The Changing Nature of Protectionism: Are "Free Traders" Up to the Challenges It Presents?

In the economic model that underlies the WTO the only group that can be expected to ask for protection is producers in importing countries. The existing multilateral trade architecture reflects that assumption. Much of the recent criticism of the multilateral trade regime has arisen as a result of new groups explicitly asking domestic politicians for protection. As these groups were not expected to ask for protection, the international trade regime does not allow domestic politicians to extend protection on the basis of the new demands. Further, countries are expected to perceive benefits from trade liberalisation. These benefits must be balanced against the expected political benefits of protectionism (and their associated welfare costs) when trade negotiations are being conducted. Failed economies, however, see few benefits from liberalisation and, hence, are biased toward protectionism, particularly if trade restrictions are a source of corruption incomes. This article explains the sources of new appeals for protectionism, outlines the relationship with traditional producer protectionism and lays out the challenges the new pressures present for trade-liberalising multilateral institutions.