Has the developed world stopped waging trade wars?

Way back at the outset of the recession, when stock markets were tanking and companies were showering their workplaces with pink slips, economists worried: Would tough times send the world into a protectionist tailspin?

After all, that's what tends to happen in periods of global economic distress. Most famously, the Great Depression of the 1930s prompted countries all over the world to throw up import barriers in a desperate attempt to keep people employed. The United States was just as bad as anyone and invited a hail of retaliatory duties by passing the Smoot-Hawley Tariff Act of 1930, which backfired -- it reduced American exports significantly.

This most recent downturn, however, seems to have come and (sort of) gone without countries entirely walling themselves in. At least, that's what it looks like to the World Bank, which has been tracking temporary trade barriers since 2004 and finds today that the percentage of goods covered by import restrictions decreased in 2013 after a small recessionary bump.


Now, there is a line in there that increased more than others: developing economies, most notably India and Turkey. There's a reason for that increase. Not long ago, emerging nations more often had permanent high tariffs, so they didn't need to layer on additional restrictions, such as anti-dumping duties (which the World Trade Organization allows, as long as it can be proven the target of the measure has been selling goods at below the market price in its own country). Over the past few decades, though, international pressure toward liberalization has prompted them to open up dramatically, which means there's more room to clamp back down when they feel their native industries are threatened.

Developed nations, though, have pretty much kicked the protectionist habit. Though the number of trade investigations did rise through the recession -- they're usually initiated in response to complaints from businesses and labor groups -- they didn't get nearly as high as in previous recessions. Here's just the United States, over the past 30 years:

From "The Great Recession and Import Protection", edited by Chad Bown.
From "The Great Recession and Import Protection", edited by Chad Bown.

So, why did the United States appear to be less aggressive about protecting itself in the face of the latest economic meltdown? It's learned from experience.

"We designed the current system in response to what happened in the 1930s," says Chad Bown, a World Bank economist who maintains the database of temporary trade barriers. For one thing, the United States is able to target products more specifically rather than entire sectors. "That helps blow off some political steam and not have overall increases in protection," Bown says.

For another thing, as corporations have gotten bigger and more multinational, fewer of them care as much about protecting American production at all costs. That's sometimes why a longstanding duty on some good -- they're supposed to be temporary but often don't lapse unless someone makes a fuss about it -- might finally be revoked. In the case of a 20-year-old duty on Norwegian salmon, for example, the Maine-based companies that had pushed for it originally were acquired by a Canadian firm, which didn't ask for the duty to be renewed.

And finally, it's sometimes the case that the industry that U.S. trade enforcement officials were trying to protect initially has weakened to the point where it can't fight to keep protections in place. Broadly speaking, that's what happened with American furniture makers, which barely exist anymore. Less dramatically, it's probably true of the U.S. steel industry, which has been the single biggest requester of enforcement actions over the years. Manufacturing employment tanked after the United States granted permanent normal trade relations with China, and the United Steelworkers have so far failed to win their campaign for anti-dumping duties against Asian nations like South Korea.

Ultimately, it's probably better for American industries to avoid the protectionist game anyway. Justin Pierce, an economist with the Federal Reserve, has found that firms sometimes increase capital investment after import barriers go up, but only if they're in place for a long time. Rarely, however, do they increase their productivity; revenue increases tend to be a result of higher prices.

And sometimes, temporary trade barriers just keep companies alive longer than the really deserve. "Antidumping duties allow for continued production by low-productivity plants that would have otherwise stopped production, slowing the reallocation of resources toward more productive uses," Pierce writes.

Lydia DePillis is a reporter focusing on labor, business, and housing. She previously worked at The New Republic and the Washington City Paper. She's from Seattle.
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