We explain what protectionism is and how this economic policy is classified. In addition, we explain its characteristics, advantages and disadvantages.
What is Protectionism?
Protectionism is an economic policy that seeks to protect national production imposing restrictions, limitations or tariffs on goods from abroad (imports), making them more expensive to make them less competitive compared to domestic goods.
Protectionist policies have shown a rise and fall throughout historybut usually in periods of crisis, war, economic depression or in attempts to achieve economic self-sufficiency, protectionism prevents the fall of local prices and the subsequent general impoverishment of the nation.
The action of protectionism directly affects competition lawsthat is, the laws of the market that explain a correlation between the supply of a product and its demand. For this reason, protectionist measures are often controversial, since they mean direct intervention by the State in the economy.
See also: Perfect competition market.
Origins of protectionism
Protectionism It emerged along with the world economyand leaders such as Abraham Lincoln in the United States already professed it in their speeches, since the protection of the economy and its strategic management is one of the tasks of politics.
However, this It was always discussed by liberalssupporters of the free market and minimal state intervention in economic and commercial affairs.
Reasons for protectionism
The reasons that justify protectionism They often involve the recognition of weak areas in a country’s economy.The aim is to prevent the bankruptcy of national sectors threatened by foreign production, or to provide incentives for a nascent industry to grow and then be able to compete without the need for assistance.
In addition, protectionist measures They usually leave money to the State in the form of tariffs and they usually promote job creation, at least for the duration of the measures.
Types of protectionism
There are the following types of protectionism:
- Compensator. It equalizes the purchase prices of products so that there are no significant discrepancies between the national and imported product, thus compensating for the weaknesses of the national industry.
- Anti-dumping. It establishes barriers with subsidies to avoid the practice of “dumping” or selling below market value in order to financially bankrupt the competition.
- Social protectionism. It protects wages between two nations from unfair competition by applying taxes to equalize the cost amounts of a worker in both nations and prevent exploitation.
- Educational protectionism. It limits the professional practice of non-graduated immigrants in the country, so that they cannot compete on equal terms with local professionals from a particularly weak sector of society.
- Fiscal protectionism. Protects the nation’s fiscal duties through strategies around tax collection.
- Military protectionism. Martial control is exercised over particularly weak sectors of the economy or society.
Advantages of protectionism
Protectionism promotes the growth of certain sectors of national productionsince it guarantees them a market and prevents imported products from competing on equal terms. This can be key in the development of certain industrial sectors, or in supporting critical periods that threaten to destroy internal productive forces.
Disadvantages of protectionism
Liberal positions consider the application of protectionist measures such as state interference in the economywhich would alter the conditions of healthy competition between producers and would lead to conditions of simulated wealth, making producers dependent on the State, thus perverting not only the economic model, but also the political one.
Protectionist measures
The main protectionist measures have to do with:
- To tax products or services imported from abroad.
- Subsidies to underprivileged productive sectors.
- Set monthly quotas for imported products that can be marketed.
- Imposing non-tariff barriers to imports, making them difficult.
- Promote the purchase of national products through state propaganda.
Political consequences of protectionism
Protectionism often has been accused of fomenting political irregularitiesby involving the State too much in economic sectors that should compete freely.
For example, it happens that There are illegal or semi-legal investments in political campaigns or in more or less veiled support for political parties by agricultural companies that would benefit from their coming to power, since they would be granted a protection regime that would artificially enrich them.
Another type of political consequences has to do with the impoverishment of trade relations between countriessince the closure of local markets does not favor international trade.
Protectionism vs. Free Market
These are two opposing positions. Protectionists demand that the free market be voracious in its rulessince this “invisible hand of the market” that should regulate the relations of supply and demand has little regard for human factors such as employment, poverty or the basic needs of man, constructing rapacious economic models.
However, Protectionism only works as a temporary measure of defense of a strategic sector, and its long-term maintenance prevents the emergence of a robust industry, since it makes it dependent on the State.
More at: Free market.
Neo-protectionism
In the context of the globalized world, it was assumed Protectionism as a minority trend against the global marketHowever, many of the economic crises experienced after 2000 and the digital revolution that has opened up new forms of market and flow of money and products, have fostered a conservative response that many call neo-protectionist, since it incurs in non-tariff barriers to limit the access of imported products, practices contrary to the free competition that the era professes.
Examples of protectionism
One of the most common forms of protectionism today are those implemented by the European Union and the United States regarding their agricultural products, as established by the Common Agricultural Policy (CAP) which since the mid-20th century has sought to prevent free access to agricultural inputs and food from the Third World to their societies, preferring to protect local production and not depend on imports.