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89-559: Protectionism , sometimes referred to as trade protectionism , is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas , and a variety of other government regulations. Proponents argue that protectionist policies shield the producers, businesses, and workers of the import-competing sector in the country from foreign competitors and raise government revenue . Opponents argue that protectionist policies reduce trade , and adversely affect consumers in general (by raising

178-504: A 2016 study found that these tariffs had no impact on employment and wages in the US tire industry. In 2018, EU Trade Commissioner Cecilia Malmström stated that the US was "playing a dangerous game" in applying tariffs on steel and aluminum imports from most countries and stated that she saw the Trump administration's decision to do so as both "pure protectionist" and "illegal". The tariffs imposed by

267-411: A free market, where there is no such total loss. Economist Stephen P. Magee claims the benefits of free trade outweigh the losses by as much as 100 to 1. Protectionism has been accused of being one of the major causes of war. Proponents of this theory point to the constant warfare in the 17th and 18th centuries among European countries whose governments were predominantly mercantilist and protectionist,

356-414: A government may say it intends to raise interest rates indefinitely to bring inflation under control, but then relax its stance later. This makes policy non-credible and ultimately ineffective. A rule-based policy can be more credible, because it is more transparent and easier to anticipate. Examples of rule-based policies are fixed exchange rates , interest rate rules , the stability and growth pact and

445-453: A limited set of circumstances and that trade policy will rarely be the best response to the problems [of globalization]". According to economic historians Findlay and O'Rourke, there is a consensus in the economics literature that protectionist policies in the interwar period "hurt the world economy overall, although there is a debate about whether the effect was large or small." Economic historian Paul Bairoch argued that economic protection

534-553: A negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers have a significantly positive effect on economic growth . Some scholars, such as Douglas Irwin , have implicated protectionism as the cause of some economic crises, most notably the Great Depression . On the contrary, Paul Krugman , winner of the Nobel Prize for Economics, argues that tariffs had no negative impact during

623-400: A predominant issue in the 19th century, as it became clear that industrial output, employment, and profit behaved in a cyclical manner. One of the first proposed policy solutions to the problem came with the work of Keynes , who proposed that fiscal policy could be used actively to ward off depressions, recessions and slumps. The Austrian School of economics argues that central banks create

712-573: A temporary waiver to enable more widespread production of the vaccines, since suppressing the virus as quickly as possible benefits the entire world. The waivers would be in addition to the existing, but cumbersome, flexibilities in TRIPS allowing countries to impose compulsory licenses. Over 100 developing nations supported the waiver but it was blocked by the G7 members. This blocking was condemned by 400 organizations including Doctors Without Borders and 115 members of

801-529: A very high tariff on foreign trade. By the early modern age, more policy choices had been developed. There was considerable debate about mercantilism and other restrictive trade practices like the Navigation Acts , as trade policy became associated with both national wealth and with foreign and colonial policy. Throughout the 19th century, monetary standards became an important issue. Gold and silver were in supply in different proportions. Which metal

890-422: Is a broad consensus among economists that protectionism has a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth. However, protectionism can be used to raise government revenue and enable access to intellectual property, including essential medicines. Protectionism is frequently criticized by economists as harming

979-706: Is a broader term that includes also institutional reforms and actions that do not require causal claims to be neutral under interventions. Such policy decisions can be grounded in, respectively, mechanistic evidence and correlational (econometric) studies. Paul Bairoch Paul Bairoch (24 July 1930 in Antwerp – 12 February 1999 in Geneva ) was a (in 1985 naturalised) Swiss economic historian of Belgian descent who specialized in urban history and historical demography . He published or co-authored more than two dozen books and 120 scholarly articles. His most important works emphasize

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1068-598: Is a set of policies that are imposed by an international body. This can occur (for example) as a result of intervention by the International Monetary Fund . The first economic problem was how to gain the resources it needed to be able to perform the functions of an early government: the military , roads and other projects like building the Pyramids . Early governments generally relied on tax in kind and forced labor for their economic resources. However, with

