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Protectionist Assaults on Developing Countries

G.K. Helleiner

• University of Toronto

“The New Industrial Protectionism and the Developing Countries.” Atlantic Papers 39(1980:7–28.

The economic problems plaguing industrialized nations during the past decade have revived protectionist policies in international trade. Protectionism has both bolstered the positions of industrial powers under the guise of seeking a more “orderly” economic environment and hurt underdeveloped economies (where alternate employment possibilities are more limited). Prof. Helleiner offers a detailed assessment of the present and future effects of trade barriers on embryonic economies.

The chief sectors in which protectionism thrives are the labor intensive branches of manufacturing in which underdeveloped countries possess a clear advantage. Since traditional primary product exports are quite susceptible to the uncertainties of weather and the business cycle, it is especially galling to developing countries that new man-made uncertainties will further hamper their expansion into the less vulnerable areas of processing and manufacturing.

The present tariff structures of industrialized countries originated in the five GATT tariff bargaining rounds held between 1947 and the early 1960s. Breaking with a tradition of product-centered reciprocity, the Kennedy Round of the 1960s implemented (with some notable exceptions) an across-the-board tariff-cutting formula. Nevertheless, contradicting the spirit of the GATT agreements, industrialized countries have substantially maintained the old pattern of effective discrimination against weaker trading partners by multiplying exceptions to non-tariff barriers (NTBs): this gravely threatens developing countries and free trade.

Even while hampering economic development in poorer nations, the new protectionism so favors the larger international trading companies and transnational corporations that 46% of U.S. imports and exports are “intrafirm.” Highly diverse and skilled in information collecting and management of legal and institutional procedures, transnationals are resourceful in the face of bewildering regulations. In contrast, independent exporters in third-world countries, highly specialized and bereft of information, have proven themselves particularly ill-suited to current protectionist developments.

Given this transnational advantage, trade barriers now being erected will divert investments from fledgling third-world industries to those areas dominated by the huge corporations. The costs imposed by these distortions in developing countries will likely (in the short-to-medium run) hinder their ability to repay commercial and official debts.

What then are the possible remedies to the current situation? Prof. Helleiner calls for intergovernmental “management” of world trade, which would replace current ad hoc measures with firm, consistent rules. “The politics as well as the economics of ... trade policy,” Helleiner concludes, “... must be better understood— and influenced—if any progress on this front is to be achieved.”