How do countries protect their markets?

 

EXPLAINERS: Concepts in 300 Words or Less

"Trade protection" typically means tariffs — taxes on foreign imports. Tariffs have certainly dominated the headlines over the last few years with the trade war between the United States and China.

But recent tariff hikes are actually an anomaly. Across the advanced industrialized world, tariffs have fallen steadily since the end of World War II. And, since 2000, average applied (unweighted) tariffs across OECD members were only about 3 percent.

Do low tariffs mean developed countries are open to global markets? Not necessarily. It turns out that tariffs are just one of a sophisticated arsenal of trade barriers that countries deploy.

As tariffs have gone down over time, developed countries and emerging markets have increasingly relied on subsidies, safeguards, anti-dumping measures, and a wide variety of other measures.

 
 

The United States is among the world leaders in some of these policy areas. Take anti-dumping. "Anti-dumping" measures are duties applied to goods sold below market prices. In the US, anti-dumping has been used frequently to provide targeted relief to the steel industry.

The idea is that anti-dumping measures substitute where tariffs leave off. Countries can better afford to slash tariffs when they have these other trade remedies available to them.

The downsides are two-fold.

First, these other policies are still protectionism, and are associated with the welfare losses traditionally linked to tariffs.

Second, using these alternative policies is highly controversial. They are complex, difficult to detect, and sometimes difficult to justify. As a result, a plurality of disputes at the World Trade Organization have been about non-tariff measures like anti-dumping and subsidies. The US alone has been sued over 50 times just for its frequent use of anti-dumping.

Either way, trade protection is about much more than tariffs. Assessing countries' levels of openness to the global market requires a much wider view.