RIETI Report September 2018

Why Don't Governments Do Away with Protectionism?

Despite empirical research showing consistently that protectionist measures dampen business conditions in those countries, the global economy is being shaken by the protectionist measures of U.S. President Donald Trump including withdrawal from the Trans-Pacific Partnership (TPP) agreement and a tariff war with China, in addition to Brexit in Europe. In the September issue of the RIETI Report, we present "Why Don't Governments Do Away with Protectionism?" by Faculty Fellow Yasuyuki Todo, who emphasizes that global trade, investment, and research benefit people economically, yet intensifying trends toward protectionism is not solely attributable to economic losses caused by globalization and are gaining support by people who are seemingly uninvolved.

Todo tries to explain the reason for this unusual situation, and questions if insularity is an inherent human trait. Looking at sociology throughout history and social psychology studies, he finds that in-group bonding and out-group hostility appears to intensify when conflicts occur against members of an out-group, with these emotions passing down to future generations. The insularity of humans gives rise to protectionist measures to close a country's borders even though it's economically disadvantageous. As such, Todo stresses that moves to combat mounting worldwide trends toward protectionism will require efforts to change and diminish the inherent insularity of humans, above and beyond just conveying the economic benefits of globalization. He calls for more extensive, interdisciplinary approaches to propose effective strategies to society.

This month's featured article

Why Don't Governments Do Away with Protectionism?

TODO YasuyukiFaculty Fellow, RIETI

The global economy has been shaken by the protectionist measures of U.S. President Donald Trump. Having embarked on protectionism in January 2017 by withdrawing from the Trans-Pacific Partnership (TPP) agreement, the president has apparently gone on to order a hike on tariffs to 25% imposed on $200 billion worth of Chinese goods, as reported in August 2018. In response, China hit back with plans to impose new tariffs on $60 billion worth of products made in the United States. Likewise, in Europe, the United Kingdom is preparing to leave the European Union (EU) amid mounting support of parties on the extreme right advocating for protectionism in respective EU nations.

Meanwhile, time and time again, empirical research in the field of economics has shown that such protectionist moves tend to dampen business conditions in the very countries implementing such policies. Based on my research findings which have been reported in the RIETI columns ("Estimating the TPP's Expected Growth Effects" and "Japan Must Form a Bulwark to Protect Globalization"), as well as in the Nihon Keizai Shimbun ("Asia's Growth and Japan"), I have advocated that international trade, investment, and research provide economic benefits, and have proposed government policy recommendations in that regard.

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