Protectionist Trade Policies Research Articles

The ‘curse of dimensionality’ resolved: The effects of climate change and trade barriers in large dimensional modelling

Solving large scale optimisation problems over space and time quickly generates a computational impasse, termed the ‘curse of dimensionality’. This severely limits the practical use of economic models, especially for determining the effects of climate change and protectionist trade policies. In this paper, we employ an innovative approach to solving (otherwise unsolvable) large scale systems through the use of parallel processing methods and a proper ordering of variables and equations in a ‘Nested Doubly Bordered Block Diagonal’ form. We illustrate how the approach can be used to solve an intertemporal CGE model with more than 500 million equations. Using existing damage functions, the framework allows us to determine the impact of climate change on long-run economic growth for 112 countries as a result of the effect of sea-level rise on land endowments, variation in crop yields and productivity and shifts in the demand for energy and transportation. We also compare our solution to more common (and smaller dimensional) recursive methods, in terms of both the economic effects of climate change and potential increases in trade barriers, showing the power and efficiency of our computational approach and parallel processing routine.

Donald Trump’s Protectionist Trade Policy from the Perspective of Economic Nationalism

This article aims to analyze American trade policy under Donald Trump’s administration. President Trump has imposed a se t of tariffs and quotas for such imported agriculture and manufactured products. Such trade policies triggered many American trading partners, most notably China and NAFTA members, to take any retaliatory measures, starting trade war. Preliminary observation on this issue starts with two problematization. First, Trump’s trade policies failed to push his trade partners for their trade compliances despite of their higher relative export dependency on American market rather than on the contrary. Second, most of Trump’s “trade belligerents” are democratic countries; it is another anomaly for established assumption about democratic peace theory which has stated that structures and norms held by democratic countries prevent them to engage conflictual relations in both political-security and economy. Further research has found that competitive trade structure US Government faced at some traded commodities put American trade interests at stake against other conflicting countries. In order to protect such interest, President Trump must deliver restrictive measures—tariffs and quotas—in favor of domestic industries and market. Such behavior is justified by both President Trump’s view and tenet about the construction of American nation and his political mobilization of popular far-right mass which also contribute to the discourse of contemporary American nationalism. The result is American economic nationalism which drives domestic political configuration to support President Trump’s political economic initiatives.

Trade and the equitability of global food nutrient distribution

Access to sufficient, nutritious food is a basic human right and is necessary to achieving the United Nations’ Sustainable Development Goals. We demonstrate that international food trade, in the current global system, is essential to nutrient access and enables some poorer countries to be able to nourish up to hundreds of millions of people. Protectionist trade policies could therefore have serious negative consequences for food security.

A general equilibrium analysis of Canada’s national policy

In this paper, we study the impact of Canada’s adoption of protectionist trade policy in 1879 on Canadian welfare. Under the National Policy, the Canadian average weighted tariff increased from 14% to 21%. The conventional view is that this was a distortionary policy that negatively affected Canadian welfare. We argue that this view is incomplete because it ignores general equilibrium effects. Using a multi-industry general equilibrium model with differentiated goods, we show that tariffs’ impact on welfare can potentially be positive, even for small open economies, due to their impact on domestic terms of trade and government revenues. We apply these theoretical insights in a reassessment of the static impact that the National Policy had on Canadian welfare in 1879, using newly compiled granular trade and production data, and newly estimated historically contemporaneous import demand elasticities. Our results suggest that, although a multilateral move to free trade would have resulted in the best welfare outcome for Canadians, the National Policy’s tariff increases actually improved Canadian welfare by approximately 0.15% of GDP in 1879 – an amount equivalent to approximately $2.3 billion 2016 USD.

