Protectionism’s scary rise

Delegates at the Democratic National Convention in Philadelphia hold up anti-TPP signs.
Delegates at the Democratic National Convention in Philadelphia show their opposition to the Trans Pacific Partnership. The U.S. has seen a rise in protectionism of late (source: dpa)

In early July, economic research institution Global Trade Alert (GTA) published its annual report on the state of international trade. GTA particularly focuses on monitoring what protectionist measures countries around the world introduce or abandon.

The report makes for disheartening reading. In fact, it is GTA’s most negative report since it began publishing them in July 2009. It found that global trade has plateaued since the start of 2015. The authors note that except during global recessions, this is practically unheard of since the fall of the Berlin Wall.

Even though we have seen a fairly sharp slowdown in global growth, the standstill in trade growth also reflects a marked rise in protectionist measures, especially in the last couple of years. According to GTA, 50 to 100 protectionist measures were implemented around the world in the first four months of each year between 2010 and 2015. In 2016 the total exceeded 150.

A graph ranking G20 members by number of protectionist measures implemented since 2008. The U.S. is in first place.
Since 2008, no country in the G20 has implemented more protectionist measures than the United States (source: macpixxel for GIS)

A particularly disturbing conclusion in the report is that since 2008 the country to have implemented the most protectionist measures in the world is also the largest economy in the world – the United States of America. Following in second and third place are India and Russia.

So while the U.S. is still officially committed to free trade, it is clear that the country has become more protectionist since the outbreak of the Great Recession in 2008. This is certainly not good news for the global economy.

Threat to peace

The French classical economist Frederic Bastiat is famously attributed with the quote “When goods don’t cross borders, soldiers will.” When the global economy slows, countries start to see international trade as a zero-sum game. This spurs protectionism, which in turn leads to geopolitical tensions and political extremism.

We saw this in the 1930s and, unfortunately, we are also seeing it today. Since 2008 there has not only been an increase in protectionism, but also a sharp rise in political extremism, terrorism and war.

Of course, protectionism is not the root of all evil. But in a world where we stop trading with each other, mistrust and hatred tend to increase. When it comes to protectionism, we seem to have learned very little from the 1930s – and that is a real threat to peace around the world.

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