Will Protectionism Pose a Threat to World Trade?

Will Protectionism Pose a Threat to World Trade?

President Trump continues to dominate the headlines. His “America First” rhetoric is dramatic and threatens to cause serious disruption to the general consensus around global free trade.  If his ascendancy is the clearest signifier of a resurgence in protectionism, will it potentially threaten global free trade?


Why Protectionism?

Globalisation has its winners and losers.  Many of those who voted for a Trump presidency feel that they have been on the losing end of a globalised free trade market.

The largest free trade agreement is NAFTA (North American Free Trade Agreement) between the United States, Canada and Mexico. President Trump intends to renegotiate this, but there is an undercurrent of hostility towards it, even though nearly five million US jobs currently depend on trade with Mexico.

This is the crux of the issue: whether such agreements help or harm, and how to balance the advantages one group gains against the disadvantages suffered by another.

The OECD (Organisation for Economic Co-operation and Development) has warned that the world economy would suffer if politicians make inroads against economic liberalisation as they respond to the disillusionment of their electorates.

Tariffs, however, remain a temptation, if a significant number of people feel they are not receiving their due share of the distribution of the rewards of global trade.

The OECD’s solution is to call for more domestic policies in individual countries to ensure that people receive a more even distribution of the gains from international trade. It sees this as the main problem – not the expansion of free trade, but rather how the benefits reach different groups.


Who is Feeling the Pressure?

America is not alone in feeling the pressure. There are upsurges in nationalist support across Europe and the UK’s Brexit vote is symptomatic of deep seated discontent with how things currently stand.

The future of free trade hangs in the balance and largely depends on how politicians respond to these domestic pressures; whether they prioritise continuing trade agreements while addressing inequalities or they make a radical break with the present and erect trade barriers.