Economics Dictionary of ArgumentsHome
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| Protectionism: Protectionism is an economic policy that restricts international trade to protect domestic industries from foreign competition. This is achieved through various methods like tariffs (taxes on imports), quotas (limits on import quantities), and subsidies for domestic producers. While it aims to safeguard jobs and promote local production, it often leads to higher prices and reduced consumer choice. See also Tariffs, Trade policy, Subsidies, Import quotas._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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IMF Working Papers on Protectionism - Dictionary of Arguments
Ostry I 5 Protectionism/tariffs/Furceri/Hannan/Ostry/Rose: We study* tariffs rather than other types of protectionism for three reasons. First, tariffs are the preferred protectionist policy of rich governments, past and present. Second, tariffs are easier to measure in the aggregate than non-tariff barriers. Third, we try to be conservative when possible, and the costs of tariffs are a lower bound for the costs of protectionism, since non-tariff barriers typically have more costly consequences than tariffs.(1) This conservative strategy also drives our domestic focus. For example, though we are cognizant that Canadian protectionism clearly has effects outside the Great White North, we are most interested in the consequences of Canadian tariffs for Canadian output, productivity, and so forth. >Method/Ostry, >Tariffs, >Market imperfections, >Imperfect competition, >Perfect competition. Ostry I 15 Protectionism also leads to a small (statistically marginal) increase in unemployment (…). Thus the aggregate results for real activity bolster the traditional case against protectionism. So does the evidence on distributiom (…); we find that tariff increases lead to more inequality, as measured by the Gini index; the effect becomes statistically significant two years after the tariff change. (2) To summarize: the aversion of the economics profession to the deadweight losses caused by protectionism seems warranted; higher tariffs seem to have lower output and productivity, while raising unemployment and inequality. * Davide Furceri, Swarnali A. Hannan, Jonathan D. Ostry, and Andrew K. Rose. (2019). Macroeconomic Consequences of Tariffs. IMF Working Paper. WP/19/9. International Monetary Fund. 1. If changes in tariffs are correlated with changes in non-tariff barriers (NTBs), there may be a concern with omitted variable bias. To test this, we run panel regressions on the relationship between three different measures of NTBs (anti-dumping cases initiated, safeguards, and WTO disputes) and changes in tariffs, controlling for country- and time-fixed effects. We do not find evidence of any strong correlation, mitigating this concern in our set-up. However, the results should be taken with a pinch of salt since NTBs are difficult to measure and data is scarce for this exercise. 2. This result is consistent with evidence in Jaumotte, Lall and Papageorgiou (2013)(3) who find that trade openness is associated with lower income inequality. While more work is needed to understand the distributional effects of tariffs, we believe that the increase in unemployment is a potentially important channel. Another possibility is that rent-seeking means that protectionism benefits more the rich than the poor. 3. Jaumotte, F., Lall, S., Papageorgiou, C., 2013. “Rising income inequality: technology, or trade and financial globalization?” IMF Economic Review, 61, 271-309. - - - Rieth I 31 Protectionism/Boer/Rieth: (…) [some of the states] produce many commodities, which are sold at competitive world markets and thus respond more strongly to US-Dollar fluctuations than more differentiated goods like industrial or information technology Products. Rieth I 32 The latter also depend more on intermediate inputs and are thus more negatively affected when imports fall. Overall, the findings* question the idea that protectionism creates systematically more domestic jobs or allows redistributing them across the country or sectors. Rieth I 35 Protectionist tariff surprises reduce US foreign trade and domestic investment strongly, in aggregate and across most sectors. Greater uncertainty about US trade policy has also negative effects. It weighs particularly on imports. Both first and second moment trade policy shocks improve the trade balance, but this comes at the cost of a domestic demand compression and persistent GDP losses. The employment impacts are ambiguous. On average, tariff level shocks are about twice as important for macroeconomic dynamics as trade policy uncertainty shocks. Historically, the shifts to free trade after NAFTA/GATT/WTO in the 1990s/2000s widened trade deficits but engendered a two decades lasting investment and output boom. >NAFTA, >GATT, >US Import Tariffs, >Tariff history, >Tariff impacts, >Tariff responsivity. * Lukas Boer and Malte Rieth (2024). The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty. IMF Working Paper 24/13. International Monetary Fund._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
IMF Working Papers Ostry I Jonathan D. Ostry Davide Furceri Andrew K. Rose, Macroeconomic Consequences of Tariffs. IMF Working Paper. WP/19/9.International Monetary Fund. Washington, D.C. 2019 Rieth I Malte Rieth Lukas Boer The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty. IMF Working Paper 24/13. International Monetary Fund. Washington, D.C. 2024 |
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