Trade protectionism is the result of governments acting to save certain sectors of their economies from foreign competition. The impact of this on the fledgling industries is considerable but they are in no position to retaliate. Protectionist policies have also been directed by developed countries against each other, but this is usually carefully negotiated to avoid retaliation.
Increased unemployment in industrialized countries has encouraged protection against labour-intensive imports from developing countries, especially traditional products. Increased protectionism has had a direct influence on the growth performance of developing countries by lowering the demand for their exports and exerting a downward pressure on export prices and earnings. It has also hampered efforts in developing countries to diversify away from traditional products. The total exports of developing to developed market-economy countries declined by about one fifth between 1981 and 1985.
As in developed-market economy countries, protection in developing countries has involved efficiency losses in those cases in which it has been excessive. In a recent study estimates that trade and technical barriers within the European Community were costing community industries Ecu 120 billion per year. In the USA it has been found that a permanent policy of tariff protection would cost, per job, 14 times more than it would provide in private benefit to the individual worker; it would cost US$ 1 for every 7 cents gained by workers whose jobs were preserved. In Canada, the ratio was 70 to 1; for every 1.5 cents by which the worker would be better off, one Canadian dollar would be wasted.
Rather than fighting protectionism, nations have accommodated and institutionalized it, disguising new barriers in such euphemisms as "bilateralism" and "managed trade". Under such agreements countries agree to open their markets to limited quantities of one other's products and exclude those from all other countries.
Protectionist policies serve to protect the national interest of the countries using them. They allow domestic industries vital to national defence to continue to be viable in spite of being uncompetitive in the world market. They guard against being cut off by foreign suppliers by ensuring domestic production, e.g. the arms industry of South Africa. They protect the domestic economy against a negative balance of payments. Given the high numbers of unemployed in most industrialized countries today, why should they allow competition from non-industrialized countries to threaten their work forces, many of which, anyhow, are comprised of immigrant workers from the non-industrialized countries themselves.