NCPA - National Center for Policy Analysis

Stirrings Of Protectionism

December 15, 1998

Free-trade advocates are concerned by increasing calls for tariffs and other trade barriers designed to keep certain types of products out of the U.S. They say protectionist arguments are increasingly being heard because countries which are in economic trouble -- particularly in Asia -- are trying to export their way to recovery.

  • In recent decades, the surge in world trade has helped push U.S. gross domestic product (GDP) from $527 billion in 1960 to over $8 trillion this year.
  • From about 9 percent of GDP in 1960, U.S. imports and exports have risen to 25 percent of GDP in 1998.
  • This fall, the U.S. House of Representatives responded to protectionist pleas from the U.S. steel industry by passing a non-binding resolution calling for a one-year moratorium on steel imports from 11 countries.
  • Claiming they are being harmed by Canadian discrimination against American grain and livestock exports, American farmers have set up symbolic blockades at the border.

At the same time, the U.S. and the European Union are embroiled in a dispute over bananas. The U.S. charges that the EU is giving preference to bananas coming from former European colonies. The World Trade Organization has agreed, but the EU hasn't reformed its practices.

The U.S. may put pressure on the EU by imposing 100 percent duties on scores of European goods -- ranging from bread and cheese to Christmas ornaments.

Experts explain that the banana case would be of minor concern were it not for the precedent it sets. If the EU gets away with it, there would be tremendous pressure for the U.S. not to follow WTO decisions in the future. Thus the WTO dispute system would be gutted.

Source: Aaron Steelman, "Global Trading System Stressed," Investor's Business Daily, December 14, 1998.


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