Protectionist trends in global trade

Abstract

The post world war II period witnessed a tremendous increase in the volume of international trade. The need for trade was obvious as different nations had different capabilities and resources and were specialized in producing some products. So, to compensate for what a nation did not produce, they had to enter into trade with other nations that specialized in them. The crux of the problem is that when two nations produce the same products but at different levels of competitiveness. It makes more economic sense if the less competitive nation sources the product from the other. However this happens only at the expense of domestic industry, in the less competitive nation. Under this situation, the policy makers, under the pressure of lobbyists and with a focus on short-term gains, are forced to rule in favour of the domestic industry. The resulting trade distortions raised concerns world-wide and resulted in the formation of GATT, which later took the shape of WTO – the international organization dealing with trade related disputes and issues. GATT and WTO has effectively monitored trade related measures taken by its members and settled disputes in cases related to trade restrictions. Incidents of trade restrictions typically increase during times of economic slowdowns. Domestic industries slump under the pressure of falling demand and sales, seek protection from imports. Protection becomes all the more difficult under the WTO guidelines and this encourages policy makers to device innovative instruments that can serve the purpose while complying fully with the WTO norms. This report tries to study such temporary instruments that were adopted by the WTO member nations in response to the current crisis and tries to analyze how it differs from the measures used under times of economic well-being.