many others you have had to buy the licensefrom the Indian Government.A variety of policies have been usedto achieve protectionist goals. These include:· Import Tariffs: Tariffs (or taxes) are generally placed on goods which are imported.Tariff rates sometimes vary as per the kind of products imported. Since exporttariffs are generally perceived as “hurting” local industries, whereasimport tariffs are perceived as “helping” local industries, exporttariffs are seldom enforced.· Import quotas: The government allows only certain number of goods and thus increasesthe market value of imported products.
The economic effect of an import quotais similar to tariff.· Direct subsidies: Government gives low-cost loans to local companies that cannot competewell against imports. These subsidies protect the local jobs, and assist localcompanies adjust to the international markets.· Export subsidies: Export subsidies increases the exports. Export subsidies have the oppositeresult of export tariffs because exporters get payment, which may be a share ofthe value exported.
· Anti-dumping legislation: When the corporations sell to export markets atlower prices than that are charged in domestic markets is called “Dumping”. Anti-dumpinglaw supporters argue that the laws stop import of cheaper foreign merchandise whichwill cause local companies to shut down.· Exchange rate control: A government can reduce or increase the value of itscurrency by intervening in the foreign exchange market by either selling orbuying its currency. This causes the cost of imports to increase and cost ofimports to decrease that results in the improvement of its balance of trade. And many others.