1157-424: Is not causation... there is no reason for necessarily thinking that import protection was a good policy just because the economic outcome was good: the outcome could have been driven by factors completely unrelated to the tariff, or perhaps could have been even better in the absence of protection." Irwin furthermore writes that "few observers have argued outright that the high tariffs caused such growth." One study by

1246-763: Is the exception and protectionism the rule". According to economic historians Douglas Irwin and Kevin O'Rourke, "shocks that emanate from brief financial crises tend to be transitory and have a little long-run effect on trade policy, whereas those that play out over longer periods (the early 1890s, early 1930s) may give rise to protectionism that is difficult to reverse. Regional wars also produce transitory shocks that have little impact on long-run trade policy, while global wars give rise to extensive government trade restrictions that can be difficult to reverse." One study shows that sudden shifts in comparative advantage for specific countries have led some countries to become protectionist: "The shift in comparative advantage associated with

1335-419: Is the most distorted exchange rate policy any great nation has ever followed". He notes that an undervalued renminbi is tantamount to imposing high tariffs or providing export subsidies. A cheaper currency improves employment and competitiveness because it makes imports more expensive while making domestic products more attractive. He expects Chinese surpluses to destroy 1.4 million American jobs by 2011. There

1424-532: The American Revolution , which came about ostensibly due to British tariffs and taxes. According to a slogan of Frédéric Bastiat (1801–1850), "When goods cannot cross borders, armies will." On the other hand, archaeologist Lawrence H. Keeley argues in his book War Before Civilization that disputes between trading partners escalate to war more frequently than disputes between nations that don't trade much with each other. The Opium Wars were fought between

1513-677: The Doha Declaration , was issued in November 2001, which indicated that TRIPS should not prevent states from dealing with public health crises and allowed for compulsory licenses . After Doha, PhRMA , the United States and to a lesser extent other developed nations began working to minimize the effect of the declaration. In 2020, conflicts re-emerged over patents, copyrights and trade secrets related to COVID-19 vaccines , diagnostics and treatments. South Africa and India proposed that WTO grant

1602-720: The European Parliament . In June 2022, after extensive involvement of the European Union , the WTO instead adopted a watered-down agreement that focuses only on vaccine patents, excludes high-income countries and China, and contains few provisions that are not covered by existing flexibilities. Proponents of protectionism argue that tariffs raise government revenue via customs . Developing countries , including least developed countries (LDCs), often do not collect income taxes because personal incomes are often too low to tax and they lack

1691-705: The Free University of Brussels where he worked from 1965 to 1995. He was economic adviser to the General Agreement on Tariffs and Trade (GATT) at Geneva from 1967 to 1969, professor at the Sir George Williams University (Concordia) in Montréal from 1969 to 1971 and on recommendation of Fernand Braudel became director of studies at the Ecole Pratique des Hautes Etudes from 1971 to 1972. In 1972 he

1780-679: The Golden Rule . Some policy rules can be imposed by external bodies, for instance, the Exchange Rate Mechanism for currency. A compromise between strict discretionary and strict rule-based policy is to grant discretionary power to an independent body. For instance, the Federal Reserve Bank , European Central Bank , Bank of England and Reserve Bank of Australia all set interest rates without government interference, but do not adopt rules. Another type of non-discretionary policy

1869-646: The Third World . He researched extensively the reasons why an industrial takeoff was prevented in the colonised countries of the Third World (see e.g. his book Révolution industrielle et sous-développement ). He is particularly known for his detailed empirical research on economic problems of Third World countries, on the Industrial Revolution and its aftermath and on urban history. His historical estimates of Gross Product measures are still being referred to in

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1958-699: The Trump administration during the China–United States trade war led to a reduction in the United States trade deficit with China. Defunct Great Britain , and England in particular, became one of the most prosperous economic regions in the world between the late 1600s and early 1800s as a result of being the birthplace of the Industrial Revolution that began in the mid-eighteenth century. The government protected its merchants—and kept others out—by trade barriers, regulations, and subsidies to domestic industries in order to maximize exports from and minimize imports to

