protectionism

protectionism

Policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other handicaps placed on imports. The chief protectionist measures, government-levied tariffs, raise the price of imported articles, making them less attractive to consumers than cheaper domestic products. Import quotas, which limit the quantities of goods that can be imported, are another protectionist device. Wars and economic depressions historically have resulted in increases in protectionism, while peace and prosperity have tended to encourage free trade. Protectionist policies were common in Europe in the 17th–18th centuries under mercantilism. Britain abandoned many of its protectionist laws in the 19th century, and by World War I tariffs were low throughout the Western world. Economic and political dislocation led to rising customs barriers in Europe in the 1920s, and the Great Depression produced a spate of protectionist measures; world trade shrank drastically as a result. The U.S. had a long history of protectionism, with tariffs reaching high points in the 1820s and the Great Depression, but in 1947 it became one of 23 nations to sign the General Agreement on Tariffs and Trade (GATT), which substantially reduced customs tariffs while reducing or eliminating quotas. Despite trade agreements such as GATT and NAFTA, calls for protectionism are still heard in many countries when industries suffer severely from foreign competition. See also trade agreement; World Trade Organization.