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A recent World Bank study indicates a disturbing rise in trade protectionism around the world in response to the economic crisis. Here are a few examples:
The chief problem with protectionism is that it's never unilateral. When one trade partner raises barriers, the others inevitably respond in kind, undermining both the targeted industries as well as unrelated industries that suffer from the foreign retaliation. The result is a decline in international trade, which can have a devastating effect on the world economy.
In 1930, the Smoot-Hawley Tariff Act created just such a cascading effect, leading to a 66% decline in world trade between 1929 and 1934. When the tariffs were enacted in 1930, American unemployment was at 8%. In 1931, it was 16%. In 1932, it was 25%. While correlation does not prove causation, most economists blame the tariff act for counter-effectively damaging US manufacturers and significantly contributing to the Great Depression. Let's not make the same mistake again.