Self-Sufficiency versus Security: How Trade Protectionism Challenges the Sustainability of the Food Supply in Russia

Food security is increasingly influenced by multilateral trade systems and foreign trade policies implemented by national governments. Many of them are now concerned about the sustainability of food supply and the vulnerability of domestic food markets to price volatility, and seek to support domestic producers and protect themselves from increasing food imports. Such restrictions improve food self-sufficiency, but decrease food security. It is important to understand any changes that may have occurred in the food consumption pattern due to trade protectionism and to observe any nutritional implications of these changes. This paper employs the rational food security (RFS) assessment approach, which differentiates sources of food supply on the domestic market, assesses the influence of agricultural and trade frameworks on food consumption patterns, and complies consumption with the appropriate food intake threshold. In the case of Russia, the study demonstrates that the conventional consumption approach to self-sufficiency (FSCA) underestimates the food insecurity level by not accounting for nutrition factors. In addition, the gap between the FSCA and the RFS increases in times of protectionist trade policy and decreases when the agricultural and trade policy framework turns to liberalization. The paper concludes that trade protectionism challenges the sustainability of food supply by decreasing food availability and quality of food products, causes dietary changes, and threatens the food security of the country.

A measure of marketing price transmission in the Red Onion Market of Sri Lanka

In the past there were several protectionist trade policies to safeguard the local onion production. This study examines their impact by means of nominal and effective protection rates and competiveness in resource utilization by competitiveness coefficient. There is a long-run co-integration relationship between the farm and the retail prices marketing margin resulting from this long-run relationship cause asymmetric short-run dynamic adjustments between the farm and the retail prices Welfare distribution among stakeholders is measured by classical welfare analysis. The analysis indicates that both big and red onion producers are noticeably protected by the trade policies and receive returns greater than they would get under a free market condition. Trade policies benefit consumers over producers. Gains to the nation are substantial.

Empirical Evidence on the Impact of Multilateral Trade Liberalization on Domestic Trade Policy

During recent years, the world has faced a growing anti-trade rhetoric, which has been translating in a strong appeal of domestic trade protectionist measures, situation that has been undermining trade multilateralization. The current paper examines the extent to which multilateral trade liberalization affects domestic trade policy liberalization. The analysis uses a panel dataset comprising 166 countries over the period 1995–2014. It suggests evidence that multilateral trade liberalization is strongly conducive to domestic trade policy liberalization. Moreover, as countries further develop, they experience a greater impact of multilateral trade liberalization on domestic trade policy liberalization. The take-home message of this analysis is that domestic protectionist trade policy measures would likely undermine the multilateralization of trade and prompt trading partners to react in the same way. This would ultimately result in trade wars, which would be damage for domestic economies and the world’s economic performance.

(Economic Development Strategy of Major Central Asian Countries and Its Policy Implications for Korea)