2047-509: The UK and China over the right of British merchants to engage in the free trade of opium . For many opium users, what started as recreation soon became a punishing addiction: many people who stopped ingesting opium suffered chills, nausea, and cramps, and sometimes died from withdrawal. Once addicted, people would often do almost anything to continue to get access to the drug. Barbara Tuchman says both European intellectuals and leaders overestimated

2136-531: The United Kingdom between 1815 and 1846, and enhanced the profits and political power associated with land ownership . The laws raised food prices and the costs of living for the British public, and hampered the growth of other British economic sectors, such as manufacturing, by reducing the disposable income of the British public. The Prime Minister, Sir Robert Peel , a Conservative , achieved repeal in 1846 with

2225-499: The WTO benefited US consumers, as the price of Chinese goods were substantially reduced. Harvard economist Dani Rodrik argues that while globalization and free trade does contribute to social problems, "a serious retreat into protectionism would hurt the many groups that benefit from trade and would result in the same kind of social conflicts that globalization itself generates. We have to recognize that erecting trade barriers will help in only

2314-448: The money supply to prevent excessive inflation. Policy is generally directed to achieve particular objectives, like targets for inflation , unemployment , or economic growth . Sometimes other objectives, like military spending or nationalization are important. These are referred to as the policy goals : the outcomes which the economic policy aims to achieve. To achieve these goals, governments use policy tools which are under

2403-467: The "reciprocity period", the average tariff declined substantially until it leveled off at 5 percent. Economist Paul Bairoch documented that the United States imposed among the highest rates in the world from around the founding of the country until the World War II period, describing the United States as "the mother country and bastion of modern protectionism" since the end of the 18th century and until

2492-476: The 1846 Corn Laws debate, arguing that it destroyed what had been "some of the finest manufacturers of the world" in 1812. The countries of Western Europe began to steadily liberalize their economies after World War II and the protectionism of the interwar period, but John Tsang , then Hong Kong 's Secretary for Commerce, Industry and Technology and chair of the Sixth Ministerial Conference of

2581-539: The 18th century, Adam Smith famously warned against the "interested sophistry" of industry, seeking to gain an advantage at the cost of the consumers. Friedrich List saw Adam Smith's views on free trade as disingenuous, believing that Smith advocated for free trade so that British industry could lock out underdeveloped foreign competition. Some have argued that no major country has ever successfully industrialized without some form of economic protection. Economic historian Paul Bairoch wrote that "historically, free trade

2670-477: The 1950s, steel in the 1960s, automobiles in the 1970s, and electronics in the 1980s. In each case, the rapid expansion in Japan's exports created difficulties for its trading partners and the use of protectionism as a shock absorber." According to economic historian Douglas Irwin, a common myth about US trade policy is that low tariffs harmed American manufacturers in the early 19th century and then that high tariffs made

2759-589: The 19th century, such as the Russian Empire and Austro-Hungarian Empire which remained highly protectionist. The Ottoman Empire also became increasingly protectionist. In the Ottoman Empire's case, however, it previously had liberal free trade policies during the 18th to early 19th centuries, which British prime minister Benjamin Disraeli cited as "an instance of the injury done by unrestrained competition" in

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2848-462: The 2019 Nobel Prize laureates exemplifies the gold type of evidence. However, the emphasis put on experimental evidence by the movement of evidence-based policy (and evidence-based medicine ) results from the narrowly construed notion of intervention, which encompasses only policy decisions concerned with policymaking aimed at modifying causes to influence effects. In contrast to this idealized view of evidence-based policy movement, economic policymaking

2937-503: The 20th century, governments adopted discretionary policies like demand management designed to correct the business cycle . These typically used fiscal and monetary policy to adjust inflation, output and unemployment. However, following the stagflation of the 1970s , policymakers began to be attracted to policy rules . A discretionary policy is supported because it allows policymakers to respond quickly to events. However, discretionary policy can be subject to dynamic inconsistency :

3026-543: The Cobden Chevalier treaty and three decades after British Repeal, Germany "had virtually become a free trade country" (Bairoch, 41). Average duties on manufactured products had declined to 9–12% on the Continent, a far cry from the 50% British tariffs, and numerous prohibitions elsewhere, of the immediate post-Waterloo era (Bairoch, table 3, p. 6, and table 5, p. 42)." Some European powers did not liberalize during

