More Trade, More Protection: Insights and Implications of the Unending Contradiction

Abstract

Despite the stance of the WTO and various RTAs, elements of trade protectionism remain prevalent. This could be understood by the divergence between countries’ national interests and international trade protocols, which was reverberated during the recent global financial crises. However, the contradiction has taken new turn following new protectionist instruments. Furthermore, the implication of these instruments on developing countries economy is prevalent. Thus, this study explores the likelihood to engage in trade protection and the implication on developing country, focussing on Africa. The study observes that in the first quarter of 2012 alone, the number of protective measures amounts to 67, with bail out and trade defence accounting for as much as 74%. Similarly, from 2009 to 2011, trade defence mechanisms and bailout accounted for 25% of the protective measures; while tariff and non-tariff are also frequently used, jointly constituting about 28.11%. The study reveals that a country’s level of economic development is not a fundamental determining factor with regards to its tendency to engage in trade protectionism. However, the study establishes among others that as a country’s institutional quality improves, the less the tendency of being involved in protectionism. Paradoxically, the more a country’s trade integration, the higher its tendency towards protectionism, which might be alluded to the fact that when a country trades more, it has more interest to protect as major complainants of trade cases are also major traders. The study reveals that a country’s per capita income growth was significantly and adversely affected by the contemporary protectionism. It impacts negatively on trade balance; however, such impact was essentially significant for African countries.