How Much Neoprotectionism is There in Contemporary World Trade?

A reaction to the negative effects of globalisation and liberalisation of trade typically leads to increased protectionism. Protection applied in the 21st century is characterised by an extensive use of non-tariff trade barriers, which do not directly indicate the intention to protect domestic producers or branches of the national economy. Some authors indicate that roots of contemporary protectionism date back to the 1970s (see, e.g., Kahler, 1985), when tariffs and especially these non-tariff barriers to trade, which are difficult to detect or monitor, such as export subsidies, voluntary export restrictions, quotas, licences, levies and antidumping procedures, became common measures protecting against foreign competition (Devadason, 2020). However, it is generally acknowledged that this “covert” protectionism, applied selectively towards sensitive branches of production or selected trade partners was initiated following the economic crisis of 2008–2009 (Rynarzewski, 2005; Riedel, 2014).

Present-day protectionism, typically termed neoprotectionism, took a more subtle form compared to its traditional counterpart. This contemporary version is realised using a wide range of non-tariff instruments with a much lesser degree of transparency than tariffs and, most frequently, it is connected with the implementation of measures, which are more difficult to detect and apparently much less actionable at the World Trade Organization (WTO), i.e., technical and administrative barriers discriminating against the competition. The problem of the ambiguous effect of non-tariff barriers on trade was discussed, e.g., by Niu et al. (2018). They indicated that while quotas and voluntary export restrictions are unanimously perceived as barriers to trade, the negative effect of technical, sanitary and phytosanitary measures is not so obvious (see, e.g., Ganslandt & Markusen, 2001; Aisbett & Pearson, 2012). This results from the fact that on the one hand, they lead to increased costs for producers, whereas on the other hand, they may stimulate consumption of quality products, which are more beneficial for consumers’ health. Also, Li and Beghin (2014) pointed out the fact that in contrast to tariffs, in the case of which it is assumed that they disturb trade and hinder reaching prosperity, non-tariff measures by eliminating market imperfections may actually improve efficiency of resource allocation, and thus promote welfare.

In view of the covert character of protectionism, it is difficult to measure the level of neoprotectionism or assess its consequences. Most commonly in the literature on the subject we may find attempts to estimate the effects of implementation of individual protectionism instruments (Bown, 2010; Kee et al., 2010, Crivelli & Groeschl, 2016) or several barriers for a given country (Shingal, 2009). More comprehensive analyses covering a greater number of countries, products or trade policy measures are scarce (Disdier et al., 2008; Ghodsi et al., 2017). Henn and McDonald (2011), using data from the Global Trade Alert (GTA) system conducted studies on the effects of over 500 trade barriers by the EU members and 14 other G-20 countries (in the period from July 2007 to December 2009). Their estimates showed that the implemented boundary instruments caused an approx. 50% decrease in bilateral turnover of the investigated countries and their trade partners, while regulatory measures influencing trade flows indirectly caused their reduction by 7%. It may be observed here that a study by Henn and McDonald (2011) refers to a limited subject scope and concerns the period of the world economic and financial crisis, significantly disturbing the behaviour of economic entities both on the national and international markets. In this context several research questions may be asked in order to identify the unique character of protectionism in contemporary world trade over a longer period and considering a larger group of its participants. Firstly, what is the number and structure of adopted trade policy instruments? Secondly, which countries use them most actively and which countries suffer the burden of protectionist measures? Thirdly, in which trade of groups of products is the use of non-tariff instruments most intensive? This attempt to elucidate the above-mentioned issues contributes to the formulation of the aim of this paper, which is to determine the dynamics of protectionism, as well as the category and geographical structure for the use of trade policy instruments in the world goods trade in the years 2010–2022.