3115-705: The Depression, Britain passed the Import Duties Act of 1932 , which imposed a general tariff of 10% on most imports and created the Import Duties Advisory Committee (IDAC), which could recommend even higher duties. Britain's protectionism in the early 1930s was shown by Lloyd and Solomou to have been productivity-enhancing. The possessions of the East India Company in India, known as British India ,

3204-497: The First World War on motorcars; clocks and watches; musical instruments; and cinematographic film were retained. Under commodities that were early to receive protection included matches, chemicals, scientific equipment, silk, rayon, embroidery, lace, cutlery, gloves, incandescent mantles, paper, pottery, enamelled holloware, and buttons. The duties on motorcars and rayon have been determined to have expanded output considerably. Amid

3293-475: The Great Depression. Although trade liberalization can sometimes result in large and unequally distributed losses and gains, and can, in the short run , cause significant economic dislocation of workers in import-competing sectors, free trade often lowers the costs of goods and services for both producers and consumers. A variety of policies have been used to achieve protectionist goals. These include: In

3382-686: The Netherlands, Denmark, Portugal and Switzerland, and arguably Sweden and Belgium, had fully moved towards free trade prior to 1860. Economic historians see the repeal of the Corn Laws in 1846 as the decisive shift toward free trade in Britain. A 1990 study by the Harvard economic historian Jeffrey Williamson showed that the Corn Laws (which imposed restrictions and tariffs on imported grain ) substantially increased

3471-564: The United Kingdom as "a decisive shift toward European free trade." This treaty was followed by numerous free trade agreements: "France and Belgium signed a treaty in 1861; a Franco-Prussian treaty was signed in 1862; Italy entered the "network of Cobden-Chevalier treaties" in 1863 (Bairoch 1989, 40); Switzerland in 1864; Sweden, Norway, Spain, the Netherlands, and the Hanseatic towns in 1865; and Austria in 1866. By 1877, less than two decades after

3560-487: The United Kingdom. Europe became increasingly protectionist during the eighteenth century. Economic historians Findlay and O'Rourke write that in "the immediate aftermath of the Napoleonic Wars, European trade policies were almost universally protectionist", with the exceptions being smaller countries such as the Netherlands and Denmark. Europe increasingly liberalized its trade during the 19th century. Countries such as

3649-423: The United States into a great industrial power in the late 19th century. A review by The Economist of Irwin's 2017 book Clashing over Commerce: A History of US Trade Policy states: Political dynamics would lead people to see a link between tariffs and the economic cycle that was not there. A boom would generate enough revenue for tariffs to fall, and when the bust came pressure would build to raise them again. By

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3738-479: The United States occurred under protectionist policies 1816–1848 and under moderate protectionism 1846–1861, and continued under strict protectionist policies 1861–1945. In the late 19th century, higher tariffs were introduced on the grounds that they were needed to protect American wages and to protect American farmers. Between 1824 and the 1940s, the U.S. imposed much higher average tariff rates on manufactured products than did Britain or any other European country, with

3827-556: The United States. In 2010, Paul Krugman write that China pursues a mercantilist and predatory policy, i.e., it keeps its currency undervalued to accumulate trade surpluses by using capital flow controls. The Chinese government sells renminbi and buys foreign currency to keep the renminbi low, giving the Chinese manufacturing sector a cost advantage over its competitors. China's surpluses drain US demand and slow economic recovery in other countries with which China trades. Krugman writes: "This

3916-531: The World Bank indicate that TRIPS has not led to a demonstrable acceleration of investment to low-income countries, though it may have done so for middle-income countries. Critics argue that TRIPS limits the ability of governments to introduce competition for generic producers. The TRIPS agreement allows the grant of compulsory licenses at a nation's discretion. TRIPS-plus conditions in the United States' FTAs with Australia, Jordan, Singapore and Vietnam have restricted