Korean Abstract: 이 연구는 중앙아시아 주요국 경제발전전략의 기본 방향과 핵심 특성을 분석하고 경제협력 확대방안을 제시하려는 목적으로 수행되었다. 세계경제의 불확실성이 한층 증대되는 상황 속에서 중앙아시아 주요국 정부의 최대 관심사는 에너지 및 광물자원 의존도 축소, 산업다각화와 경제현대화를 통한 미래지향적이고 지속가능한 경제성장에 있었다. 따라서 한국은 중앙아 주요국의 신경제발전정책에 부합하는 상생 경제협력 방안 마련에 나서야 할 것이다. 본고에서는 고위급 회감의 정례화, 한ㆍ중앙아 경제협력위원회 구성, 한ㆍ중앙아 산업협력 펀드 조성, 산업다각화에 필요한 전문인력 양성 지원 등을 경제 협력 확대방안으로 제안했다. English Abstract: Uncertainties in the global economic environment are increasing due to prolonged low oil prices, China’s low economic growth, the possibilities of strengthened protectionist trade policies after the U.S. presidential election, and the emergence of neo-isolationism due to Brexit. In this situation, the Central Asian governments are developing and pursuing individual economic strategies which reflect their own socio-economic characteristics and core policy goals. Kazakhstan is shifting its policy direction from maximizing exports of raw materials to qualitative economic development. The country has pursued an open foreign policy and trade liberalization to overcome its geographical limitations as a small landlocked country. The open economy originally focused on exporting energy resources and attracting foreign capital, but with some control by the government in energy resources management. However, as the structural changes in the external economic environment occurred after the global financial crisis in 2008, the government started to focus on improving the structure of the economy, which remained dependent on energy resources. The key tasks for Kazakhstan were to upgrade its competitiveness, improve the investment climate, build infrastructure, diversify its industries through technological innovation, expand the role of private sectors, improve the efficiency of national asset management and develop human resources. Accordingly, the government adopted the State Program of Industrial-Innovative Development for 2015-2019 and announced the Nurly Zhol plan for promoting infrastructure development in 2014, followed by the 100 Concrete Steps to Implement Five Institutional Reforms in 2015. This was a strategic attempt to build a foundation for sustainable economic growth by responding to changes in the external economic sector, through securing new growth engines in the economic sector, promoting industrial diversification and implementing structural reform. Uzbekistan has been pursuing an import substitution policy while maintaining a closed economy since independence. Uzbekistan’s government-led closed-economy essentially followed policy goals which prioritized the protection of its domestic market and economic stability from external volatility. Thereby, the country concentrated its efforts in developing domestic industries among the five Central Asian countries. Thanks to this, the country has been able to accomplish considerable achievements in the manufacturing sector, but still has many limitations in cultivating its export competitiveness, as its main export items are weighted towards raw materials (cotton, gold, gas, etc.) and its manufacturing sector is mostly composed of labor-intensive industries. Recently, the Uzbek government is putting the highest emphasis on enhancing competitiveness and efficiency in import substitution while promoting export-oriented industrialization. Through these efforts it aims to pursue stable economic growth based on strategic cultivation of the export industry and to drive a shift from labor-intensive industries to technology-intensive business. The government set key initiatives in reducing excessive governmental involvement in the economic sector, expanding the role of the private sector, deregulating trade activities and exchange rates, etc. In this context, the government formulated a comprehensive global financial crisis recovery plan in 2009, and such initiatives as the Priorities for Economic Policy and the Short-term and Long-term Action Plan of the Uzbekistan Cabinet were presented in 2015. At present, the government is preparing long-term programs for economic development up to 2030, which are expected to include more details on improving the nation's industrial structure, such as the development of raw materials processing and high value-added industries.

The ‘Curse of Dimensionality’ Resolved: The Effects of Climate Change and Trade Barriers in Large Dimensional Modelling

Solving large scale optimisation problems over space and time quickly generates a computational impasse, termed the ‘curse of dimensionality’. This severely limits the practical use of economic models, especially for determining the effects of climate change and protectionist trade policies. In this paper, we employ an innovative approach to solving (otherwise unsolvable) large scale systems through the use of parallel processing methods and a proper ordering of variables and equations in a ‘Nested Doubly Bordered Block Diagonal’ form. We illustrate how the approach can be used to solve an intertemporal CGE model with more than 500 million equations. Using existing damage functions, the framework allows us to determine the impact of climate change on long-run economic growth for 112 countries as a result of the effect of sea-level rise on land endowments, variation in crop yields and productivity and shifts in the demand for energy and transportation. We also compare our solution to more common (and smaller dimensional) recursive methods, in terms of both the economic effects of climate change and potential increases in trade barriers, showing the power and efficiency of our computational approach and parallel processing routine.

American Tire Tariffs against China: What We can Learn from Poor Policy

Facing a significant decline in domestic tire manufacturing jobs, President Obama imposed tariffs on tires made in China for a three year period beginning in 2009. With domestic employment in the tire manufacturing industry in decline and Chinese tire imports rapidly rising, President Obama yielded to industry pressure. The tariffs significantly decreased the sale of Chinese made tires, however, tires made in other countries such as Mexico, Indonesia and Thailand rose as Chinese tires became more expensive. This paper explores the effectiveness of this trade policy and proposes there are lessons to be learned when pondering further such protectionist trade policies.
 JEL Classifications Code: F13

State, Representative Institutions and Economic Reforms in Times of Decline: Royal Taxation and Trade Policy in Aragon (1626–1700)

This article explores fiscal and trade policy in Aragon between 1626 and 1700, providing a case study of economic management by regional institutions in a composite monarchy of the early modern period. The increasing burden and irregular distribution of royal taxation hastened economic decline in seventeenth-century Aragon. Eventually, the monarchy moderated its fiscal demands in 1678–1697 to alleviate the financial distress of the region’s towns and villages and cure the economic ills caused by protectionist trade policies in north-eastern Spain. The Aragonese Parliament only lowered royal subsidies after 1678, though it began to raise import duties as early as 1626 to ease the pressure on heavily indebted municipal treasuries. However, conflicting regional interest groups undermined the Cortes’ economic policies, and their main effect was to drive up transaction costs without preventing French control of trade and manufacturing in Aragon in the second half of the seventeenth century. In contrast, the free-trade policies pursued by the Diputación were more consistently applied and enjoyed greater legal and political support, fostering export-led agricultural specialization from which the elites were able to profit, although they failed to deliver long-run economic growth.

