How Costly is Protectionism?

Abstract

How costly is protectionism? This paper begins from a U.S. perspective, examining the costs to both the U.S. and other countries from U.S. protectionism. It emphasizes that substantial costs are imposed on foreign countries by U.S. protectionism. These costs result from the highly selective nature of protection in particular industries and against particular exporting countries. No discussion of the costs of protection would be complete without mentioning the increasing levels of investment by foreign firms within the U.S. economy. The paper next moves to a more global policy perspective. The emerging free trade areas in Europe, North America, and Asia raise the prospect of gains from trade within each region but also the possibility of global costs from protectionist actions across the regions.