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.
In recessionary environments, the manufactured exports of developing countries have encountered heightened protectionist barriers, especially of the non-tariff kind, which have further exacerbated the ability of these countries to service and repay debt incurred at a time of brighter prospects for growth in world trade. There has been a pronounced movement away from the development consensus embodied, for example, in the Generalized System of Preferences, which was pioneered at UNCTAD II in New Delhi in 1968. The non-reciprocal non-discriminatory concessions extended under the GSP are being gradually withdrawn and to a large extent offset by discriminatory measures against developing countries' exports. Hence developing countries which in the period 1973-1981 were the most dynamic partners in the world exchange of goods, both as exporters and importers, are unable to make an effective contribution to the recovery of world trade, precisely at a time when such a contribution is most required. By September 1988 it was estimated that about 50% of world trade is affected by protectionist measures which assume the forms of voluntary export constraints, anti-dumping measures and all kinds of administrative procedures and obstacles.
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.