Protectionist Trade Policies

The effects of pursuing protectionist trade policies are completely opposite to the ones mentioned above [Isachsen, Hamilton and Gylfason, 1992]. Shielding the economy from external inputs means isolation, which limits production and discourages competition, creativity and entrepreneurship. Eventually, unemployment grows and costs of living go up, both governments and individuals ending up by being worse-off.

The prevalence of free trade over protectionist trade policies is highlighted by numerous ongoing integrative processes. Most telling examples are:

  • The growing audience and enlarged scope of the World Trade Organization (WTO), as the main institutional structure in charge with multilateral negotiations aiming at achieving freer trade.