4005-588: The World Trade Organization , MC6, commented in 2005 that the EU spent around €70 billion per year on "trade-distorting support". Since 1971 Canada has protected producers of eggs, milk, cheese, chicken, and turkey with a system of supply management . Though prices for these foods in Canada exceed global prices, the farmers and processors have had the security of a stable market to finance their operations. Doubts about

4094-570: The achievement of their independence, most of the Latin American countries adopted protectionism. They both feared that any foreign competition would stomp out their newly created state and believed that lack of outside resources would drive domestic production. The protectionist behavior continued up until and during the World Wars. During World War 2, Latin America had, on average, the highest tariffs in

4183-472: The admittedly high tariffs of the time came with a cost, estimated at around 0.5% of GDP in the mid-1870s. In some industries, they might have sped up development by a few years. But American growth during its protectionist period was more to do with its abundant resources and openness to people and ideas. According to Irwin, tariffs have served three primary purposes in the United States: "to raise revenue for

4272-484: The agricultural preconditions necessary for industrialization and controversially claim, contrary to most scholars that colonization was not beneficial to colonial empires. He argued that tariffs and growth were positively correlated in the 19th century. Bairoch gained a bachelor's degree by correspondence, intending to become an engineer but he turned to studying economic history in 1956 at the parisian Ecole Pratique des Hautes Etudes . He obtained his doctorate in 1963 at

4361-460: The application of compulsory licenses to emergency situations, antitrust remedies, and cases of public non-commercial use. One of the most visible conflicts over TRIPS has been AIDS drugs in Africa . Despite the role that patents have played in maintaining higher drug costs for public health programs across Africa, this controversy has not led to a revision of TRIPS. Instead, an interpretive statement,

4450-432: The business cycle. After the dominance of monetarism and neoclassical thought that advised limiting the role of government in the economy in the second half of the twentieth century, the interventionist view has once more dominated the economic policy debate in response to the 2007-2008 financial crisis, A recent trend originating from medicine is to justify economic policy decisions with best available evidence. While

4539-463: The capability to collect such taxes from individuals. Tariffs were the greatest source of United States federal revenue (up to 95% at times) until the federal income tax began after 1913. For well over a century the federal government was largely financed by tariffs averaging about 20% on foreign imports. At the end of the American Civil War in 1865 about 63% of Federal income was generated by

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4628-522: The control of the government. These generally include the interest rate and money supply , tax and government spending, tariffs, exchange rates , labor market regulations, and many other aspects of government. Government and central banks are limited in the number of goals they can achieve in the short term. For instance, there may be pressure on the government to reduce inflation, reduce unemployment, and reduce interest rates while maintaining currency stability. If all of these are selected as goals for

4717-446: The cost of imported goods) as well as the producers and workers in export sectors, both in the country implementing protectionist policies and in the countries against which the protections are implemented. Protectionism has been advocated mainly by parties that hold economic nationalist positions, while economically liberal political parties generally support free trade . There is a consensus among economists that protectionism has

4806-441: The cost of living for British workers, and hampered the British manufacturing sector by reducing the disposable incomes that British workers could have spent on manufactured goods. The shift towards liberalization in Britain occurred in part due to "the influence of economists like David Ricardo", but also due to "the growing power of urban interests". Findlay and O'Rourke characterize 1860 Cobden Chevalier treaty between France and

4895-472: The development of money came the first policy choice. A government could raise money through taxing its citizens. However, it could now also debase the coinage and so increase the money supply . Early civilizations also made decisions about whether to permit and how to tax trade . Some early civilizations, such as Ptolemaic Egypt adopted a closed currency policy whereby foreign merchants had to exchange their coin for local money. This effectively levied

4984-530: The economic historian Brian Varian found no correlation between tariffs and growth among the Australian colonies in the late nineteenth century, a time when each of the colonies had the independence to set their own tariffs. Economic policy Most factors of economic policy can be divided into either fiscal policy , which deals with government actions regarding taxation and spending , or monetary policy , which deals with central banking actions regarding

