The New Protectionism: Key Characteristics and Economic Impact
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1. The Rise of Nontariff Barriers
The first feature of the revival of protectionism since the mid-1970s is known as the "New Protectionism." It relies heavily on new forms of nontariff barriers (NTBs), specifically Voluntary Export Restraints (VERs) and the establishment of Orderly Marketing Agreements (OMAs).
The World Bank conducted detailed research on the effects of NTBs in 1986. Results show that 16% of imports in industrialized countries were affected, compared to 13% in 1981. Corresponding figures for the US were 15% and 9%, respectively. The new protectionism often takes ingenious forms, such as the French government's action to restrict imports of videocassette recorders (VCRs) by requiring customs clearance only at Poitiers.
2. Sector-Specific Focus
The second feature of the new protectionism is its focus on a small number of sectors:
- Steel
- Automobiles
- Textiles and apparel
- Televisions
- Machine tools
- Footwear
- VCRs
- Semiconductors
- Ships
From the end of World War II until 1974, the US adopted only two special protection measures for manufactured products (excluding the cotton textiles arrangement): canned tuna in 1951 and carbon steel in 1969. Together, these accounted for a minute share of total US imports. However, since 1974, the US has established VERs and other hard-core NTBs for all sectors listed above, except for VCRs and ships.
3. Bilateral Nature and GATT Violations
The third feature is its bilateral nature, which violates the GATT principle of nondiscrimination (Most-Favored-Nation policy). VERs, OMAs, and subsidies were initiated by the US and other industrial countries outside of Article XIX of GATT (the safeguards article). Consequently, countries harmed by these restrictions seldom invoke Article XIX, which provides for compensatory or retaliatory actions. This is viewed as a strategic advantage by the country imposing the restrictions.
4. Lack of Transparency
The fourth feature of the new protectionism is its lack of transparency. These devices allow for a great deal of administrative discretion, which can be used to hide their effects from outsiders. This provides an advantage to the restricting country, as it can claim that a device is not protectionist in nature.