Protectionism is on the Rise. Here’s Why That’s a Problem

A new WTO report indicates a worrying rise in economic protectionism. Countries are imposing new protectionist trade barriers at the fastest rate since the onset of the recession in 2008. Since that year, G20 countries have erected 1,583 new trade restrictions, potentially hurting the global economy.

The anti-trade sentiment fueling this growing protectionism is evident in the rhetoric of various politicians and their constituents, particularly in the US and Europe. The recent Brexit referendum delivered yet another blow to the free market rules that have been enforced for decades in the West.

Strikingly, in an age of hyper-partisanship, such trade skepticism is shared by many across party lines. In the US, trade is about the only thing on which Donald Trump and Bernie Sanders agree. Even Hilary Clinton has reversed her previous support for the Trans-Pacific Partnership. Similarly, in Europe, opposition to international trade can be seen from leftists as well as right-wing politicians like Nigel Farage and Marine Le Pen. While many of the recently adopted trade measures are legitimate responses to violations by other countries, the current protectionist trend is much broader. There appears to be a growing hostility to international trade of any kind, and many of the trade barriers being imposed will only hurt the economies they’re supposed to help. If the anti-trade trend persists, the already ailing global economy will only further struggle to improve, and the prosperity of future generations will be compromised.

While some are quick to decry protectionism, it is important to note that many trade barriers are in fact valid measures in response to legitimate grievances. If one country’s illegal trade practices are hurting another country’s economy, that nation has the right to respond in lawful ways in order to protect their domestic industries. Indeed, many of the trade measures recently adopted have been in response to massive Chinese overproduction of various materials, particularly regarding steel and aluminum products. China currently produces 325 million metric tons of excess steel a year, more than twice the total amount of steel produced in Europe. The glut has led to a steep drop in steel prices, with China’s industry dumping cheap exports into countries around the world and threatening to put their domestic producers out of business, costing thousands of jobs. In response, countries have imposed high tariffs onto Chinese steel imports to protect their domestic producers. The United States, for example, has placed duties of over 500 percent on Chinese cold-rolled flat steel.

But it is not just steel that Chinese companies have greatly overproduced. There is also an oversupply of glass used in solar panels, to give one example. In response, the European Commission has imposed tariffs on Chinese imports on such materials ranging from 17.5 to 75.4 percent. Beyond the specifics, China seems to have a general disregard for international trade laws, committing a wide range of violations. When China sought to obtain Market Economy Status from the European Union, members of the European Parliament were highly critical. Of the five criteria required to acquire such a status, China fulfills only one.

Of course, responses to cheap Chinese imports are not the only legitimate trade barriers recently erected. The European Union, for example, is crying foul over discrimination against European companies in bidding for public companies, particularly in the US. Consequently, the EU is proposing legislation that would tax companies from offending countries when they bid on deals in Europe.

Unfortunately, the West’s growing protectionism goes far beyond reasonable, limited measures to protect domestic industry. There is evidently a growing general hostility to international trade. This can be seen in the strong opposition to a number of major international trade deals currently under negotiation or awaiting ratification. The Transatlantic Trade and Investment Partnership (TTIP) under negotiation between the US and EU has faced harsh criticism, particularly in Europe. Opponents fear that the deal would diminish Europe’s food and environmental standards, among other things. As such, the pact’s fate is highly uncertain, especially after the United Kingdom voted to leave the EU. Similarly, the massive Trans-Pacific Partnership (TTP) deal recently concluded between the US, various Asian countries and Australia has been widely attacked in the United States, where it still awaits congressional ratification. Critics contend that the agreement will only cause American jobs to be lost to cheap labor overseas. That many of the arguments against such deals are hard to justify on their own merits indicates a worrisome aversion to international trade of any kind.

Another striking example of anti-trade sentiment was pointed out by Pieter Cleppe of OpenEurope, a think tank. Aluminum tariffs in the EU have been wrongfully supported by European aluminum companies in a bid to protect their own lagging competitiveness when compared with non-European producers. Caving to their pressure, Brussels obliged, and enforced a 3% tariff on primary aluminum products, inflicting €15.5 billion worth of damages to small and medium enterprises reliant on cheap aluminum in the process. Even if European companies only produce some 30% of the EU’s aluminum needs, the European Commission saw fit to protect an already dying industry.

Ultimately, while trade barriers are often healthy and necessary responses to other countries’ harmful policies, the growing protectionist tendencies seen in the US and Europe are concerning. International trade brings tremendous economic benefits for the world, propelling economic growth and raising wages and standards of living. The TTP, for example, is expected to raise American incomes by $131 billion, according to one estimate. While some jobs may be lost to countries overseas, the net economic benefits are significantly positive. Trade obstructions like tariffs, however, usually do more harm than good. If politicians and ordinary citizens alike wish to make the world a better, wealthier place, they will have to stop closing their economies off to the outside world and embrace the economic realities of globalization. It is trade, not tariffs, which will bring the prosperity we seek.