5073-500: The exception for a period of time of Spain and Russia. Up until the end of World War II, the United States had the most protectionist economy on Earth. The Bush administration implemented tariffs on Chinese steel in 2002 ; according to a 2005 review of existing research on the tariff, all studies found that the tariffs caused more harm than gains to the US economy and employment. The Obama administration implemented tariffs on Chinese tires between 2009 and 2012 as an anti-dumping measure ;

5162-428: The excise taxes, which exceeded the 25.4% generated by tariffs. In 1915 during World War I tariffs generated only 30.1% of revenues. Since 1935 tariff income has continued to be a declining percentage of Federal tax income. A 2016 study found that "trade typically favors the poor", as they spend a greater share of their earnings on goods, as free trade reduces the costs of goods. Other research found that China's entry to

5251-591: The exploitation of the third world in the 19th and early 20th century. He argued that this exploitation was not indispensable for industrialisation. This he thought is "good news" for the third world because it means that development could occur without exploitation of other regions. "S’il me fallait résumer ce que l’essence de l’histoire économique peut apporter à la science économique, je dirais qu’il n’existe pas de « lois » ou règles en économie qui soient valables pour toutes les périodes de l’histoire ou pour chacun des systèmes économiques." ("If I had to summarise

5340-433: The first commercial treaties signed with France in 1536 and taken further with capitulations in 1673 and 1740, which lowered duties to 3% for imports and exports. The liberal Ottoman policies were praised by British economists such as J. R. McCulloch in his Dictionary of Commerce (1834), but later criticized by British politicians such as Prime Minister Benjamin Disraeli , who cited the Ottoman Empire as "an instance of

5429-484: The government, to restrict imports and protect domestic producers from foreign competition, and to reach reciprocity agreements that reduce trade barriers." From 1790 to 1860, average tariffs increased from 20 percent to 60 percent before declining again to 20 percent. From 1861 to 1933, which Irwin characterizes as the "restriction period", the average tariffs increased to 50 percent and remained at that level for several decades. From 1934 onwards, which Irwin characterizes as

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5518-403: The idea that free trade historically led to periods of economic growth; that moving away from free trade caused the Great Depression ; and that colonial powers in the 19th and early 20th centuries became rich by exploiting the Third World . Bairoch argued that such beliefs are based on insufficient knowledge and misguided interpretations of the economic history of the United States, Europe and

5607-642: The injury done by unrestrained competition" in the 1846 Corn Laws debate: There has been free trade in Turkey, and what has it produced? It has destroyed some of the finest manufactures of the world. As late as 1812 these manufactures existed; but they have been destroyed. That was the consequences of competition in Turkey, and its effects have been as pernicious as the effects of the contrary principle in Spain. "L'occident n'a pas besoin du tiers monde, ce qui est une mauvaise nouvelle pour le tiers monde." ("The West doesn't need

5696-519: The late 1940s, it stifled agricultural production, exports and business sentiment, in general. Despite these shortcomings, protectionism and government credits did allow an exponential growth of the internal market: radio sales increased 600% and fridge sales grew 218%, among others. During this period Argentina's economy continued to grow, on average, but more slowly than the world as a whole or than its neighbors, Brazil and Chile. By 1950, Argentina's GDP per capita accounted fell to less than half of that of

5785-401: The liberal era of low tariffs and free trade. One study found that tariffs imposed on manufactured goods increase economic growth in developing countries, and this growth impact remains even after the tariffs are repealed. According to Dartmouth economist Douglas Irwin , "that there is a correlation between high tariffs and growth in the late nineteenth century cannot be denied. But correlation

5874-466: The literature, although some are also challenged by other economic historians such as Angus Maddison . Bairoch argues that free trade contributed to deindustrialization in the Ottoman Empire . In contrast to the protectionism of China, Japan, and Spain, the Ottoman Empire had a liberal trade policy, open to foreign imports. This has origins in capitulations of the Ottoman Empire , dating back to

5963-538: The member nations of the World Trade Organization (WTO). It establishes minimum standards for the regulation by national governments of different forms of intellectual property (IP) as applied to nationals of other WTO member nations. TRIPS was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) between 1989 and 1990 and is administered by the WTO. Statements by

