Protectionism doesn't work in the long run

Related pages: Trade Matters homepage | Millennium Development Goal 8: Aid, trade, growth and global partnership

The lesson of history is that the alternative to open markets – protecting your own goods by handouts and taxes against competition from imports – doesn’t work in the long run.

It leads to inefficient companies, supplying consumers with products they don’t want at artificially high prices.

The companies close, the jobs are lost. Markets shrink, economic activity slumps. And the poor remain poor. But it’s also true that as a temporary, stop-gap measure to manage transition, or to help new industries get off the ground, a degree of protection may be necessary.

After all, this is how many countries first got on the ladder to prosperity. They built up their economies at home – investing in education and developing the financial sector to create the right climate for doing business.

Upgrading economies

The poorest countries, too, should receive the support they need to help them upgrade their economies and nurture businesses that can compete on a global scale. Nobody expects Burundi to take on the same obligations as Brazil, or Chad the same as China. Developing countries must have the flexibility to determine how and when they open up their trade to wider competition.

That’s why the WTO has developed a process to help developing countries gain from world trade at a pace that suits their rate of economic development. At the same time, increases in aid will help them improve their ability to trade as they work to become competitive

This case study is part of Trade Matters

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Other links to stories about trade and protectionism

• We must make trade work for the poorest (November, 2005)
• When is a sardine not a sardine? (case study)
• What happened at the World Trade Organisation meeting in Hong Kong (December, 2005)
• The Guardian on the WTO Summit: Africa's poorest fight hypocrisy and vested interests (December, 2005)

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