Governments
are better placed to ward off powerful lobbies
One
of the lessons of the protectionism that dominated the early decades
of the 20th Century was the damage that can be caused if narrow
sectoral interests gain an unbalanced share of political influence.
The result was increasingly restrictive policy which turned into a
trade war that no one won and everyone lost.
Superficially,
restricting imports looks like an effective way of supporting an
economic sector. But it biases the economy against other sectors which
shouldn’t be penalized — if you protect your clothing industry,
everyone else has to pay for more expensive clothes, which puts pressure
on wages in all sectors, for example.
Protectionism
can also escalate as other countries retaliate by raising their own
trade barriers. That’s exactly what happened in the 1920s and 30s with
disastrous effects. Even the sectors demanding protection ended up
losing.
Governments
need to be armed against pressure from narrow interest groups, and the
WTO system can help.
The
GATT-WTO system covers a wide range of sectors. So, if during a GATT-WTO
trade negotiation one pressure group lobbies its government to be
considered as a special case in need of protection, the government can
reject the protectionist pressure by arguing that it needs a
broad-ranging agreement that will benefit all sectors of the economy.
Governments do just that, regularly.
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