6052-732: The modern trade arena, many other initiatives besides tariffs have been called protectionist. For example, some commentators, such as Jagdish Bhagwati , see developed countries' efforts in imposing their own labor or environmental standards as protectionism. Also, the imposition of restrictive certification procedures on imports is seen in this light. Further, others point out that free trade agreements often have protectionist provisions such as intellectual property, copyright , and patent restrictions that benefit large corporations. These provisions restrict trade in music, movies, pharmaceuticals, software, and other manufactured items to high-cost producers with quotas from low-cost producers set to zero. In

6141-460: The money supply and interest rates. Such policies are often influenced by international institutions like the International Monetary Fund or World Bank as well as political beliefs and the consequent policies of parties. Almost every aspect of government has an important economic component. A few examples of the kinds of economic policies that exist include: Stabilization policy attempts to stimulate an economy out of recession or constrain

6230-478: The opening up of New World frontiers, and the subsequent "grain invasion" of Europe, led to higher agricultural tariffs from the late 1870s onwards, which as we have seen reversed the move toward freer trade that had characterized mid-nineteenth-century Europe. In the decades after World War II, Japan's rapid rise led to trade friction with other countries. Japan's recovery was accompanied by a sharp increase in its exports of certain product categories: cotton textiles in

6319-468: The people it is intended to help. Mainstream economists instead support free trade. The principle of comparative advantage shows that the gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialize in the production of goods and services in which they have a comparative advantage. Protectionism results in deadweight loss ; this loss to overall welfare gives no-one any benefit, unlike in

6408-468: The post-World War II period. Alexander Hamilton , the first United States Secretary of the Treasury , was of the view, as articulated most famously in his " Report on Manufactures ", that developing an industrialized economy was impossible without protectionism because import duties are necessary to shelter domestic " infant industries " until they could achieve economies of scale . The industrial takeoff of

6497-477: The power of free trade on the eve of World War I . They believed that the interconnectedness of European nations through trade would stop a continent-wide war from breaking out, as the economic consequences would be too great. However, the assumption proved incorrect. For example, Tuchman noted that Helmuth von Moltke the Younger , when warned of such consequences, refused to even consider them in his plans, arguing he

6586-430: The previous approaches have been focused on macroeconomic policymaking aimed at sustaining promoting economic development and counteracting recessions, EBP is oriented towards all types of decisions concerned not only with anti-cyclical development but primarily with the growth-promoting policies. To gather evidence for such decisions, economists conduct randomized field experiments. The work of Banerjee, Duflo, and Kremer,

6675-640: The realm. The Navigation Acts of the late 17th century required all trade to be carried in English ships, manned by English crews (this later encompassed all Britons after the Acts of Union 1707 united Scotland with England). Colonists were required to send their produce and raw materials first of all to Britain, where the surplus was then sold-on by British merchants to other colonies in the British empire or bullion-earning external markets. The colonies were forbidden to trade directly with other nations or rival empires. The goal

6764-503: The safety of bovine growth hormone , sometimes used to boost dairy production, led to hearings before the Senate of Canada , resulting in a ban in Canada. Thus, supply management of milk products is consumer protection of Canadians. Most Latin American countries gained independence in the early 19th century, with notable exceptions including Spanish Cuba and Spanish Puerto Rico . Following

6853-522: The short term, then policy is likely to be incoherent, because a normal consequence of reducing inflation and maintaining currency stability is increasing unemployment and increasing interest rates. This dilemma can in part be resolved by using microeconomic supply-side policy to help adjust markets. For instance, unemployment could potentially be reduced by altering laws relating to trade unions or unemployment insurance , as well as by macroeconomic ( demand-side ) factors like interest rates. For much of

6942-552: The so-called late-Victorian climacteric in the British economy: a decline in the growth rate, i.e. a deceleration. During the interwar era, Britain abandoned free trade. There was a limited erosion of free trade during the 1920s under a patchwork of legislation including the Safeguarding of Industries Act of 1921 , the Safeguarding of Industries Act of 1925 , and the Finance Act of 1925 . The McKenna Duties , which were imposed during

