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Calling the Protectionists’ Bluff

BRUSSELS – Most reports about globalization in recent years have focused on its problems, such as declining levels of trade and the abandonment of “mega-regional” trade agreements. Indeed, US President Donald Trump has now terminated the Trans-Pacific Partnership (TPP) – a trade deal among a dozen Pacific-rim countries, including the United States and Japan; and negotiations on the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union have come to a halt.

But headlines can be misleading. Although new trade deals can spark controversy, it is highly unlikely that protectionism will prevail. This is true even in the US, where Trump was elected on the promise of getting tough with major trading partners such as Mexico and China. So far, the Trump administration has taken no action suggesting that a new era of protectionism is at hand. And in Europe, the benefits of economic openness have been widely acknowledged, and negotiations on a free-trade agreement with Japan are currently underway.

Most developed countries remain fairly open today, and this pattern will likely continue. A new surge of support for protectionist policies would require a coalition of powerful interest groups to organize a campaign aimed at changing the status quo. With average tariff rates at negligible levels (below 3% for both the US and the EU), who would support a push for higher barriers?

In the past, coalitions of workers and capitalists from the same industry would lobby for protection. Their interests were aligned, because higher tariffs allowed workers to demand higher wages, while capitalists could still make higher profits in the absence of foreign competition. The infamous 1930 Smoot-Hawley Tariff, which many believe helped precipitate the Great Depression, was the result of such lobbying.