New protectionism

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New protectionism

In addition to tariffs and quotas, there are several other barriers that national governments may use to limit imports or stimulate exports. Despite the relative success of the WTO in encouraging multi-lateral negotiations to reduce tariff barriers, and to arbitrate over disputes, barriers still exist, but are becoming harder to detect, and somewhat hidden from view.  Examples include the following:

Government favouring domestic firms

Countries can protect their domestic industries by employing public procurement policies, where national governments favour local firms. For example, national or local governments may purchase supplies of military or medical equipment from local firms. While many WTO members have signed up to the GPA (Government Procurement Agreement), the majority have not signed up to initiatives to make national public procurement more open to overseas competition.

Domestic subsidies

Governments may also give subsidies to domestic firms, which can then be used to help reduce price and deter imports. This financial support can also be in the form of an export subsidy, providing an incentive for firms to export. Such subsidies may be in the form of start-up or 'launch' aid, which may be given to larger projects, such as the EU with its Airbus development, and the US with its support for Boeing.

Health and safety grounds

National governments can also use health and safety regulations to discriminate against imported products, such as banning the import of a product on health or safety grounds, while local producers do not have to pass such stringent tests.

Quality standards

In a similar way, governments can set tough quality standards that may be difficult for overseas producers to meet.

Bureaucracy

Excessive bureaucracy associated with the process of importing and exporting may also restrict trade. For example, goods may be deliberately held-up at ports and airports, and there may be unnecessarily complex and lengthy paperwork associated with international transactions.

Exchange rates

Monetary protection involves countries deliberately devaluing their exchange rate to stimulate exports and deter imports.

See: Tariffs and motives for protection


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