Does protectionism work?

Does protectionism work?

Being open to global trade has grown the EU's economy, raised prosperity and helped to keep us competitive.

Read more

At the same time, many countries – sometimes with lower wages or taxes – are competing with Europe in low-skill, low-value-added industries. In some cases this has led to factory closures, job losses and downward pressure on workers’ pay and conditions.

In order to stay competitive, the EU supports its industries through, for example, funding for research and innovation, or protection for sensitive agricultural products. This is done within internationally-agreed rules. If other countries break these rules, the EU is quick to apply measures to defend its companies from unfair competition. Some argue that the best way to address foreign competition is through protectionism – putting a brake on imports and favouring domestic production. Experience shows this may generate some short-term relief, but never achieves lasting success. Such measures drive up prices not only for consumers, but also for EU producers who rely on imports to make high-quality goods – a key source of Europe’s highly skilled, well-paid jobs.

Protectionism also risks pushing other countries to slap taxes on imports. This sort of tit-for-tat situation can easily spiral downwards, as it did in the 1930s, lowering growth and destroying jobs – the opposite of what was intended.