Globalisation and liberalisation are pillars of contemporary trade (Kołodko, 2007). On the one hand, globalisation makes it possible to prepare a globally uniform mechanism for the functioning of world economy and provides conditions promoting a free development of international economic cooperation. This facilitates an unlimited transfer of technologies and inputs, while also contributing to comprehensive utilisation of production capacities. On the other hand, elimination of trade barriers enhances susceptibility of the world economy to the spread of crisis phenomena, threatens sovereignty of countries on the part of financial institutions and transnational corporations and endangers economic independence of populations, at the same time as aggravating differences in economic development and disturbing fair competition principles (Stiglitz, 2004; Dzun, 2013; Grottel, 2016). Negative effects of globalisation are sources of protectionist practices, whereas concepts of contemporary trade policy, including the strategic policy of international trade and industrial policy are based on the assumption that an active (protective) trade policy may be more advantageous for the economy than free trade is. The role of protectionism in correcting disturbances in the mechanism of competition was acknowledged, e.g., by Baena Rojas and Londoño Pineda (2020). Argumentation of the neoprotectionists also considers issues related to the negative effect of excessive trade openness on the stability and autonomy in the formation of the state’s economic policy on the macroeconomic scale (Kłosowicz-Toborek, 2018). Implementation of protection measures in this case is supported by the thesis that a high or rapidly increasing share of international trade in the economy increases susceptibility of the economy to external disturbances and hinders maintenance of macroeconomic stability in employment, inflation rate, the country’s current account in the balance of payments, etc. (Puślecki, 1992).

Although in practice it is difficult to distinguish between the strategic trade policy from the industrial policy, it needs to be remembered that their objectives are different. The former policy aims at taking over benefits from international trade by domestic enterprises (rent shifting), while the latter policy is to increase the competitive capacity of the domestic industry on the international market, stimulate structural changes and innovative activity in the industry, as well as improve efficiency in the utilisation of resources. Protection instruments used most commonly in both of these policies include subsidies, import restrictions, tax benefits, R&D subsidies, preferential credits and credit guarantees, as well as exemptions from certain antitrust regulations. In view of the above it may be stated that whereas traditional protectionism focused on the protection of the market against excessive competition, the new concepts of trade policy have been based on the concepts to rationalise the operation of the domestic market, create competitive (fair) conditions for economic activity and to strengthen competitive advantages of domestic enterprises and sectors of the economy (cf. Grottel, 2016; Drelich-Skulska & Domiter, 2018; Kłosowicz-Toborek, 2018).

Peterson (1987) presented neoprotectionism as a response to unfair trade practices. In turn, Ehrlich (2010) argued that a majority of fair trade proponents openly support the concept for the limitation and regulation of trade in order to protect the rights of marginalised producers and employees, as well as mitigate degradation of the natural environment. In the opinion of Ehrlich (2010, p. 1017), earlier literature on the subject promoted the conviction that fair trade is “protectionism in disguise” or – as it was termed by Rodrik (1997, p. 3) – “old (protectionist) wine in new bottles”. The importance of equal labour standards and high environmental standards as premises for protection measures was also stressed, e.g., by Srinivasan (1995), Bhagwati and Srinivasan (1996) and Brown, Deardorff and Stern (1996). In view of protection being undermined by neoliberal schools of economics it was necessary to formulate new, alternative arguments supporting protectionism. In the opinion of Bhagwati (1995), supporters of the protection policy adopted the rhetoric of fair trade, because they perceived greater value in using “unfairness” of trade as an argument for protection, rather than stating that protection is simply a necessity.

However, Ehrlich (2010) stressed that fair trade and protectionism may constitute completely separate dimensions of trade policy, which means that fair trade may be supported without implementing protectionism and conversely, protectionism does not have to stem from the concern to ensure greater equality in international trade. Taking this assumption, Ehrlich (2010) proposed a dichotomic classification of directions of trade policy, making it possible to distinguish not just two strategies (free trade and protectionism), as has been the case to date, but four alternative strategies (Table 1). The first option comprises opponents of both protectionism and fair trade and is manifested in the classical free trade policy. The second is realised by supporters of fair trade opposing protectionism. The third variant is traditional protectionism, for the justification of which no arguments for fair trade are given, whereas the fourth alternative is neoprotectionism justified by fair trade.

