Protectionism
causing inefficiencies and delays. Consumers must in turn face the inflation which trickles down to them. This, however, also reflects a greater transformation of protectionism itself: while the postwar period saw it used as a development scaffolding to nurture domestic giants, today’s policies are used to fortify superiority in an interdependent economy. The US-China conflict of 2025 is the latest illustration of how the role of protectionist policies is evolving, yet it is also a clear example of its drawbacks. While controls over trade have the ability to encourage investment into domestic firms and reduce a nation’s dependence on strategic, foreign goods, they can’t completely insulate countries from the interdependence which now blankets our global economy. The foundation of multinational corporations is based on the complexity and vastness of supply chains, making complete decoupling between countries very damaging. The most significant of these effects is the spillover onto other major actors. European manufacturers, for instance, must now grapple with high costs of production as they navigate rising uncertainty, Southeast Asian economies are pressured to choose between deeper integration with China or pivoting towards US- backed supply chains. Meanwhile, Taiwan’s thriving semiconductor industry is caught in the line of fire of strategic rivalry. While granting short-term strategic or political gains, protectionism often jeopardizes the stability of the wider market. The persistence of protectionism reveals that its costs and benefits are politically uneven. Economic theory assesses policies on their efficiency; however, protectionist policies live on because of their concentrated benefits and distributed limitations. Such a dynamic was famously articulated by Mancur Olson. 20 He showed that policies which hurt economic growth often succeed because they have benefits which are focused on a small area of the economy yet have costs which are diffused across the population, resulting in little public resistance. An example is as follows: a tariff may save 10,000 manufacturing jobs in a domestic firm – a benefit which is highly visible. Meanwhile, the cost of a few more dollars for millions of consumers on imported goods is too minimal to spark backlash. When looking at the wider picture, this doesn’t seem such an irrational political strategy. From the Corn Laws in the 19th century to modern lobbies for tariffs, it is frequently in the government’s interest to cater to vocal groups. Therefore, political stability is often the reason behind the refusal to chase economic optimality. I had mentioned that the work of the WTO was essential in preventing trade wars and policies which endanger the stability of the global market, and yet hostile protectionism has seemingly become only the more prevalent given such examples. The reason, therefore, is that the WTO has been paralysed by the very geopolitical conflicts it was meant to resolve. The six-step process of dealing with disputes, beginning with consultations and ending with the necessary retaliation, has ground to a halt since 2019 following numerous US administrations blocking the appointment of judges to the Appellate Body . The resulting institutional vacuum has left numerous appeals in a state of legal purgatory 21 and nations are forced to act unilaterally as judge and jury in their own trade disputes. Such an erosion of governance
20 Wikipedia Contributors. Mancur Olson. https://en.wikipedia.org/wiki/Mancur_Olson. Consulted 28/08/25. 21 Lester, S. Ending the WTO Dispute Settlement Crisis: Where to from here? https://www.iisd.org/articles/united- states-must-propose-solutions-end-wto-dispute-settlement-crisis . Consulted: 29/08/25.
22
Made with FlippingBook - PDF hosting