The engine of the global economy is powered by international trade. Countries import goods, that they cannot produce themselves or cannot make efficiently, and export goods that other countries want. Imported goods, such as commodities, help drive manufacturing and industry. Those industries then export finished goods.
TUTORIAL: Investing 101

Economies cannot function without imports, but when economies sour many countries forget this. Industry leaders and labor groups want politicians to support policies that protect domestic export-driven businesses, and pundits point out that imports lead to trade deficits. The adage is that exports create jobs and imports create debt.

Balancing imports and exports is a delicate issue, because there are a number of protectionist policies available, and because other countries can retaliate. If trade policies are deemed to hurt a trading partner, a trade war can erupt, in which countries ratchet up protectionist policies in a tit-for-tat manner, ultimately leading to economic slowdown. According to Global Trade Alert (GTA), there are over 1,100 protectionist measures in place during September 2011, and the number of measures has increased dramatically since 2008. (For related reading, see The Basics Of Tariffs And Trade Barriers.)

Who are the bad guys in the big business of world trade? You'd be surprised. Using information from the World Trade Organization (WTO) and GTA, we've found the "Great 8" of being not so great to foreign exporters.

United States
The United States has been the target of 113 complaints since 1995, by far the most by any member of the WTO. One third of complaints have stemmed from anti-dumping policies. The European Union (EU) initiated 32 of the 113 complaints, but the most well-known have involved aerospace products (America's Boeing and the EU's Airbus are competitors). Six of its complaints came in 2000, a particularly contentious year.

Exporters of steel beware: the United States doesn't like you. Nine member countries fired out complaints in 2002 after President Bush placed a tariff on imported steel (the tariff was lifted in December 2003) in an effort to protect domestic production.

According to GTA, the U.S. has initiated, or renewed, 26 measures that almost certainly affected foreign commercial interests since March 2009. A number of these measures are related to various bailouts offered by the government.

European Union
If you are a foreign farmer, the EU has a bone to pick with you. The EU has had 70 complaints lodged against it since 1995. Unlike disputes seen in China and the U.S., many of these complaints did not involve anti-dumping tariffs, but instead targeted specific products, ranging from salmon and bananas to technology products. The U.S. has levied 19 of the complaints, including several in recent years related to EU regulations relating to agricultural products and genetically-modified materials.

According to GTA, the EU has initiated, or renewed, 29 measures that almost certainly affected foreign commercial interests since June 2009. Ten of these measures were put in place between May and July 2011, a time in which European politicians may have been gambling that protectionist measures were better than a euro area collapse. (For related reading, see What Is International Trade?)

China
According to the WTO, China has been on the receiving end of complaints 23 times since 2004, with 12 of the complaints brought by the U.S. and 5 by European communities. In recent years, the biggest complaint has involved anit-dumping duties. GTA lists 42 measures launched by China to protect its domestic industries, with over 30% being launched in the first half of 2011. Over half of China's measures targeted products and services offered by the EU and the U.S., giving rise to continued tensions between the three economic powerhouses.

India
According to the WTO, India has been on the receiving end of complaints 20 times since 1996, with 10 of the complaints brought by European countries. A big chunk of these complaints (six) came about in 1997 from quantitative restrictions placed on agricultural, textile and industrial products. GTA counts 52 policies in place that hurt foreign exporters, including 38 that would affect its Asian rival, China.

Canada
Canada was dinged 17 times by WTO members since 1996, with the majority coming from the U.S. and the EU. Unlike the EU and the U.S., Canada seems to draw less ire from the international community when it comes to trade. Three of the complaints involved aerospace industry, and all of these complaints were brought by Brazil.

Argentina
Argentina was the target of 17 complaints since 1996, with the largest amount (seven) coming from the EU. GTA found 104 Argentinian policies to be anti-trade, dwarfing all other countries, save for Russia. Forty of these policies were enacted in 2011, and can be chalked up to a government fighting for dominance in Latin America. Additionally, political uncertainty has led to years of glad handing.

Brazil
According to the WTO, Brazil has been on the receiving end of complaints 14 times since 1995, with 12 of the complaints brought by the U.S. and 5 by European countries. Several complaints were brought on by countries looking to export automobiles to Brazil, which was trying to protect its domestic industry in the mid-1990s.

GTA says 45 measures were undertaken by the Brazilian government that would negatively impact imports. Twenty four of them came about in 2010, and 16 were specifically targeted to agricultural and textile products.

Russia
Russia, which had the 11th highest GDP in 2010, according to the International Monetary Fund, is not a member of the WTO. This hasn't kept it from creating policies that affect the importation of other countries' goods and services. GTA counts 105 measures that definitively affect imports, 69 of which affect the U.S. and 83 that target the EU. (For related reading, see What Is The World Trade Organization?)

The Bottom Line
Protectionist policies are not limited to developing countries looking to protect nascent industries; some of the biggest offenders are some of the largest economies. Is this because big economies have more skin in the game, or is it because they play dirtier? Even with organizations such as the World Trade Organization helping settle trade disputes, protectionist policies like tariffs, quotas, subsidies and "softer" barriers to trade can still have a big impact.

Related Articles
  1. Economics

    Calculating the Consumption Function

    The consumption function shows the level of consumer spending as it relates to disposable income.
  2. Fundamental Analysis

    Examining Mexico's Trillion-Dollar GDP

    Examining the gross domestic product growth and composition of Mexico, the second largest economy in Latin America
  3. Fundamental Analysis

    What Causes Inflation in the United States

    Inflation is the main catalyst behind U.S monetary policy. But what causes this phenomenon of sustained rising prices? Read on to find out.
  4. Term

    Understanding Net Exports

    Net exports are the difference between a country’s exports and imports.
  5. Investing News

    How The Devaluation of the Yuan Hurts the Russian Economy

    With oil and gas comprising the majority of Russia’s exports and China serving as its largest trading partner, a devalued yuan signals the weakening Chinese economy will demand less energy while ...
  6. Active Trading Fundamentals

    The Top 5 Impact Investing Firms

    Learn what impact investing is and obtain information on some of the top impact investing firms ranked by total assets under management.
  7. Investing Basics

    Explaining Trade Liberalization

    Trade liberalization is the process of removing or reducing obstacles that impede the exchange of goods and services between nations.
  8. Economics

    Explaining Strategic Alliances

    A strategic alliance is a business relationship between two or more entities that share recourses for a common goal.
  9. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  10. Economics

    The Problem With Today’s Headline Economic Data

    Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
RELATED TERMS
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods ...
  2. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  3. Cost, Insurance and Freight - CIF

    A trade term requiring the seller to arrange for the carriage ...
  4. Brazil, Russia, India And China ...

    An acronym for the economies of Brazil, Russia, India and China ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of standardizing ...
  6. Inflation

    The rate at which the general level of prices for goods and services ...
RELATED FAQS
  1. When do I need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  2. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  3. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  4. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>
  5. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    The difference between cost and freight (CFR) and free on board (FOB) lies in who has responsibility for various shipping ... Read Full Answer >>
  6. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!