7031-687: The support of the Whigs in Parliament, overcoming the opposition of most of his own party. While the United Kingdom espoused a policy of free trade in the late nineteenth century, it was hardly the case that Britain was unaffected by the tariffs imposed by its trade partners—tariffs that generally increased during the late nineteenth century. According to one study, Britain's exports in 1902 would have been 57% higher, if all of Britain's trade partners also embraced free trade. The decline in overseas demand for British exports, resulting from foreign tariffs, contributed to

7120-402: The third world, which is bad news for the third world.") – Paul Bairoch, Le tiers monde dans l'impasse (1992) "L'occident n'avait pas besoin du tiers monde, ce qui est une bonne nouvelle pour le tiers monde." ("The West didn't need the third world, which is good news for the third world.") – Paul Bairoch, Mythes et paradoxes de l'histoire économique Bairoch referred here to colonialism and to

7209-408: The time that happened, the economy would be recovering, giving the impression that tariff cuts caused the crash and the reverse generated the recovery. 'Mr. Irwin' also attempts to debunk the idea that protectionism made America a great industrial power, a notion believed by some to offer lessons for developing countries today. As its share of global manufacturing powered from 23% in 1870 to 36% in 1913,

7298-412: The world", meaning that its finished goods were produced so efficiently and cheaply that they could often undersell comparable, locally manufactured goods in almost any other market. By the 1840s, the United Kingdom had adopted a free-trade policy, meaning open markets and no tariffs throughout the empire. The Corn Laws were tariffs and other trade restrictions on imported food and corn enforced in

7387-463: The world. Juan Perón erected a system of almost complete protectionism against imports, largely cutting off Argentina from the international market in the 1940s. Protectionism created a domestically oriented industry with high production costs, incapable of competing in international markets. At the same time, output of beef and grain, the country's main export goods, stagnated. The IAPI began shortchanging growers and, when world grain prices dropped in

7476-628: Was a "soldier," not an "economist." The ongoing Russo-Ukraine War began in the aftermath of the Revolution of Dignity and the signing of the European Union–Ukraine Association Agreement in 2014, which included a Deep and Comprehensive Free Trade Area for Ukraine and the European Union (EU). The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all

7565-604: Was adopted influenced the wealth of different groups in society. With the accumulation of private capital in the Renaissance, states developed methods of financing deficits without debasing their coin. The development of capital markets meant that a government could borrow money to finance war or expansion while causing less economic hardship. This was the beginning of modern fiscal policy . The same markets made it easy for private entities to raise bonds or sell stock to fund private initiatives. The business cycle became

7654-819: Was made professor of history at the University of Geneva . He retired in 1995. He was also visiting professor at Harvard and at the Collège de France (1983) and Doctor honoris causa at the ETH Zurich . From 1985, Bairoch directed a number of research projects on the world economy at a Centre for International Economic History in Geneva. Paul Bairoch sought through quantitative, empirical research of historical trends to question and challenge many beliefs which are nowadays generally accepted in economics (see in particular his work Economics and World History: Myths and Paradoxes ), among which:

7743-467: Was positively correlated with economic and industrial growth during the 19th century. For example, GNP growth during Europe's "liberal period" in the middle of the century (where tariffs were at their lowest), averaged 1.7% per year, while industrial growth averaged 1.8% per year. However, during the protectionist era of the 1870s and 1890s, GNP growth averaged 2.6% per year, while industrial output grew at 3.8% per year, roughly twice as fast as it had during

7832-516: Was the centrepiece of the British Empire, and because of an efficient taxation system it paid its own administrative expenses as well as the cost of the large British Indian Army . In terms of trade, India turned only a small profit for British business. However, transfers to the British government was massive: in 1801 unrequited (unpaid, or paid from Indian-collected revenue) was about 30% of British domestic savings available for capital formation in

7921-503: Was to maintain the North American and Caribbean colonies as dependent agricultural economies geared towards producing raw materials for export to Britain. The growth of native industry was discouraged, in order to keep the colonies dependent on the United Kingdom for their finished goods. From 1815 to 1870, the United Kingdom reaped the benefits of being the world's first modern, industrialised nation. It described itself as "the workshop of

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