It needs to be stated that the fair trade movement, which promotes concepts to ensure fair conditions for the competition on the international market, fight against poverty and improvement of living conditions in developing countries, plays a significant role in stabilising the income of agricultural producers in countries of the Global South. It is sometimes seen as a kind of charity or humanitarian help; however, its advocates postulate an alternative model of trade, based on sustainable and direct relations between local producers from poor countries of the South and consumers of rich countries of the North, supporting these societies in accordance with the principle “trade not aid” (Jastrzębska, 2011; Śliwińska, 2018). In 2019, beneficiaries of the fair trade initiatives included 1.6 million farmers, primarily from Latin America and the Caribbean, Africa and the Middle East, as well as Asia and the Pacific, growing coffee, tea, cacao, sugar cane, flowers, herbs and spices, rice, bananas and cotton, while profits generated by sales of their products on markets of highly developed countries were estimated at over 190 million Euro (Fairtrade International, 2021).

It may be observed that the development of the concepts of fair trade requires preferential treatment of exporters from developing countries on the markets of highly developed countries and acceptance of consumers in those countries to pay higher prices for certain products, which may be seen as a manifestation of discrimination of the other trade partners. Moreover, an important element facilitating identification of fair trade products is connected with their certification and labelling, classified as technical measures of trade policy. In view of the above, it may be stated that the fair trade movement functions at the boundary of the concept of free trade and protectionism. Reducing tariff rates for specific goods and adopting labelling procedures constitute a trading system parallel to mainstream trade, inaccessible to all participants. The issue of openness of the fair trade system to new producers and a potential reduction of benefits attained by their previous beneficiaries is a major dilemma concerning the fair trade movement (de Janvry, McIntosh & Sadoulet, 2015). Fair trade may thus be perceived both as an opposite of free trade and a harmful form of interventionism (Colier, 2007), as well as a valuable attempt to include poor producers from the South into the international system of trade and support development, where it may not be generated endogenously using previously adopted liberalisation methods (Śliwińska, 2018).

In order to estimate the level and structure of utilisation of trade policy instruments, including non-tariff measures, source data of the GTA for the years 2010–2022 were used. The number and structure of interventions undertaken in the world goods trade divided into liberalising policy instruments and harmful policy instruments were discussed. The structure of policy instruments used in the world goods trade by categories was investigated, while countries contributing most and those most affected by trade interventions in 2010–2022 were identified. The types of trade interventions and their division into liberalising and harmful policy instruments align with the GTA taxonomy.

Moreover, applying the methodology developed by the United Nations Conference on Trade and Development (UNCTAD) and the WTO, based on the most recent data available in the open access mode by the UNCTAD (data as of 11 November, 2020), the scope of the application of non-tariff measures in trade of three largest world exporters and importers of goods, i.e., the EU, USA and China, was estimated. Three indexes were employed (Disdier & Fugazza, 2019):

the Frequency Index, which indicates the proportion of goods impacted by one or more NTMs;

Contemporary protectionism is supported by other arguments than traditional protectionism and these two differ in the instruments they use. Non-tariff barriers in trade gained in importance, as in the case of technical measures, in which implementation is justified by the need to eliminate imperfections of the market and protect the health of domestic consumers, while tariffs are found at a historically low level (Grundke & Moser, 2019).

The persisting positive dynamics in protectionist practices undertaken in the world goods trade and a change in the structure of protection from the tariff to non-tariff forms are shown by data from the GTA. In the years 2010–2022 in world trade over 43.7 thousand new interventions were undertaken, of which approx. 85% were harmful policy instruments, while 15% were measures contributing to trade liberalisation, having no discriminatory character (Table 2). It may be stated that the protective character of trade policy was enhanced during crises. Thus, the number of implemented interventions increased both as a response to the economic and financial crisis of 2009, and as a consequence of the spreading COVID-19 pandemic, followed by Russia’s war with Ukraine. In the case of the latter, also the number and percentage of instruments liberalising trade increased, which resulted, among other things, from actions aimed at assuring the supply of goods to countries dependent on the import of goods from Ukraine, including particularly imports of agricultural products such as cereals, oil seeds as well as oils and fats. It results from FAOSTAT data (2023) that over 18.5% of the total import of cereals to Northern Africa came from Ukraine, while this import met as much as 10% of total cereal consumption in that region. Southern and western Asia was also heavily dependent on the supply of oil crops and vegetable oils from Ukraine, whereas in southern Europe almost 7.5% and over 8% consumption of cereals and vegetable oils, respectively, were satisfied by imports from Ukraine.