Anti-dumping Initiations in Indian Manufacturing Industries

Anti-dumping as a new protectionist trade policy has evolved as the popular strategy choice for the trading nations. Since the Uruguay Round of World Trade Organization (WTO) (1994), India has been a prominent user of it. This article attempts to explore the possible factors that might have triggered off 90 percent cases of anti-dumping by five major Indian manufacturing industries over the period 1997–2011. We construct a balanced panel combining data on anti-dumping initiations from the ‘Global Antidumping Database’ with trade data from the Directorate General of Commercial Intelligence and Statistics (DGCI&S)-India and United Nations Comtrade database at the Indian Trade Classification (ITC) based on Harmonized System (HS) two-digit level. Having count data, the empirical model is estimated initially through a random- effects Poisson regression model followed by a negative binomial model. The number of anti-dumping initiations in India is dependent on the value of imports, the presence of a dominant industry lobby and the retaliatory behaviour by the affected domestic firms, among some others. In fact, we find that in determining the number of anti-dumping initiations the conventional economic and foreign affairs policies take a backseat!

Learning by Doing: Who's Learning, Who's Doing? And Other Production Function Myths

The success of endogenous growth models has led to the wide acceptance that increasing returns to scale (IRS) and the positive externalities of knowledge creation are inherent features of technology. This acceptance has lent justification to stylized models that espouse protectionist trade policies in order to generate economic growth. The justification for these policies, however, stems from a deeply flawed understanding of what a production function represents and the institutional conditions necessary for IRS to be present. Distinguishing between physical and institutional technology allows us to conclude that IRS are not inherent features of physical production processes, but represent the emergent outcome of entrepreneurial choices within certain institutional arrangements. We conclude by showing that IRS are not invariant with respect to protectionist policies because they hamper the institutional technology that leads to IRS and knowledge creation, and are thus unsuitable growth policies.

Atlantic Herring in Estonia: In the Transverse Waves of International Economy and National Ideology

This article examines the background of and reasons for a sudden decrease in the Estonian import of Atlantic herring during the Great Depression in 1932. The economic and ideological factors that influenced the process are discussed, including protectionist trade policy measures, customs regulations and nontariff trade measures. We argue that the attempt to replace herring imports by establishing a national herring fishing fleet was grounded in ideological as well as in nutritional arguments. Such protectionist measures were met with confrontation by Estonian foreign trade partners. The case study highlights a complicated interplay between oceanic resource exploitation politics and national ideologies, locating it in the context of regional environmental historical research.

The comparative effects of independence on trade

Empirical evidence suggests that belonging to an empire favours trade by lowering transaction costs and establishing preferential trade agreements. Does the end of an empire invert this effect, and if so, through which channels? This paper uses an original dataset to explore the impact of independence on former colonies’ bilateral trade over the 1948–2007 period. We show large differences across empires. Whereas independence reduces the trade (imports and exports) between former French colonies and their coloniser, as well as with other colonies of the same empire, we do not find any comparable effect for former British colonies. We attribute this finding to the particularly protectionist trade policy implemented by France during the colonial era, and we are able to rule out alternative explanations related to transaction costs. We also find that after independence, all former colonies trade more with third countries, and we relate this result to the geographical diversification of trade.

