World Bank Discussion Paper 225. This paper looks at the role protectionism has played in recent trade policy and its effect on growth and employment in the industrial countries. Not convinced of the benefits of free trade, some industrial countries still employ protectionism. But in recent years many have liberalized their trade policies and moved towards greater reliance on exports. The author analyzes trade policy within this context, paying particular attention to the case of the European Community (EC). He argues that contrary to popular opinion, the use of protectionist policies is in decline. The paper first looks at the impact of exchange rate fluctuations on imports over the course of the 1980s. EC protectionist policies such as the Common Agricultural Policy (CAP) are reviewed. The author then draws comparisons between the EC, Japan, and the United States. The case of imports from developing countries is examined separately in order to evaluate the hypothesis of discrimination against them by industrial economies. The relationships between trade, employment, and protectionism during the recent period of slow economic growth in the industrial countries is also discussed. The author concludes that while protectionism in the short run can ease pressures from competition, only through open trade and sound macroeconomic management can economies adapt to future trade challenges. A summary page in French is also included.
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