The most commonly implemented trade barriers include subsidies (excluding export subsidies; 54.1%), export-related measures (including export subsidies; 17.0%), new tariffs or increase in previous tariffs (9.2%), trade-related investment measures (7.4%), as well as temporary protective measures (6.0%) in the form of tariff quotas, antidumping procedures, levies or protection clauses (Figure 1). The countries which during the investigated period most frequently introduced new trade restrictions include the USA (7790 interventions), China (5619 interventions) and Brazil (5403 interventions). In turn, Germany, India, Italy, Canada and France during the same period imposed on their trade partners approximately four or five times fewer new trade barriers (Table 3). At the same time, Germany, Italy and France ranked as the first three in terms of the number of trade restrictions targeting a given country (13035, 12608 and 12571 interventions, respectively). The next countries, which were strongly affected by the trade limiting instruments administered against them, included the United Kingdom, Japan, Korea, Spain, China, the USA and the Netherlands.

Figure 1.

What is essential, is that while China and the USA lead in the application of trade restrictions, they themselves most frequently used trade liberalisation measures introduced by their trade partners. However, the number of trade preferences granted to them was from approx. 45% (China) to 2-fold smaller (USA) than the number of implemented trade barriers. The predominant liberalising policy instruments included reductions of tariffs (58.1%), relaxation of quotas in import (15.9%) and export-related measures (including export subsidies; 12.7%) Moreover, price-control measures (5.2%) and subsidies (excluding export subsidies; 4.4%) were also used (Figure 2). Measures liberalising trade were most commonly implemented by Brazil and India. In the years 2010–2022, those countries used over 810 and 710 new interventions, respectively, i.e., approximately 2 times more than Russia, Argentina, Spain and Italy (Table 3). Except from China and the USA, the relatively greatest extent of liberalising policy instruments was granted to Germany, the United Kingdom, Italy and France.

Figure 2.

It results from the presented data that the adoption of non-tariff barriers in present-day trade in goods, particularly in a situation of establishing new discriminating policy measures, is common practice. In view of the diversity of used non-tariff measures, their impact on the overall level of protection and welfare being less evident compared to that of tariffs, as well as problems in their identification and quantification, it is difficult to assess the importance and scope of application. In accordance with the methodology developed by UNCTAD and the WTO, the use of non-tariff barriers may be measured based on three indicators, i.e., the Frequency Index, the Coverage Ratio, and the Prevalence Ratio (Disdier & Fugazza, 2019).

Table 4 presents the estimated use of non-tariff measures in the EU, USA and China as being the greatest exporters and importers of goods in the world. The high scope of protectionism was found for the trade policy of China and the EU. In those countries, non-tariff measures covered 90–92% tariff items and value of imports, while in relation to a single tariff item over six instruments were implemented. An exceptionally high usage of non-tariff barriers was observed in trade in agricultural products. In all three economies, non-tariff measures were introduced in relation to 98–100% tariff lines and value of imports. An extremely protectionist trade policy in the agricultural sector was undertaken by China, implementing over 20 instruments in imports of specific individual products. Similarly measured, a slightly lesser scope of protection for the agricultural market was used by the EU and USA, to which access was protected by approx. 15–16 instruments per tariff item. This much greater level of protection when compared to the analogous level in the trade in non-agricultural goods confirms earlier analyses of Li and Beghin (2012), Sapa (2015) or Disdier and Fugazza (2019). At the same time, Sapa (2015), Kalaba et al. (2016) and Liu et al. (2019) indicated that the scope of implemented protection varies depending on the groups of products and countries, differing particularly between developed and developing countries.

Due to the indispensable character of imports, the importance of non-tariff protection was relatively low in EU trade in minerals. A different trade policy for this group of products was used by the USA, where non-tariff barriers covered 100% of imported tariff items and the value of imports, at the same time extending a lower level of protection for the market of manufacturing products compared to their competitors (Table 4). While in the USA non-tariff instruments were imposed on 74% tariff items and 80% value of import of manufacturing products, in the EU and China analogous percentages were around 90%. It also needs to be stated here that both in trade in minerals and manufacturing goods the average number of trade barriers applied in imports of individual products was lower than in total trade.

