The Double Standard of Protectionism: Why America is Blamed for Doing What Others Practice

Strategic Insights -

Nations of every stripe have built walls around industries they consider vital, all while demanding open markets abroad. America's critics argue that its trade policy is deeply protectionist, citing tariffs on steel, aluminum, and Chinese imports, as well as subsidies for farmers and new industrial supports like the CHIPS and Science Act. However, the US is hardly an outlier, and the real question is whose protectionism we are willing to tolerate. Every country shields what it values most, but America's size and influence mean it cannot hide its protectionism in the shadows.

Key Takeaways:

  • Around the world, governments have built walls around industries they consider vital, such as China's subsidies and market-entry barriers for foreign companies.
  • India, Japan, South Korea, Brazil, Russia, Indonesia, and Turkey have all implemented protectionist policies to promote domestic industries and jobs.
  • Even France and Germany, often portrayed as champions of global rules, have been accused of sheltering their agricultural, energy, and automobile industries with subsidies and regulatory barriers.
  • The European Union's Common Agricultural Policy (CAP) is a massive subsidy regime that props up European farmers while keeping out cheaper imports from other regions.
  • The US is criticized for its protectionist policies, despite being part of a global economy where nearly every government invokes the language of free trade while practicing selective protectionism.
  • Protectionist impulses are not confined to states; they run deep in societies as well, with examples including French farmers, American labour unions, the Brexit campaign in the UK, and nationalist consumer movements in China.
  • The criticism of America's protectionism is largely due to its size and influence, which makes its policies more visible and impactful on the global stage.
  • The debate on protectionism is not about whether it exists, but rather whose protectionism we tolerate and the impact it has on global trade and competition.

Statistics:

  • The US accounts for around 15% of global GDP and is the world's largest economy.
  • The EU's Common Agricultural Policy (CAP) spends around €58 billion per year on agricultural subsidies.
  • China's subsidies to its state-owned enterprises (SOEs) have been estimated to be around $150 billion in 2020.
  • The US trade deficit with China was around $377 billion in 2020.

Sources:

  • Bert Dijkstra, "The EU's trade agreements with third countries," 2014
  • "China's Industrial Policy in the Digital Age," European Commission, 2020
  • "The impact of the EU's Common Agricultural Policy (CAP) on trade," European Commission, 2020
  • "The US-China trade deficit," US Census Bureau, 2020
  • "Protectionism and the global economy," World Trade Organization, 2020