Growing support for protectionist policies in countries around the world will hamper global economic growth going forward, according to a recent statement by the IMF and reporting by the Wall Street Journal. Recent political trends seem to be favoring protectionism - or the placement of barriers to free trade - including the British referendum to leave the EU (Brexit), nationalist and anti-immigration movements across Europe, and the rise of Republican candidate Donald Trump in the United States.

These policies, while they may appeal broadly to working and middle-class workers who are feeling disenfranchised in the decade following the financial crisis of 2008, tend to stifle GDP growth and actually cause more economic harm than good for a country. Deporting millions of migrant workers, building walls, and withdrawing from free trade agreements may seem logical in the short-term, but their longer term economic consequences could be dire.

Trade Barriers on the Rise

Generally, most economists agree that free trade is a good thing, enriching all parties involved. Conversely, impediments to free trade tend to have  consequences. While the most common form of protectionism, tariffs (which are taxes levies on imports from abroad), seem to be on the decline, other forms of trade barriers are on the rise. These include temporary trade barriers, anti-dumping measures and duties. 

The decline in tariffs has been largely the result of international free trade agreements, such as NAFTA and the proposed TPP, both of which have come under heavy pressure from their critics and opponents recently. If free trade agreements are rescinded or treaties canceled, it would increase tariffs worldwide, and undermine economic growth.

 According to the IMF report, "the waning pace of trade liberalization and a recent uptick in protectionist measures have added to the downward momentum [in economic activity]. Such reductions in global trade can feed back to lower GDP growth. For example, trade allows economies to specialize in producing goods and services in which they have a comparative advantage, and to exploit economies of scale and scope. Moreover, trade can improve productivity at the level of individual firms by—among other things—providing opportunities for learning, spreading technological innovations, and increasing the incentives to invest to access new markets. Thus, slowing trade risks inhibiting a key growth engine for the global economy."

Still, many workers who feel that their jobs, such as in manufacturing, have been lost to China or other low-income countries or feel that they cannot compete globally on price tend to favor protectionism. 

The Bottom Line

The global economy has struggled to grow out of the Great Recession, and despite record low interest rates, the outlook for growth remains subdued. One reason for this is the growing appeal for politicians to enact trade barriers as the support for protectionism grows across the globe. Disenfranchised members of the middle and working class who have seen their quality of life and their incomes suffer blame free trade and globalization, however economists argue that such measures would inflict more economic pain.


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