The non-tariff protection measure used most commonly by the largest participants of world trade was connected with technical barriers, which concerned approximately 90% of tariff items and the value of imports to the EU and China, and 72% and 81%, respectively, of imported products and the value of imports of goods to the USA. In relation to one tariff item, these countries typically established around four technical standards (Table 5). On average over 50% of products and 66–75% of value of imports to the EU and China were also covered by quantitative restrictions. Moreover, among the three analysed economies China most intensively protected its domestic market using sanitary and phytosanitary measures and the anti-import policy was strengthened by the export reducing policy. Export-related measures, which include, e.g., export taxes as well as export quotas and bans, covered 73% of all tariff items and 81% of Chinese exports. In turn, the use of such measures in the EU common trade policy was marginal. In the relatively smallest scope, the investigated countries used price-control measures, including additional taxes and fees, as well as pre-shipment inspection.

Due to the degree of dissemination as well as the relatively high number of barriers per one tariff line, the greatest concerns, particularly among developing countries, were connected with the implementation of technical, sanitary and phytosanitary measures in present-day world trade. Thus, the established quality and safety standards binding in exports to markets of highly developed countries frequently exceed international standards and even if they are not themselves protectionist in principle, they may exclude small producers from developing countries from the target market (due to excessively high adaptation costs) (Disdier & Fugazza, 2019). The covert and selective character (both in terms of the subject and object) of the contemporary non-tariff protectionism is evident here.

While on the one hand it would seem that world trade has never been so close to fulfilling the classical concept of free trade as it is today, on the other hand most countries, particularly highly developed ones, apply various types of trade barriers to protect less efficient sectors of their economies and to support exporters. It is stressed in literature on the subject that free trade is no longer perceived as the best possible option of trade policy and the optimal free trade policy is dependent on the existence and volume of disturbances in domestic markets, justifying introduction of additional trade barriers, which are to balance them and enhance welfare (Nagel & Burnete, 2018). The aim of this paper was to determine the dynamics of protection as well as the category and geographical structure for the use of trade policy instruments in the world goods trade in the years 2010–2022.

In the years 2010–2022 in world trade, over 43.7 thousand new interventions were undertaken, of which approx. 85% were harmful policy instruments. The dominant measures included non-tariff instruments, in which action is less evident and more difficult to detect, and which are used selectively both in the geographical and goods category aspects. A high level of protectionism was observed for the trade policy of China and the USA; at the same time these countries, to relatively the greatest extent, used trade preferences granted by their partners. The burden of discrimination measures was experienced mainly by Germany, Italy, France and other EU members. An exceptionally high use of non-tariff barriers characterising contemporary protectionism was observed in trade in agricultural products, which traditionally both at the WTO and within the preferential trade agreements were considered sensitive products, subjected to special treatment and were thus limited and experienced selective liberalisation. In the import of agricultural products to the EU, USA and China, being the largest participants in the world agricultural trade, non-tariff measures were used in relation to 98–100% of tariff lines and the value of agricultural imports, with a single tariff line potentially being covered by as many as over 20 non-tariff instruments. A lower level of neoprotectionism was recorded for trade in minerals and manufacturing products.

The realised model of protectionism varies depending on the group of products being traded, the level of economic development of the country implementing the trade policy measures, its export specialisation and the degree of self-sufficiency. It may also be observed that the protectional character of the trade policy was typically strengthened during economic crises. An interesting issue is connected with the estimation of effects of implemented non-tariff instruments in world trade, regional trade or in specific bilateral relations. In this context, it may also be asked which of the past crises, the economic and financial crisis of 2008–2009 or the COVID-19 crisis, exerted relatively the greatest impact on international trade? In studies on the subject conducted to date such analyses were relatively scarce, which opens grounds for further investigations to fill the gap in our knowledge on consequences of trade policy for the functioning of international markets exposed to exogenous shocks.