3.8 Protectionism
In contrast to the interdependence of France and Germany , countries sometimes adopt various barriers to prevent imports from competing with domestically-produced goods. This is known as protectionism .
By the end of the nineteenth century, commercial agreements had alleviated many barriers to trade, but World War I voided most of these agreements. Following World War I, huge indebtedness and economic stringency led to the passage of high protective tariffs, especially in Europe . In 1929, following the stock market crash and the ensuing depression, cheap foreign products and agricultural imports began to flood the US market. This caused American farmers to clamour for protection and in 1930 the US increased its tariff duties. Within a year, 45 nations retaliated by raising duties on imports from the US . These measures further depressed world trade. In 1934, the US relented and entered in bilateral agreements with a number of countries.
In light of the experience of the 1930s, the post-World War II period has been characterised by international efforts to reduce barriers to trade through multilateral agreements. The most important of these agreements is GATT, which was mentioned in Chapter 1 of this unit.
Activity 3.4
As a reminder, write here to what the acronyms GATT and WTO refer.
Unfortunately, even as the WTO implements the GATT, there are disturbing signs of a resurgence of protectionism. Current events such as this are not found in textbooks because they are happening all around us. As a student of international business, you owe it to yourself to keep abreast of current events by reading a reputable newspaper whether in hard copy or on the Internet. Check: what did you learn from Activity1.1 in Chapter 1?
Activity 3.5
Visit the website http://crayon.net/using/links.html for a comprehensive list of newspaper links - both US and the world.
If you prefer to search on a regional basis for newspapers, visit http://www.onlinenewspapers.com.
Barriers to trade are not always obvious so it is appropriate that we now look at the range of devices available to governments wishing to limit the extent of imports.
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