The Rise of Economic Protectionism: A Post-Pandemic Global Trend?

The Covid19 pandemic impacted the global economy in an unprecedented manner, impacting international trade policy accordingly. Indeed, important protectionist policies were adopted in different countries. Protectionism, in its core meaning, is defined as a set of policies aimed at saving home industries from foreign competition.

Understanding Economic Protectionism

Economic protectionism is typically rooted in government policies and actions that limit international trade in order to protect local industries. These typically include tariffs, import quotas, subsidies and strict regulatory standards.

Benefits

The argument of educator protectionism (F. List industries): The new technologies have too high unit production costs for international competition. List calls for the protection of these industries temporarily, bymeans of customs tariffs, so that it can be developed by realising

economies of scale and the savings of experience required. As soon as the industry is competitive enough to compete globally, the protection must be lifted. South Korea has been applying for several this strategy and still practice high tariffs for some sectors highly exposed to global competition

The argument of strategic protectionism:

In some markets, where barriers to entry are high, only a few firms are in competition. These firms then have market power. In this situation, some economists believe that it is profitable for a national economy to implement strategic commercial policies, namely to subsidize firms domestically to discourage investment and production of foreign companies. The global aeronautics market, dominated by two major companies, Airbus in Europe and Boeing in the US, illustrates this strategy.

Protectionism can respond to environmental challenges and demand Democratic nation to limit imports for products. The EU has a strong environmental and public health impact. The EU is already done, with the ban on imports of processed beef from hormones or the establishment of maximum residue limits (MRLs) of pesticides in products entering the internal market. From December 30, 2024, beef from deforestation will also be prohibited.

Limits

Protectionism limits the exposure of domestic industries to international competition. This can lead to a reduction in investment in R&D since companies need less to innovate in order to differentiate from competitors.

The introduction of a customs duty artificially raises the price on imported products. Export subsidies and the quotas have effects comparable to those of the right customs duties, since they also contribute to price increases domestically. For example, the existence of a US sugar quota increased the price from $496 per tonne (world price) to $747 (price on US market). This results in a decrease in purchasing power for the buyers.

The problem of economic retaliation: protectionism allows in some cases to improve domestic welfare but these behaviors can be described as predatory because of their effectiveness. The welfare of trading partners is diminished. Also, there is a good chance that the trading partners will react by retaliating against protectionist countries' trade that annihilated the gains of the original measure. War trade between the US and China which took place in particular during Trump’s first term as president illustrates this problem. For example, on March 8, 2018, Trump announced import taxes on steel (25% of the tariff) and aluminium (10%). As of 23 March, The People’s Republic of China publishes a list of 128 products States with customs duties of 15 to 25%.Factors Driving Post-Pandemic Protectionism

The emergence of protectionist policies in recent years has been driven by a combination of factors:

Supply Chain Disruptions:

The pandemic underlined the vulnerability of international supply chains-most evidently those for lifesaving medical supplies and semiconductors. Many nations, in turn, have sought to reduce reliance on foreign suppliers by incentivizing onshoring of production.Economic Nationalism: Pressured to aid ailing local businesses, governments have moved toward protectionism as a means of ensuring that recovery is first domestic. The slogan "buy local" has become a rallying cry for self-sufficiency.Geopolitical Tensions: Trade frictions, especially between major economies such as the United States and China, have whetted protectionist sentiments. These tensions have forced countries to reevaluate their reliance upon strategic imports.

Growing Inequality: 

Further, critics of globalization argue that free trade has also heightened income inequality domestically. Protectionism is usually packaged as saving jobs and safeguarding vulnerable industries.

Examples of Post-Pandemic Protectionism:

United States: The Biden administration's Inflation Reduction Act subsidizes the manufacture of renewable energy products domestically. This has been criticized by its trading partners, who claim it will distort competition.

European Union: Under this, the EU has moved the CBAM, a taxation of basic imports that would originate from countries with low environmental standards. At the same time, it saves industries in the European Union from the cheapest, most carbon-emitting imports.

China: The term "Dual circulation" is applied to characterize China's combination of self-sufficient domestic consumption and innovation with reliance on foreign technology and markets.

Economic and Global Trade Implications:

The increase in protectionism has affected international trade and economic growth adversely in the following ways-

Lower Efficiency: Most protectionist measures have resulted in higher production costs and reduced efficiency as countries forgo the benefits accruing from specialization and comparative advantage.

Trade Wars: Retaliatory tariffs and upward spirals of trade conflict disrupt global markets, raise uncertainty, and stifle economic recovery.

Fragmentation: Moving away from multilateralism into regional or bilateral agreements might fragment the global trade system, exclude the majority, and render it far more vulnerable to geopolitical pressures.

Stagnation of Innovation: Lessened competition has effects-reduced incentive for national industries to aspire to be better.

Balancing Protectionism : 

Though it's true that protectionism might save the local jobs and industries, in these matters, the balance is always to be gained. Governments, apart from this, may try to do the following: Invest in Resilience: Resilience in strategic supply chains can be increased through diversification, not insulation, at no cost to the open global economy.Encourage Fair Trade: There must be equity in the agreements on labor rights, environmental protection, and technology transfer so as to nullify certain criticisms against globalization.Nurture Cooperation: Resurgence of the multilateral institution WTO will go a long way toward dispute mediation and enforcement of rules-based trade. 

Conclusion :

The resurgence of economic protectionism in the post-pandemic period presents itself as an end result of the complex interrelation of economic, political, and social factors. Whereas it would serve as protection for domestic industries, the long-term implications it has are seriously devastating for recovery and cooperation in the world. Policymakers face challenges as each country navigates this current trend with the need to balance such local interests against the requirements of an increasingly interdependent world economy. How far our ability to embrace resilience can go hand in hand with collaboration in greater uncertainty will mean the road ahead of world trade.