Lignocellulosic ethanol production from woody biomass: The impact of facility siting on competitiveness

Abstract Just as temperate region pulp and paper companies need to compete with Brazilian eucalyptus pulp producers, lignocellulosic biofuel producers in North America and Europe, in the absence of protectionist trade policies, will need to be competitive with tropical and sub-tropical biofuel producers. This work sought to determine the impact of lignocellulosic ethanol biorefinery siting on economic performance and minimum ethanol selling price (MESP) for both east and west coast North American fuel markets. Facility sites included the pine-dominated Pacific Northwest Interior, the mixed deciduous forest of Ontario and New York, and the Brazilian state of Espirito Santo. Feedstock scenarios included both plantation (poplar, willow, and eucalyptus, respectively) and managed forest harvest. Site specific variables in the techno-economic model included delivered feedstock cost, ethanol delivery cost, cost of capital, construction cost, labour cost, electricity revenues (and co-product credits), and taxes, insurance, and permits. Despite the long shipping distance from Brazil to North American east and west coast markets, the MESP for Brazilian-produced eucalyptus lignocellulosic ethanol, modelled at $0.74 L−1, was notably lower than that of all North American-produced cases at $0.83–1.02 L−1.

Protectionism During Recession-Why are Trade Barriers no Longer the Preferred Policy Choice?

Based on the experience of the Great Depression, when barriers to trade rose precipitously in a beggar-thy-neighbour trade war, a similar spate of increases was forecast by some as the global economy descended into the biggest economic downturn since the 1930s in the wake of the financial crisis of 2007. The evidence to date, however, shows no major swing to protectionist trade policy by governments in the world's major trading nations. In this paper, we assess the importance of trade policy in crises management and resolution and we investigate the main reasons for the absence of protectionist policies in the wake of the latest financial crisis.

Trade policy disaster: lessons from the 1930s

The extreme protectionism that contributed to a collapse of world trade in the 1930s is examined in light of the recent economic crisis. The recent economic crisis-with the plunge in the stock market, numerous bank failures and widespread financial distress, declining output and rising unemployment-has been reminiscent of the Great Depression. The Depression of the 1930s was marked by the spread of protectionist trade policies, which contributed to a collapse in world trade. Although policymakers today claim that they will resist the protectionist temptation, recessions are breeding grounds for economic nationalism, and countries may yet consider imposing higher trade barriers. In Trade Policy Disaster, Douglas Irwin examines what we know about trade policy during the traumatic decade of the 1930s and considers what we can learn from the policy missteps of the time. Irwin argues that the extreme protectionism of the 1930s emerged as a consequence of policymakers' reluctance to abandon the gold standard and allow their currencies to depreciate. By ruling out exchange rate changes as an adjustment mechanism, policymakers turned instead to higher tariffs and other means of restricting imports. He offers a clear and concise exposition of such topics as the effect of higher trade barriers on the implosion of world trade; the impact of the Smoot-Hawley tariff of 1930; the reasons some countries adopted draconian trade restrictions (including exchange controls and import quotas) but others did not; the effect of preferential trade arrangements and bilateral clearing agreements on the multilateral system of world trade; and lessons for avoiding future trade wars.

The green side of protectionism: Environmental concerns and three facets of trade policy preferences

ABSTRACT A large literature in international political economy views individuals’ trade policy preferences as a function of the income effects of economic openness. We argue that the expected environmental consequences of free trade play a noteworthy role for protectionist attitudes that has not been noted so far. We use unique Swiss survey data that contain measures of individuals’ environmental concerns and different aspects of trade policy preferences to examine whether those who are more concerned about the environment also hold more protectionist trade policy preferences. Our results support this expectation. Individuals who are more concerned about the environment tend to think that globalization has more negative than positive effects, more strongly support jobs-related protectionism, and place more emphasis on aspects that go beyond price and quality when evaluating foreign products. Our results suggest that also the expected environmental consequences of free trade matter for trade policy preferences and not just the potential effects on the domestic wage distribution.

The Slide to Protectionism in the Great Depression: Who Succumbed and Why?

The Great Depression was marked by a severe outbreak of protectionist trade policies. But contrary to the presumption that all countries scrambled to raise trade barriers, there was substantial cross-country variation in the movement to protectionism. Specifically, countries that remained on the gold standard resorted to tariffs, import quotas, and exchange controls to a greater extent than countries that went off gold. Just as the gold standard constraint on monetary policy is critical to understanding macroeconomic developments in this period, exchange rate policies help explain changes in trade policy.